Financial Zip

If you are like most Americans you probably don’t have a budget or even put away any type of savings. Most likely as well you don’t even balance your checking account. The reason it’s to much work so why even take the time to do it.

Here is another tendency we seem to get into. See if this sounds familiar. You get a credit card bill and for that month you can’t pay but only the minimum balance so you just through that little amount in order to appease them. You live paycheck to paycheck thinking this money should be going further than it does. Your mail box continues to get overfilled with offers of 0% interest on this or that credit card, and 0% sounds so good you think it’s justifiable to go ahead spend a little and all you have done is dig yourself into debt a little deeper.

It’s funny how little things add up over time. You justify spending $20 bucks on this and $50 on that and oh I will pay the balance off at the end of the month. Then unfortunately at the end of the year you have a credit card bill upwards of $3200.

Now this may be a story that is very familiar to yours and if it is then you need to create a budget. A budget is really the only way that you can get a hold on where your finances are. Having a budget is really the only way to get yourself out of debt and start moving to a brighter financial future.

Things these days are expensive, and everyday life can really way you down. The mortgage is due, this kid wants some new clothes for school, the car breaks down and now you have to get it fixed. It is just these trickles and sometimes floods of expenses that can really make you want to start pulling your hair out. Raising a child these days from birth to 18 can cost you upwards of $180,000 for each child. I feel bad for people who have 15 kids then. Yikes!

Then there is your future that you have to start thinking about. Less than 20% of people age 40 -60 have adequate amount to retire on. They may expect to be able to use equity in their home and with the fact that home prices are depreciating quickly in this market that does not seem like a viable option for retiree’s now. Less and less people are saving a couple years ago the nation as a whole had a negative savings rate the first time that has happened since the Great Depression.

Making a budget and being able to stick with it or creating a plan and using it are the keys that you will need to get through the financial storms of life. The true secret to financial happiness is not to earn more, it is to spend less, and a budget is the way in which you are able to tell where your money is going.

There are plenty of families who are making between $8000 and $10,000 a month and seem to see it slip away form them with out them even knowing. Most people who have this feel like it should last longer. Instead of spending it on savings and retirement they use it for a lavish lifestyle. The nice car, the club on the weekends, the nice boat etc… It is generally a lifestyle that is a complete lie. On the surface it looks good but under the water most people are paddling so hard to stay afloat.

Here is some good news for anybody that is wanting to follow a budget that is you can figure out what you have coming in and how much is going out and start to get a hold on the financial leaks in your life.

What a budget really does is not unlike a physical that you get at the doctors office. It checks for your financial health. In order for your finances to get better you have to document it and come up with a plan to treat it.

Your Financial Mindset

If you want to change anything you have to want to do it. There is a book out there called Think and Grow Rich by Napoleon Hill and the very first thing he talks about in terms of accumulating any type of wealth at all is to have the Desire. With out desire you cannot achieve anything. It is desire that promotes the need for change.

Your desire to change has to be a very serious undertaking, are you willing to give up the things you want but can’t afford, are you willing to get yourself onto a repayment plan for getting yourself out of debt. I think out all these the most important one is are you willing to give up your credit cards completely and start saving for things that you want.

Saving was a lot easier for our parent s and grand parents they came from the Great depression era and they needed to save because they had no idea what kind of economic conditions would persist. The fact is they knew how to save and we do not.

What we need to do as a generation is to resolve to focus on our needs instead of our wants. And it’s ok to want to provide for our family’s needs but it will show our children in the long run that it is better if we show them how to use and save money responsibly instead of every time we have a money problem using a piece of plastic.

The way best to measure your financial health is to look at your savings at the end of the year and if there is more in it last year than this year you have done a good job at increasing your wealth.

Setting Goals

I would say this is the most important thing you have to do in order to achieve your financial success. I read an article recently in Kiplinger Magazine about a man who retired a millionaire on $11 an hour. He planned for it, expected it, and now at the age of 78 he has it.
I have a friend who is taking his kids to Disney land this summer and he saved up for it for the last 5 years. He has the assurance that when he gets back from the trip that he won’t have a looming credit card bill waiting for him. Another friend of mine likes to do the same thing however he usually doesn’t plan for it and throws the trip on a credit card and he confessed to me that he is strapped and is having a hard time making his house payment. This is an example of a person who doesn’t plan his spending and tends to bite of a little more than he can chew.

The best things as far as setting goals are to create a cash flow statement that measures your spending in a given month. Record what you spend in the month on this sheet and find out if your are in the plus or minus. If you keep more than you spend congratulations you are one of the few. If it is big red number there are some habits and things that you will want to curb.

Here is a simple formula to figure if you have too much debt. Add up what you pay a month in loans – car loans, student loans, and credit cards - but exclude your mortgage. Divide that number by your monthly loan payment and then by your monthly income and you get your Debt to Income Ratio. Your Debt to Income should be around 10% – 15% with out your mortgage and with your mortgage around 36% if it is higher it is time to buckle down and start getting rid of your debt.

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