Did you know that the average wage earner would have earned over 1.8 million dollars throughout their lifetime? So at some point we are all millionaires. If we are all millionaires, then how come most of us do not have a million dollars in the bank? The answer to this is simple - it is not important what you earn, it is important what you keep.
You’re probably, thinking right about now that it is easier said than done. Let’s face it, after bills, taxes, school, etc…you hardly have money leftover. That is why it is critical that you pay yourself first. Here’s how.
Put Yourself at the Head of the line:
This means that before anyone else gets your money (i.e. the gas company, grocery store, etc…), you pay yourself by putting a set amount aside in a savings or investment account. Later on, in chapter 8, you will see how you will be able to derive a set amount, by following the Rapid Debt Reducer. The ideal amount is to set aside 10% of your income. Starting out it may be less; however, the Rapid Debt Reducer program will show you how, over time you will be able to comfortably set aside 10% or more of your income.
After you figure out how you are going to pay yourself first, then you need to figure out where to put the money. In order to have a complete savings program there are three accounts you need. You will need to establish an emergency fund account, a short-term savings account and a long-term savings/investment account.
Emergency Fund:
This fund is for when emergencies arise, such as, an unexpected expense, job loss, serious medical issue, etc… It is a good idea to have three months’ earnings in your emergency fund account.
Short-Term Savings Account:
This account is so that you can keep your credit cards back in your wallet (better yet, back in the freezer). The short-term savings account is money set aside for expenses such as a vacation or new computer.
Long-Term Savings Account:
In this account, you will put your money for retirement, your children’s college funds and other long-range savings goals. It is important to invest the cash for this account into some form of an investment vehicle, such as a mutual fund, IRA, or Savings bonds. You may want to consult a financial advisor for various options.
So now that you have paid yourself first and set-up accounts to place your savings in you have taken the first step towards financial freedom. In order to stay on that road you may want to think about using direct deposit for your savings. This will take away any temptation you may have about not wanting to pay yourself first. Trust me, there will be times when you have an extra $25 and you will want to purchase that new CD, rather than add to your emergency fund. Don’t put yourself through this struggle use direct deposit.
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How to Become a MultiMillionair
Friday, June 20, 2008
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Chapter 1 Free Financial Freedom Education
Chapter One: Take Control
The first key to financial freedom is learning to control the things you can control. For example, you cannot control rising costs; however, you can save more. You may be thinking, right about now, “how can I save money if I can barely pay the bills?” Not to worry, help is on the way. No matter what your financial situation is or your income, there are always ways to free up funds for investments. Here’s how:
Ø Pay yourself first
Ø Adjust your priorities
Ø Adjust your lifestyle
Ø Earn additional income
Ø Re-align your assets
Ø Avoid Credit
Ø Set goals and have a plan
Pay yourself first:
Paying yourself first means putting you and your family before any other demands on your money. The best way to pay you first is to deposit a set amount every month into an investment program. (Remember do this first no matter what other financial obligations you may have).
Adjust your priorities:
In order to adjust your priorities, you first have to get a hold of your current situation. The best way of finding out where all your money is going is to jot down every penny you spend for a month. I guarantee that at the end of the month you will be amazed where your money is being spent.
Create a DEBT PAYOFF PLAN FREE
Adjust your lifestyle:
Mick Jaeger said it best; you can’t always get what you want… So it goes with money. In order to take control of your financial life you have to make a conscious decision about your choices. A good exercise is to take a note pad and divide it down the middle. One side will be labeled “wants” and the other side “needs”. Fill in each column with your wants and needs. Then decide what is most important to you. Do you need a new car or do you want a new car?
Earn Additional Income:
If you want to make significant progress in your financial life and you feel that paying yourself $25 just isn’t enough, then consider taking on a part-time job. That way you can use the extra income to start your investing program with.
Re-Align your assets:
This means that you move assets you have around to free up cash. By re-aligning your assets you may be able to free up enough money to start your investment program.
Avoid Credit:
The only way to win the credit battle is to pay cash. Try to avoid using credit cards. However, if you find yourself in a situation where you must, then pay off your charges at the end of the billing period. Otherwise you may incur fiancé charges.
Set Goals and have a plan:
We all need a map of some sort in order to guide ourselves to whatever destination we may choose. You must have financial goals in order to achieve his/her financial dreams. It is important to set-up short-term goals as well as long-term goals.
Free Financial Freedom Education
Introduction: There Is A Need:
If you dream of living debt-free as the bills pile up, you're not alone. A survey of 1,000 consumers found that most people have no strategy to manage their debt, and some who struggle to make monthly payments still plan to go deeper in the hole with big-ticket purchases. The typical U.S. household carries $9,200 in credit card debt. The U.S. Federal Reserve reports that debt levels of U.S. households fell $8.7 billion in November after a sharp drop in charge card and credit activity. Total consumer debt fell 5% to a seasonally adjusted $2.085 trillion, including a $7.2 billion decline in revolving credit such as credit cards, non-revolving credit, including car loans, tuition and vacations, fell $1.5 billion. The monthly decline was the largest since January 1943, when the Fed began collecting consumer-credit data. Wall Street analysts expected consumer credit to increase by $6 billion in November. However, the Federal Reserve revised October's consumer-credit increase to $9.6 billion, up from the originally reported $7.7 billion rise.
When securing a consumer loan, understand the cost--the points, fees and other charges. Understand the term, or length, of the loan, because low payments over a long term are expensive. With credit cards, understand the escalation clauses that will increase the interest rate--a late payment or a large balance, for example. This can bump you up to 20% from the introductory rate. Finally, read the disclosure statements because this is all spelled out. The survey underscores the gap between consumers' intentions to reduce debt and their current spending:
If you dream of living debt-free as the bills pile up, you're not alone. A survey of 1,000 consumers found that most people have no strategy to manage their debt, and some who struggle to make monthly payments still plan to go deeper in the hole with big-ticket purchases. The typical U.S. household carries $9,200 in credit card debt. The U.S. Federal Reserve reports that debt levels of U.S. households fell $8.7 billion in November after a sharp drop in charge card and credit activity. Total consumer debt fell 5% to a seasonally adjusted $2.085 trillion, including a $7.2 billion decline in revolving credit such as credit cards, non-revolving credit, including car loans, tuition and vacations, fell $1.5 billion. The monthly decline was the largest since January 1943, when the Fed began collecting consumer-credit data. Wall Street analysts expected consumer credit to increase by $6 billion in November. However, the Federal Reserve revised October's consumer-credit increase to $9.6 billion, up from the originally reported $7.7 billion rise.
When securing a consumer loan, understand the cost--the points, fees and other charges. Understand the term, or length, of the loan, because low payments over a long term are expensive. With credit cards, understand the escalation clauses that will increase the interest rate--a late payment or a large balance, for example. This can bump you up to 20% from the introductory rate. Finally, read the disclosure statements because this is all spelled out. The survey underscores the gap between consumers' intentions to reduce debt and their current spending:
80% of the respondents said they don't plan to seek professional help to manage their finances or debt.
30% said they’d develop a plan on their own.
13% said they have no intention of developing any kind of financial plan.
33% of those concerned about their debt have a debt-to-income ratio of 50% or above, about- 10% higher than the national average. Nearly 25% have a debt-to-income ratio exceeding 50%. Many financial planners say a debt-to-income ratio of about 33% is manageable.
19% of respondents concerned about debt said they plan to purchase a car in 2005, and 21% plan to make home improvements valued at more than $3,000.
76% have outstanding balances on their credit cards or have personal loans, and 37% of those make only the minimum monthly payment.
Despite growing debt and lack of a budget, 40% of the respondents said they're knowledgeable about personal finance. Experts say that the best way to combat debt is to make a plan to manage debt and stick to it, and to be an educated borrower. The following post will help you map out a plan that will result in the elimination of your debt and help you start on the road to financial prosperity. Live Life Abundantly Debt Free
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