Thursday, December 09, 2010

Money Time

From the DLM Blog:

Important Financial Truths You Should Always Remember

Posted: 18 Sep 2010 08:23 AM PDT


Do you have dreams of an early retirement? Being mortgage free? Being completely debt free?

If you're like a lot of people, financial independence is right near the top of your long-term-goals list. I've spent a lot of time over the past few years reading and learning how to achieve my goal of financial independence sooner rather than later. There is a lot of financial advice to be had and everyone seems to have an opinion on where to put your money, how to spend it, and how not to spend it. No matter what I read though, successfully getting ahead financially boils down to a few simple truths.

So whether you're looking to fast track your way to financial independence or are at your wits end when it comes to your personal finances, re-familiarizing yourself with these 7 financial truths may give you a fresh perspective.
  1. Nobody cares as much about your money as you do.
    Mindlessly handing your money over to a fund manager, investor or banker is never the best idea. We may feel that because they have the training, experience or fancy job titles that they know what's best for you when it comes to your money. Sometimes they're right but sometimes they aren't. Truth is they just don't care that much about it. Take control, become empowered and while you may not become intimately familiar with the inner workings of the financial system, knowing where your money is and being able to make informed decisions is one of the best things you can do for your financial future.

  2. Spend less than you earn.
    This one seems pretty obvious but for a lot of people it's simply not happening. The only way you are going to get out of debt or make advancement on your savings is to spend less than you earn. That's really all it boils down to.

  3. Shop around and simplify where it makes sense.
    While there is a strong push to simplify your finances by having everything in one place, sometimes consolidating just doesn't make sense. This ties in with the first point in that you should spend some time getting to know the different products out there. Does one financial institution offer better mortgage rates? Does another financial institute have much lower interest rates for personal loans or lines of credit? Simplify and consolidate but only when it makes sense.

  4. You need to pay yourself first.
    This doesn't mean give yourself money to go out and buy a new sweater or jacket or new a computer or phone. What this means is that before anything else (bills, groceries, gas etc...) you put an amount of money away into savings. Initially this may be a very small amount and that's OK; it's something! When you can, increase the amount you're saving to 10%, 15%, 20% or more of your income. By doing this you are consistently making progress on your goals even though there may be something a lot more fun you could do with that money.

  5. Budget budget budget.
    Yes it's the dreaded B-word. Budgeting doesn't need to be difficult but it does need to be realistic. A budget that doesn't accurately reflect your spending habits and expenses won't be a useful tool at all to get you closer to realizing your financial goals. A budget will help you to see at a glance where your money is going and where you can possibly reduce spending to improve your financial situation.

  6. Wants are not the same as needs.
    In reality there are very few things we really need. For the majority of people, once adequate food, shelter and clothing are provided almost everything else classifies as a want. You may think you need cable TV or a cell phone or a car but there are several people who manage to get by everyday without any of these things. So before you make another purchase ask yourself a few simple questions:

    • Is this a need or a want?

    • Can I delay this purchase to see if it's really what I want?

    • Can I get this item cheaper somewhere else? (library, second hand, borrow from a friend).

  7. Using cash when you can is best.
    There is something about handing over physical cash that is a tad more painful than handing over a plastic card. If you have $20 to spend on entertainment this week you'll likely think twice about spending $15 on movie rentals Monday evening when you know you've already made plans for Friday. Using credit is a slippery slope. You don't see a running total and $8 here and $20 there doesn't seem like a lot but after 30 days those small purchases can add up to a lot.
As with most things, when it comes to your finances you need to do what works for you. If you try to use a system that you end up fighting every step of the way it won't be effective and you'll simply end up frustrated and annoyed. You can get out of debt and you can speed up your financial goals. Just be realistic, take control and keep everything in perspective.

Written on 9/18/2010 by Sherri Kruger. Sherri writes at Zen Family Habits, a blog celebrating all things family. Sherri also writes on personal development at Serene Journey, a blog dedicated to sharing simple tips to enjoy lifePhoto Credit: meddygarnet

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