If you don't control money, it will control
There are simple techniques
for managing money, they are seldom used by ordinary people. I did not intend to
write a lot about money but the two biggest stops that people Think they
have are time and money. That's right I said think they have. I know that some
people who read the next few sentences will get annoyed with me, that's alright,
some people will never be successful. Time and money are excuses, the real
problems are lack of understanding and control.
To get an
understanding of what money is basically about you should read the page
There is one common idea about money problems that is totally wrong. Most people
will tell you that if they just made more money they could handle all of their
money problems. This is completely untrue. On another page I mentioned the fact
that just about all of the big lottery winners were broke again within five
years. It is a truth that people who can't handle money will only overspend any
extra money that they get.
Change You Mind
To start managing money properly takes a complete change
of mindset. The successful people that I have talked to seldom think about
money, let alone worry about it. One of them said that he did not understand why
money is a problem to so many people, it is really very simple. And it is true,
it is simple when you know how and follow the steps.
worrying about money. Worry never accomplishes anything.
Money is not a problem, if you try to deal with money problems then you handling
the wrong thing. Consider this, a patient goes to the doctor with chicken pox.
The apparent problem is that the person has itchy spots on their body. If the
doctor then tried to handle that problem by cutting of the spots he would
make it worse. Instead he will handle the infection within the body.
To handle your money problems you will need to handle your control problems.
Learn to control yourself and your money.
The first rule for managing money is so obvious that it should not need to be
stated. Spend less than you make. If you follow that one rule you will never
have money problems again. How simple can you get? I can hear people saying but
I have bills, I owe money, I need ...., I will deal with that later. For now
just firmly plant in your mind "I spend less than I make."
spending into the future. this is the credit trap. Finance companies love to see
you give them money that you can't really afford. Have you noticed how friendly
they can be when they are 'helping you to get it now'? How friendly are they
when you can't make the payments? Don't get suckered into accepting too much of
I have devoted a whole page to credit,
If you bought some furniture for $5000 and put it on your credit card at 19%
(the last time I checked the average was 19.7%). You decide that you can afford
$250 a month. It will take you two years to pay it off and $1060
in interest charges. That furniture cost you $6060 and two years of hoping your
job was secure. And this is if you don't add any other purchases.
A simple tip that most people miss. If you have
some money in a savings account for emergencies, then put it on your credit card
or other high interest loan. A bank is paying you maybe 3 or 4% interest on your
savings and taking 19 or 20% on your credit card, you can save 16%, that really
adds up. If an emergency does come up the money will still be available to you.
Pay your bills on time but don't pay them ahead of time. If you have money set
aside to pay a bill then use it to pay down your credit card. You can use the
credit card to pay the bill when it is due. This gives you a few weeks or a
month with a lower balance on your card and if you read the conditions you will
notice that interest is charged on an average daily balance. It is quite an eye
opener to check all of your bills in a month and see how much money you are
Credit cards can be useful, I keep one for emergencies, When they are needed to
rent something or buy on the internet. I always make sure it is fully paid up on
the due date. I don't think they like that but I don't feel any obligation to
give them extra money.
Its time to start managing money on a
regular basis. Take a look at your spending habits, do you really 'need' that
item. If you do need it, does it have to be brand new or top of the line. A good
used car is usually less than a quarter of the price of a new one. The same is
true of furniture, appliances and other items. Some people are embarrassed to
buy used, but the second they take that new item home it is used. Personally I
would find it more embarrassing to not be able to pay my bills.
Make a list of the absolute essentials that you need for a month. Really this
should only include rent (mortgage), food, power and what you need to get to
work. There will also be long term essentials, clothes, car tires, health
Now look at your non essential needs. Phone,
cell phone, cable TV, internet etc. things you could give up but probably won't
have to. You really won't 'die without them', people survived quite well before
they ever heard of those things.
Whatever else you spend money on
are niceties. It is fine to have these things but don't wreck your finances
getting them. This about managing money, when you get your control over money
you will find that you have more to spend on them. Even just honestly looking at
your expenses will exert some control.
Part of managing money is setting up a basic
financial plan. Whenever you receive some income, wages or whatever, set aside
the money for absolute essentials first. Then with the rest assign 50% to non
essential needs, 20% to long term essentials, 20% to niceties and 10% for
emergencies. These percentages can be adjusted a little to suit your needs, just
make sure that the absolute essentials come off the top and something is
assigned to the others.
With the emergencies fund you should use
most of it to pay down old debts first. After that do not touch it unless there
is an emergency. No that stores emergency clearance sale is not really an
Note: if you get an unexpected lump of income use it
to pay off debts. I know it is tempting to go out and get that thing you always
wanted but in the long run it is better to get out of debt.
to handle debt collectors. If bill collectors are harassing you then do the
following. Work out how much you can comfortably pay them each month. Then tell
them "I will send you $10 a month", or whatever figure you came up with. They
probably will not like it and even threaten court action, don't worry, just tell
them to take you to court and don't phone again. They will not take it to court,
if they did and you could show that you were making even minor attempts to
handle it then the judge will throw it out. You probably have more protection
under the law than you realize.
Here is a quick recap on managing
money. Spend less than you make. Pay off your debts, even if it is tough at
first. Follow the simple financial plan. Do not incur further debt. You will
find that your money goes a lot further and life is a lot less stressful when
you are debt free.
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