Monday, October 20, 2008

Basic Finances: Stepping to Success

What happens when you can't keep up with your payments and you struggle to make ends meet? It is time to reevaluate your financial position and get moving in a positive direction.

You have a mortgage, utilities, car payments, student loans and one heck of a headache. Running up your credit cards seems to be the only way you can make it paycheck to paycheck. Where do you go? What can you do? It is as easy as five simple steps.

Step One: Do something NOW. The longer you wait, the larger the repercussions will be with the ships sinks. You can only make minimum payments for so long. At some point you will not be able to continue the cycle of debt avoidance.

Step Two: Prioritize your spending. Using a simple spreadsheet created in excel or a sheet of paper, write down the bills and expenses that are absolutely necessary. Be honest with yourself. The 200 dollar cable bill is not a necessity.

Step Three: Cut back slowly. Nothing will set you up for failure more than anything else. By immediately turning off the TV, locking yourself in the kitchen to avoid going out, and never watching a movie again, you will drive yourself and your family crazy. Take it slow and gradually reduce unneeded spending.

Step Four: After cutting back, set up goals prioritizing your debt payoff schedule. Use any excess money you have to begin building your emergency fund. Grow your assets, diversify your investments and continue looking for additional ways to introduce frugality into your life.

Step Five: Educate yourself in all aspects of your financial life. Learn about managing your income, expenses, investments, insurance, debts, and goals. Knowledge is power. It is the key to making the changes in your financial lifestyle long lasting and productive.

At the very top level, these are the basic means from taking complete financial chaos to simplistic financial order. However, steps 2-5 can be fledged out into a several substeps. I will be taking a look at the break down of these more detail steps in the next couple of weeks.

Securing financial independence and security is a slow and tedious process. No one can guarantee success, but with a little effort and some hard work, you can and will reach succeed.

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