Help When Overwhelmed by Personal Finances – DFA Tip of the Week – 4/13/2009

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There are many ways to reduce costs in our every day lives, so to help do just that each Monday I will post a money saving “Tip of the Week”.

“And he said unto him, Well, thou good servant: because thou hast been faithful in a very little, have thou authority over ten cities.” Luke 19:17

This weeks tip involves…Getting Started.  I want you to consider the following quote, then read the rest of this article.  By the end you should be well equipped to get started on your very own Debt Free Adventure!

“A journey of a thousand miles begins with a single step!”  ~Lao Tzu

The Trap…

All of this Personal Finance business can be overwhelming!  Debt repayment vs. Reduce Monthly Bills vs. Saving & Investing, etc.  While all of these topics require your necessary attention, it is important that you do not focus on everything all at once.  You need to start somewhere, so here are a few tricks you can employ to get yourself started without falling into the trap of idleness.

Tips to Avoid the Trap…

To get your finances in order break them down into the 3 following main groups:

  1. Debt Repayment – Make a simple list of all the “consumer debt” you have including auto loans, credit cards, department store cards,  student loans.  Write down each debt, how much you pay toward it each month, and then add the debt of each up to come up with your total debt amount.
  2. Monthly Expenses – Write down all your monthly bills and how much each costs you per month (if amounts vary, come up with a guesstimate average).
  3. Savings and/or Investment Accounts – Make a list of all your savings accounts and investment accounts and write down how much you contribute toward each.

Once you have the above completed you are REALLY CLOSE to having created your very own budget!  That is the next step…finish these steps to complete your budget:

  1. Write down your monthly income – Do not budget weekly, bi-weekly, or any other way…budget monthly.  Write down how much monthly income you have from all sources.
  2. Write down all outgoing expenses – In a 2nd section, copy the information you compiled above regarding your monthly debt & expense costs and jot them all down and subtract them all from your income.
  3. Add any other expenses – You may have forgotten to write down groceries, gasoline, etc.  Figure any other expenses you have each month and add them to your “outgoing expenses” section to arrive at the total amount you spend each month.

Now that you have your first rough draft budget done, go celebrate by eating a cookie, dancing the jig, or doing anything else to express the joy you feel that comes from getting started on the path toward financial freedom!  When you are done dancing and eating dessert, look over you budget one last time to make sure you didn’t forget anything.  Ask your spouse to proof-read it as an additional check to see if you have left anything out.

Now commit to the following…

Now that you have your budget, you have your expenses, debt, income, & savings all written down and can start to wrangle everything in.  Commit to the following:

  1. Give 10% to the Lord – Read my Testimony to the Tithe and see how the Lord promises to bless you if you give, but also promises your indebtedness will continue if you do not.
  2. Contribute any amount to savings automatically – Transfer any amount, no matter how small, into your savings each month.  Even if it is just $20/month, make a promise to yourself that you will pay yourself that $20 instead of paying it in interest to some big bank.  Try to make this an automatic thing.  I HIGHLY recommend switching your banking to Capital One 360 to make all this easier.  Read about how I use Capital One 360 for debt repayment and emergency fund savings…and remember…this is all spoken from personal experience!
  3. Reduce your monthly expensesfollow my advice and work to reduce each of your monthly expenses, but do so one at a time.  Commit to calling one service provider a week to see about either switching, reducing your plan, or discontinuing that service altogether if possible.
  4. Tweak your budget – Your budget is a “living document” and should be given attention on a weekly basis.  Think about how you can reallocate your money after you reduce your monthly bills as we discussed above.  Continue to contribute more and more toward your debt repayment, and I advise you to focus the majority of your funds on this until your debt is greatly reduced.  Once your debt is considerably lower, begin contributing more toward your savings each month.  I currently employ a 75/25 plan where 75% of my available funds go toward debt repayment and 25% go toward savings.  Do what works for you, but again…I urge you to focus the majority on debt repayment!

Follow these simple steps to get started and remember to break tasks into their respective groups and tackle things one at a time.

Memorize the following quote:

“A journey of a thousand miles begins with a single step!”  ~Lao Tzu

Click here to see all our past DFA Tips of the Week.

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1 Credit Spark

I though I got a ping back from this post. Hmmmmm I wonder… Don’t be naughty…

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