Change is the constant. The individuals best prepared to succeed are those who can learn, modify, and grow, regardless of age, experience, or ego.  People, places, technology change but economics don’t.

The rules are not new or earth shattering, but rules we were probably taught by our parents and have not practiced as we know we should.  As with any discipline, daily practice transforms them into habits, and good habits practiced daily are the foundation for positive changes in our lives.

1) Spend less than you make – although simple, this one rule will revolutionize your finances in the following ways:

• You will begin to eliminate debts because spending less than you earn frees up money you need to make larger payments on your debt.  Over time, they begin to disappear thus reducing your bills and giving you more breathing room.
• You will begin to save by building up some cash reserves in your savings account.  This enables you to handle emergencies (car breakdown, home repair, etc) without incurring new debt.  You then have the confidence and motivation to begin investing long-term for your retirement.
• You have less stress because you have fewer debts, less emergencies, you are saving for retirement… you sleep better, your health improves, and you feel better about your life.

2) Talk about money – this is the one rule that trips up so many families.  Somewhere between one spouse controlling the finances, and each spouse doing their own thing… is a middle ground.  Both spouses discussing their finances, debt, spending in a non threatening, loving manner in the context of their mutual long-term goals, plans and dreams.  Things like:

• Do you have the same dreams for your future? Are their debts you are hiding? Do you both agree on the financial condition of your household?  Are your relationships fulfilled and making you happy?  Do you have a financial plan for your future?
• Are your children expecting you to pay for their college? Are you expecting to? Are they expecting you to help with their wedding?
• Are you constantly doing things with your friends that cost more than you are comfortably spending?  Are you buying things to try to impress or keep up with others.

3) Monitor your progress – Let me illustrate with an example.  If you were to go to the gym and enlist the services of a personal trainer, one of the first thing he would do would be to evaluate where you are now physically, and where you want to be 1-3-6-12 months down the road.  He would set short, intermediate, and long-term goals with you.  The first step is to compile your net worth (all assets – all liabilities) TRY THIS ONE. Begin to track your assets, track your debts, track your net worth.  These are markers to gauge your progress, if the goal is to reduce your debt each month, and add to savings the worksheets will aid you in this.

4) Establish a debt repayment plan – Here are the steps:

• Get out a piece of paper and the latest statement for every single debt you have.
• Make 4 columns on the paper listing the debtor name, balance of debt, minimum monthly payment, and interest rate, add the amounts.
• Make a new list on the back side of the paper but reorder the list from smallest overall debt amount to the largest amount.
• Determine how much extra you can pay above the amount needed to pay all the debts.
• Begin adding the extra dollars to the smallest debt amount, once that debt is repaid take the amount you were paying on that debt and add it to the next debt on your reordered list (now the smallest debt amount).  Continue until all debts are paid.

5) Plan your spending – How much do you spend on groceries each week?  How much on gas?  How about eating out, or soda and snacks?  If you have a plan for your spending you know this BEFORE you spend it, because you plan in advance.  Let me ask you if you know how much you earn each month?  If you know how much you earn, than you should know in advance what you will spend.  If you don’t follow this rule chances are you will always struggle financially!

I told you the five steps are simple, and they are actually easy once they become established habits in your life.  It has been said we can achieve success in any area of life by identifying the optimum strategies and repeating them until they become habits.  Just do it.

Let me know if I can help.

Dave