Step 1: Build up $1000 in savings for emergency (something that threatens life, limb, or ability to work)
Step 2: Increase your net worth
a. Do not do anything that increases your debt. No loans, credit cards, etc...
b. Sell off or donate things you don't need
c. Exchange high payment items for lower payment items
d. Choose free or low cost activities instead of high price excursions
e. Do it yourself instead of hiring contractors
f. Do crafts for gifts instead of high price presents that end up in the trash, storage, or garage sale for 10cents. It'll mean more anyway.
g. Look for ways to cut expenses and save money. Get rid of leeches. Do you really need 500 cable channels? Getting rid of extra gadgets will also lower utility bills.
Step 3: Pay your food and utility bills; then, minimums on each debt bill, and anything left over send to pay extra on the lowest debt first.
Step 4: Once the lowest debt is payed off, then add what you were paying to pay off the next lowest. Repeat 3 & 4 until all debt is paid off. This gets results fast, and snowballs quickly.
Step 5: If you're not already, work up to giving at least 10% of what you make (before taxes) to God. Put the next 10% into savings and investments. Give to God first, and 'pay yourself' next.
Step 6: Pay bills, then put anything else toward building a secure, non-volatile but accessible nest egg of enough money to meet your living expenses for at least 3-6 months.
Step 7: You're there! You have security and no debt. Now you can breath easier, formulate a new budget and set immediate (within this year), near term (within 5 years), and long term (college, retirement, etc) goals.
a. Continue giving at least the first 10% to God.
b. Budget around 45% into savings and investments (at least 10% to long term savings and the rest for immediate and near-term goals -- buying a house, saving for college, vacations, car, etc).
c. You can now use the remainder for living expenses and anything left over is short term goals, gift giving, activities, and "mad-money".
Implement some self discipline:
1. If you can't buy it with cash, you don't need it. If there is something you want, it is far more satisfying to set goals and save up for it.
2. There is no 'good' debt, and you don't need a credit rating if you have the cash to pay for it.
3. A house is not an investment, it is a home. Don't commit to more house than you need. If you feel you 'have' to carry a debt, your mortgage should be the only one and you should work to pay it off early. Do not get a second mortgage or equity loan, and do not refinance.
4. Do not loan money to friends or family. If you can't afford to give it to them to keep, then don't.
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5 comments :
There are other formulas for paying off debt. Often highest interest rate first and others might save a few dollars here and there.
However, money tends to be a emotional thing. When you pay off the first small bill, you get to see a difference sooner rather than later, and this gets you motivated to keep going.
I should make an attribution for this post. A lot of what is here I remembered from a radio program that had Dave Ramsey (Financial Peace University) as a guest. I mixed in bits of advice I've heard from different sources as well as from my own experiences.
Those guidelines are very sound!
If I may pick at you for a moment though, please receive no offense. Your blog name is Bibleguy, but I find no stated principles of the word in the guidelines. Yes, the tithe is there, and the principles of staying out of debt, and of giving, but are there not actual scriptures that contain power for you and I to receive financial freedom?
One of the most financially freeing things I ever understood was that God is my provider. When I really get that down, I became so free. When I give the Source of Wisdom a gift of 100%, I start finding out what sort of stewardship He requires of me. There is so much freedom in knowing I have the backing of heaven at my disposal, and that no matter how bad I botch any deal, my provision is guaranteed by the poverty that Jesus bore on the cross.
Having said that, thank you for the excellent tips. So many people wind up in spiraling circles of financial pits because they are missing both natural knowledge and spiritual understanding of how to manage money. It starts by giving it all to Him (not 10%) and the first step on that path is learning to hear His voice so you can hear how much He wants you to give and what or who He wants you to give it to. What's that verse in Malachi where God told Israel to stop giving? I haven't heard that one from the pulpit at offering time yet!
anwealde,
pick away, man. that's one of the reasons i started these blogs was to get "peer review" feedback.
a lot of my posts are kind of concepts in "genesis", so any and all feedback is appreciated to help keep me on the straight and narrow -- and most importantly biblically centered!
this article, is an example of one that i compiled the advice based on experience and ad-hoc from various sources.
that is kind of why i created the "soapbox" so i could differentiate these articles from ones that are more directly scripturally based.
this is differentiated from articles in the main "bibleguy" column that come from a preferred method of reading scripture and recording the exposition and/or inspiration from it.
i will most definitely revisit these articles (eventually :) and tie in the scriptural basis. in the meantime, please feel free to share any and everything
Since posting this, I've gone through Dave Ramsey's Financial Peace University course. I highly recommend it and/or similar help through Crown Financial.
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