As promised in my last article, this article will focus on practical advice and guidelines on how one might go about achieving financial success, reaching our financial goals. Financial mismanagement is one of the greatest strains on our lives. The American Bar Association has indicated that 89 percent of all divorces can be traced to quarrels and accusations over money. I personally see the stress financial problems place on marriages regularly.
Financial stress is very dangerous to health as well. It interferes with sleep, digestion, mental focus and every aspect of one’s health and well being, especially the heart. It can kill a marriage and an individual. I would like to suggest some simple (not always easy) steps to financial management. In 1975 a wise gentleman, Marvin J. Ashton, gave a talk on becoming financially independent and I would like to refer heavily on his words.
First, pay an honest tithing. Now some of you reading this may not be religious or you may be religious but never paid tithes or offerings. From my personal experience, you cannot go broke giving to the Lord or to others (charity), even if you are not religious. The old saying what goes around comes around is true in giving as well. Churchill stated, “We make a living by what we get, but we make a life by what we give.” He understood that giving of our time, talents and yes, our money, is part of what makes life not good but better.
Second, learn to manage your money before it manages you. Financial peace of mind is not determined by how much we make, but is dependent upon how much we spend. Dave Ramsey states that, “you must tell your money where to go on the first day of each month or you will wonder where it went on the last day of the month.” Managing money takes time, practice and probably some failure, but it is achievable.
Third, learn self-discipline and self-restraint in money matters. Learn to control spending impulses. Never make a large purchase on a whim. Think it over, sleep on it, go back a few times, better yet, save for it. Learn to determine the difference between needs and wants. Most of what we think we need is really only a want. Ashton stated that, “We live in a self-indulgent, me-oriented, materialistic society,” – now keep in mind that was in 1975, it has only become more so today. Good financial decisions start by being able to distinguish between what is necessary to have and what is nice to have.
US News states that, “Every purchase has an opportunity cost. Money is finite, even for wealthy families. That means money used to purchase one item won't be available to purchase other items.” Always make sure the item you purchase does not prevent you from purchasing another more essential item or paying the light bill. Learn how to wait to make a purchase. Practicing delayed gratification creates the self-discipline needed to save money for retirement, college and other expenses.
Fourth, use a budget. Making and keeping an honest budget is vital to accomplishing any financial goal. A budget helps you to plan and evaluate your expenditures. Create a budget for a specific period such as weekly or monthly or according to your pay schedule. Your goal with budgeting should be to balance income with expenditures and spend less than you make. Making and keeping (especially the keeping) a monthly budget is not easy. Just remember, when you fail it is only a temporary failure and you can work harder next month. Do not beat yourself up over it. Just keep moving forward. You know, baby steps.
Fifth, have an emergency savings. Dave Ramsey always says that, “It is not a question of if it will rain, but when.” We will all face storms in life. An emergency savings is like a boat in a flood. Liquid savings available for emergencies should be sufficient to cover at least three months of all essential family obligations.
Janet Yellen, former Vice-Chairman of the Federal Reserve stated that, “most Americans are just one small emergency away from bankruptcy.” By small emergency she means a new set of tires or a transmission. Baden-Powell, the founder of the Boy Scouts of America encouraged the scouts to, “Be prepared…the meaning of the motto is that a scout must prepare himself by previous thinking out and practicing how to act on any accident or emergency so that he is never taken by surprise.” This statement is true with money as well. Play the game worst case scenario, or what-if. To quote another wise gentleman, L. Tom Perry, “The need for preparation is abundantly clear. The great blessing of being prepared gives us freedom from fear.” Think about that: freedom from fear, the opposite from stress.
Once you have an emergency savings, you should continue to save and invest a specific percentage of your income, in something like the stock market. I suggest 10% in the beginning. Each time you receive a raise or bonus or tax refund, or even a birthday gift from mom, those funds should go directly and quickly into savings. Saving and watching it grow can be a great game. It can become as addictive as spending. This is not the last you will hear from me on saving.
Ashton also recommended creating a debt-elimination calendar to assist in getting rid of the debt. Dave Ramsey calls it the debt snowball. It is where you concentrate on the smallest debt first and once it is paid in full, use the money you were paying on it to pay then next smallest debt. As you pay off debt, use whatever money used to pay those debts to continue until all debt is paid in full. Do not focus on the interest rate. Instead focus on smallest to the largest debt amounts. Paying off a small debt gives you a sense of accomplishment and encourages you to continue to go forward. This will take time. Just remember – you cannot incur additional debt until all debt is paid in full (and hopefully never again).
Never take a vacation with credit cards. Vacations are luxuries, not something you deserve or are entitled to. We live in a society that thinks everyone is entitled to whatever they want (not need). You are entitled to whatever you can afford (without credit cards). Just because you can afford the monthly credit card payment does not mean you can afford to use them. My next article will focus more on credit cards and compound interest and how money works. Until then, baby steps – Never Give Up!
Debra B. Dutton – Debbie returned to college, earning a bachelor’s degree in history from Georgia State University, graduating Summa Cum Laude, after successfully raising three children with her husband of over 40 years. She earned her JD from John Marshall Law School Atlanta. After law school, she purchased the 30-year-old law firm she had managed for over 8 years. Her main concentration of practice is consumer bankruptcy. She is a member in good standing with the State Bar of Georgia, the American Bar Association, and the Spalding County Bar Association, where she serves as Treasurer three years running. She is a member of the National Association of Consumer Bankruptcy Attorneys and attended their annual national bankruptcy continuing legal education seminar. She attended Dave Ramsey’s Bankruptcy Leadership Summit in Nashville. She has been a guest attorney for a cable TV show entitled Law Call, has been a presenter for the Fayette County Bar Association Continuing Legal Education conference, and a presenter twice for CLE on the High Seas V and VI. She is a volunteer for Historic Oakland Foundation in Atlanta; University of Georgia Education and Research Garden; and Boy Scouts of America. She is a Facility Advisor for the Spalding County High School Model United Nations competition team. Her favorite title is still mom and Omi.
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