Pretty simple rule, yet one that is often ignored or at a minimum, not really understood. We grow up not really being taught how to manage our finances and so we go to college, or perhaps get a job. We then get a checking account, a credit card…or two, or three, start spending, accumulating debt, and before you know it many folks are living paycheck to paycheck, or as we’ve seen over the past few years, find themselves in financial crisis. Bottom line, no matter how much money you earn, spend less. View a short example here. (The producer of this video holds all copyrights. Leader Development Institute has no connection to, nor endorses said company. Video is for illustrative purposes only). I know, you’re thinking a good lesson for our government to learn. Well perhaps, and someday, if I’m elected POTUS I’ll work on that. In the meantime let’s focus on your success.
It’s easy to be influenced by the media, marketing and peer pressure. We’re made to feel we can’t do without something, or pressured to, “Keep up with the proverbial Jones’s’”. But not you, you follow Rules and Tools for Success, you’re proactive and practice self-discipline, eventually you will be the “Jones’”. Don’t misunderstand, credit can be a powerful tool if you understand it and use it wisely. For example, I use a credit card for just about every purchase I make, from candy bars to cars, thousands of dollars a month. HOWEVER, and this is a big however, at the end of the month, when the statement shows up in the mail, I pay it in full. For me, that’s hundreds of thousands of airline miles and free tickets. For others it’s cash back, or a down payment on a car. HOWEVER, and this is a big however, if you do this, you MUST have the self-discipline to NOT overspend, and pay it in full every month.
Many years ago, after buying a car on credit, and paying it off, I continued to, “make the payment” to myself for several more years. During that time I worked to pay off my credit card debt, created an immediate emergency fund, started a long-term emergency fund, and saved to purchase my next vehicle for cash. I continued to practice financial fitness and started investing in mutual funds and started an IRA. When I got a pay raise, I immediately put 20% of the raise into my IRA and another 20% into savings and/or my mutual funds. At the time, if I wanted a big ticket item, like new furniture or a big boy’s toy, I would either save until I had enough to make the purchase or, if I wanted to take advantage of a deal, I could “borrow” from my savings and pay myself back just as if I had to take out a loan, only difference was it was my money and no interest.
Remember, shop wisely and exercise financial fitness. No matter where you are in your life, plan ahead (savings, emergencies, retirement, etc), prepare (savings, emergencies, retirement, etc), prevent (don’t over spend, pay bills, no consumer debt). Seek to avoid immediate gratification and instead practice self-discipline. If you are a supervisor, mentor your young employees. If you are a parent teach your children financial fitness early, if they are in high school or college, pass this rule on to them in full. If you are a young adult, START NOW!
Tips for Financial Fitness
• Establish an immediate emergency fund. About $2,000.00 (Emergency house or car repair. Travel to ailing family member, etc)
• Long-term emergency fund 6 months’ salary
• Borrow from yourself
• Use credit cards that offer cash return, or other benefit – use them for everything – then pay them off monthly.
• Know you budget – and stick to it
• Make the most of your retirement investment 20%(If you have a 401k with matching contributions, max it out, after that, contribute to an IRA)
• Negotiate for everything (The time to learn is not with your car or your first home)
• Establish multiple income streams (There are a number of business opportunities to do this, but perhaps the quickest and somewhat easiest is to invest)
Be Extraordinary! Be Debt Free!
Founder & CEO
Leader Development Institute