The lack of money is the root of all evil.
– Mark Twain
Most people’s success goals include some form of financial freedom. In fact, when I work with my coaching clients, our time together usually starts off with them dramatically expressing how having MORE money would change everything for them. Many people, in fact, tell me that the only reason they work is to make money. It’s not until I press them further and ask, “What will that money buy you?” that they suddenly discover that money is just a means to an end – a tool or way of keeping score – and that what they really want is enough money so they can do whatever they want, when they want it, and how they want it.
As I work with people and show them how to enjoy an empowered life, I find that many of them come to me initially with a practice of spending beyond their means. They simply don’t have any type of financial blueprint that they follow (let alone understand). Here’s a shocking statistic from October 2013 that might help put this all in perspective. The Bureau of Economic Analysis (U.S. Department of Commerce) showed that personal income in the United States decreased $10.8 billion (0.1 percent) and disposable personal income decreased $23.6 billion (0.2 percent). And while income decreased in October, personal consumption expenditures increased $32.7 billion (0.3 percent). Now I know that these figures fluctuate from month-to-month. Still, there is a trend here; namely, that many people don’t have enough money simply because they keep spending it without any fiscal strategy. Some statistics claim that 40% of all Americans spend more money than they actually have. I continually wonder if it’s actually a higher percentage than that.
Bear in mind, I’m not talking about people who are homeless or poverty-stricken. This article is meant to address those of you who make good money and still find yourselves stretched to your financial limits each month. There’s a difference between being impoverished and being financially foolish (although the latter may lead you to the former).
If you’re one of those people who continually scratches your head wondering why you always find yourself in debt, perhaps its time to start a new trend. And even if you are debt-free, wouldn’t you like more expendable income? Check with your own financial advisor as everyone has little nuances to take into account, but here’s something easy to think about: How would your life be different if you maintained a savings account that held at least six months to a year or more of cash in order to cover emergency situations and unexpected costs? Healthcare costs, by the way, aren’t getting any more reasonable. And, unfortunately, financial analysts have been opining that less than 6 percent of our incomes are actually being deposited into savings accounts. That means most of us have borrowed lifestyles. As we continue to live longer, a life of debt is really not a sustainable financial model of success.
If you would like to participate in your own financial success, you might want to consider one or more of the following strategies:
1. Create a habit of saving 10% of each and every paycheck. When I say a “habit,” I mean a “habit.” You must have an obsession to putting money aside – essentially paying yourself first. Open an account where you can deposit the money and then treat that savings account as sacrosanct; only to be touched in a real emergency. For those of you who don’t think you make enough to create a substantial savings, then you should really do yourself the favor and look at what compounding means. And, here’s a fun analysis that many of us learned in school that will help you understand the concept of saving: Would you rather save $1,000 a day for one month or double your money each day starting with the deposit of just one penny? Many of you know the answer is to start with one penny, double it, and at the end of 31 days, you will have millions.
For those who want to dig deeper, here’s a breakdown of the penny saving experiment:
2. Keep a spending journal so you can see what type of money spending diet you need to go on. Nothing is harder for people to do then to get real about their financial health and to analyze their spending. And when I ask them to create a budget so that they can get a handle on their economic health, you’d think I was asking them to cut off an arm. Take the time to really discover how you spend your money. Take a month and write down each and every penny that you spend and where it is going. The secret to losing weight is simple: burn more calories than you take in. The secret to living a debt free life is equally as straightforward: spend less money than you get. Many of you just don’t know what’s coming in and precisely what’s going out. This spending journal, by the way, might be enough, all by itself, to get you to a place of new awareness and ultimately to financial freedom.
3. Use your credit card but always pay it off. This is all based on the foundational principle of using other people’s money to achieve your goals. Use the bank’s or credit card company’s money to buy something and then pay off the credit card so you don’t incur interest payments. That means you don’t buy something with your credit card if you don’t already have the money to buy it with cash. Some statistics indicate that the average American family has nearly $16,000 in credit card debt. If you are one of those people, you’re probably paying an additional $11,000 in interest if you pay the monthly minimum. That illustration should make you crazy! There are lots of websites and books out there designed to help you payoff your current credit card debt. START READING and create a real strategy to become debt free.
Creating a debt-free lifestyle is the aim of every magician. Nothing is more frustrating that having your ultimate dreams hampered by the lack of money. Isn’t it time that you adopted a mindset that allowed you to take charge of your financial health?
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