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Saturday, January 26, 2008

Top Personal Finance Necessities

If you want to get ahead in any endeavor there are always is a list of Must-Do’s. The list may look simple at first; however it is often the simple things that get forgotten. If you want to really get on the right path of money management and debt reduction, start today! So, in celebration of the 39th anniversary of a certain event…I humbly submit the following 39 Top Personal Finance Necessities.

  1. Find out where you really are financially – This is a scary step but if you don’t do it you can’t fix it.

  2. Decide that you want the situation to get better – If you cannot stop the bleeding you can’t be saved. Period.

  3. Stop the bleeding – Lock the credit cards up, freeze them, give them to Mom, whatever it takes.

  4. Be prepared to make sacrifices – The Van Gogh of the month club will probably have to go
  5. Build a Budget – Build one that deals with the following: Consumer debt pay; Recurring Bills; Cash Items; Mortgage or Rent; and Targeted Saving
  6. Make your budget realistic – If your grocery bill for the family is always $400, budget $400, not $200! You are better having a little fat on a budget then cutting muscle.
  7. Build escape valves into the budget – Without having the ability to make some small person purchases, you are setting yourself up for a big failure later on.
  8. Budget isn’t a four-letter word – It is a lifestyle choice. Not a club to get people not to buy stuff!
  9. Emergency Fund –Do you have an Emergency Fund? If not It should be your first priority. You will never break you debt chains unless you stop using debt!
  10. Build a Debt Snowball – This is for your Consumer debt pay, do this right after you fund your Emergency Fund
  11. Kill the bills that you can – See #4 if you are confused. Wash your own car; mow your own lawn; read the paper online. The more you trim the easier it will be.
  12. Develop an Envelope System – Pay cash whenever you can, not just when it is convenient. You’ll potentially save thousands a year.
  13. Review your Mortgage – Are you in an ARM? When is it going up? Get a plan to refinance if your credit is good, or work on your FICO Score until it is. If you are in a fixed loan: How is the Rate? Know your deal backward and forward.
  14. Check your FICO Score and Credit Report – Many people have inaccurate information on their report. It is easy to dispute and if they don’t respond it gets taken off.
  15. Check your Insurance – Make sure you have enough coverage. It feels counter-intuitive to say save, save, save then go shop for insurance, but a great way to destroy your finances is to have a disaster and no way to recoup.
  16. Get a career plan – Are you floating along, or do you know where you want to be in five years. So many people will return cans for $5, but then won’t be prepared to get the most out of their salary, the way we get the bulk of our income.
  17. Understand you didn’t get here in a week – You aren’t getting out in a week
  18. Get everyone in the house involved – If they aren’t they will never be bought in, and won’t understand why things are changing.
  19. Full disclosure – Everyone needs to know how the family is doing financially. It will end the requests for vacations and extras that we will all cave on eventually, especially if we have kids!
  20. Find a mentor – Great blogs are out there. Pro’s like Dave Ramsey, Suzy O, too. Find whoever speaks to you. Listen and Learn. But don’t be afraid to ask questions, especially “stupid” ones!
  21. No matter how bad it is… – Realize it IS worse elsewhere…I guarantee that!
  22. Track everything –You don’t have to go out and buy MS Money or Quicken (although they are great). You can do it with Excel or free spreadsheet programs that are out there. I use both, as I like the master sheet view I have created in excel.
  23. Understand how you got here – Break your “vicious circle”…Be conscience of your issues and you’ll be surprised how much more manageable they are.
  24. Tell your story – Doesn’t have to be a blog. Talk to a friend, you’ll be surprised how many have/are going through the same thing. Also the peer pressure of telling folks you are starting this will help you to not want to disappoint them.
  25. Have a success mindset – If you tell yourself “you can’t do it, it’s too hard.” You will be right!
  26. Avoid “Get Rich Quick” Deals – the only ones that make money on these are the ones selling them.
  27. Do Not invest in Stock Tips – I don’t care if your Uncle Tommy knows this guy, eventually you will lose. You have way better odds in Vegas.
  28. Do Not over invest in your own companies stock – Enron anyone?
  29. Be systematic – Doing 1% of 100 things is not as effective as knocking out 100% of one thing
  30. Retirement – Once your consumer debt snowball has worked its magic, try to maximize your retirement contribution
  31. Invest in yourself – Need a degree to go to the next level in your career? Take night classes. Need some job/trade certification? Get them. I would just make sure that there is a ROI there, no professional students!
  32. Health – Try to be healthy as possible. Exercise. Think of it this way…a heart attack is expensive!
  33. No one is perfect – Dave Ramsey was once 100% broke! The only thing you can do is to move forward the best you can. If you make a mistake, or slip, jump back on the budget horse!
  34. Your Net Worth – Is not the same as your Self Worth, easy to confuse the two, but they are not the same at all!
  35. Shop around for everything – Make it a game of I bet I can get that cheaper!
  36. Never buy a New Car – 20%+ depreciation for driving it off of the lot
  37. Understand the Difference between Needs, Wants and Desires – Handle your base needs first, before you buy the Louis V private space capsule.
  38. Understand that this is a marathon, not a sprint - The market drop today is the bull market tomorrow.
  39. The Power of Compounding – Every dollar you save or pay-off today can literally mean hundreds later. The sooner the better!

Ok… this is a ridiculously long post. I also know that some of these feel very basic. But if it is so basic, why isn’t everyone doing it? Sometimes the most obvious stuff is right under your nose! Remember I am not a financial adviser, just someone going through the same thing as you! I hope this helps you on the road of money management and personal finance


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