To get into your rightful place financially, you have to move past what has not only become comfortable, but what has become just a way of life.  When I say comfortable, I’m basically talking about life as usual. 

We have dreams of something bigger and better, but getting there sometimes seems too difficult.  What we normally do is keep the dream in our heads, but never move toward action.  We mostly use the One Day Theory.  You know…One Day I’m gonna have enough money to do whatever I want OR One Day I’m gonna own my own home.

You can probably rattle off a couple of your own One Day Theories – in fact, you’ve probably heard and said them many times over.  Truth is though, the One Day Theory is just another basic form of procrastination.

On a deeper level, procrastination overlaps with avoidance.  When a task initially seems too difficult to handle, we’ll put it off and put it off until it becomes a monster.  I don’t know what makes us think that the problem will go away.  It NEVER does. 

I know it seems easy to bury your head in the sand and ignore life along with your hopeful dreams.  The thing about that is, it’s suffocating.  You definitely can’t survive that way.  Survival of the fittest is taking responsibility quickly and creating the success you desire.

Do I suffer from the disease of procrastination?  Of course, I do.  All the time.  As I write this article, it is very late in the evening.  My initial thoughts were to shut the computer down and start fresh tomorrow.  But then I thought about how the delay would really throw me off schedule.  My right action was to do what’s needed now and feel good about what I accomplish later.

I remember reading a book a few years back by Brian Tracy called, Eat that Frog: 21 Great Ways to Get More Done in Less Time.  This book was key in transforming my thoughts about goal achievement and handling daily life.

My 4-Most Important Mantras from the book were:

1. Consider the consequences.  Take a moment to consider what the outcome will be if the task is put off until later.
2. Do the most difficult task first.  This statement is the entire basis of eating the frog.  Getting the difficult task out of the way first frees your mind for greater accomplishment.  It becomes a snowball of successful action.
3. Slice and dice the task.  Breaking down bigger projects into smaller manageable chunks = faster goal achievement.
4. Develop a sense of urgency.  A determination to stay focused until the project is completed.

He also says:

The key to reaching high levels of performance and productivity is for you to develop the lifelong habit of tackling your major task first thing each morning.  You must develop a routine of “eating your frog” before you do anything else and without taking too much time to think about it.

The thing is, I’m seeing many people achieve their dreams each day.  We all have our good and bad days.  The key though is to have more bad than good.  See if you constantly make two steps forward and only one step backwards, you’re doing your best to make greater strides in the right direction. 

So as you continue your day, consider something you have been avoiding – a work assignment, cleaning up your financial house, getting organized, any short or long term goal.  Be determined today to eat that frog.

How about you on the other side of the screen?  What’s stopping you? 

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I appreciate you reading today.  If you enjoyed it, don’t be selfish – share this article with a friend.   Have a wonderful and prosperous day!

Gotta Get Organized Image by Szlea

Here’s how it begins.  You open a checking account.  You’re given a checkbook, a check register and a debit card.  Then you’re sent off into the fast paced world of spending.

For someone that’s not had to manage an intangible object such as money in the bank, keeping track can sometimes seem overwhelming.  If you want to achieve that Master of Household Management title, I’ve got two basic rules to share with you of which I hope you will make a mental note…

“Rule No. 1: Never lose money.  Rule No. 2: Never forget rule #1.” – Warren Buffet

The confusing part about having a checking account is the use of two systems tied to one account – checks and debit card.  Not only do we have to keep track of the checks that we write, but we also have to make sure we write down the ATM withdrawals and debit purchases made.

In a quick rush, we’ll make a purchase or withdrawal and will forget to write it down at that moment or will tell ourselves that we’ll make a note of it later.  Well, later never comes.  We forget all about it and lose track of what we actually have left to spend.  Keeping track is a little easier now because of online banking, but there are ways to work smarter – not harder.

My advice:  Make a note in your check register as soon as a purchase or withdrawal is made.  I know it’s easier said than done, but you’ll be amazed how starting a new habit will improve your flow of life.

Another tip:  The use of the “duplicate checks” feature offered by check printing companies.  I don’t write many checks, but with the few that I do write, I always have the carbon copy of who the check was written to and the amount.

The Balancing Act

I’ve heard many reasons around this task, but I believe it should never be overlooked – reconciling or balancing your bank account.  This is a basic task of comparing your check register to your bank statement for a specific period of time…usually monthly. I know it seems tedious, but there are several benefits:

1. You avoid overdrafting your account.
2. It’s a great way to find any errors made by you or your bank.
3. You can uncover unexpected bank fees.
4. Unauthorized withdrawals or charges are discovered quickly.

So for now, the pros far outweigh the cons to balance your checkbook monthly.  When it’s all said and done, I’d rather walk around with the comfort in knowing that the amount I want to spend is actually in the bank.  No more guessing game!

If you are already doing a great job of keeping track of your purchases/withdrawals, this message can be considered as a reminder to keep up the good work.  If you’re a veteran checking account holder and haven’t been following these principles, I urge you to take a few extra moments to start today.

Yes, I understand that you’ve been doing it this way for years, but I promise you won’t be disappointed trying it this way.  I’ve heard that it takes 21 days to create a new habit.  If you start today, you’ve only got 20 more to go.  We don’t want Mr. Buffett to be disappointed!

So what do you do?

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If you are planning on being successful with your finances this year, you and a written budget should consider becoming very familiar with each other.

I wish there were an exception to this process, but your spending plan IS your roadmap to financial success.  Every month, I conquer my battle against financial distress by creating a budget.  It’s my battle plan. 

Many times we get discouraged after we attempt a new process only to be stopped dead in our tracks by roadblocks.  Are these roadblocks meant to be a dead end?  No.  A roadblock is an action or condition that obstructs or hinders progress toward an objective.  Very important words – obstructs or hinders – not stop. 

If you’ve tried budgeting before and it didn’t work, consider giving it another attempt.  You remember what W. C. Fields said, “If at first you don’t succeed, try, try again.”  Your first budget may not be or may not have been perfect, but I hope the suggestions below will help to lessen your learning curve and help you become more confident with your money management process.

Balance your checkbook.  Before you can start your budget, you must balance your checkbook so you will know how much money you have left in your account to spend for the rest of the current month. 

Now you can create your plan for the next month.  Because a budget is a “monthly” cash flow plan, you have to try your best not to spend any of the new income you receive within the month.  This money will be used for budgeting next month’s income.  For example, today is January 7th and I just created my first budget.  My pay dates are January 15th and January 30th.  The money received on the 15th and the 30th will be the income used for my February budget and spending.

Carry a notebook everywhere you go.  This is a tedious process, but it can help you to estimate dollar amounts for your budget categories.  After creating your initial budget, make it a point to write down actual amounts you are spending for each category.  Compare those numbers to your budget estimates.  Are your estimates too strict?  To loose?

Include a mandatory “blow” money category. This area can be your lifesaver.  The blow money category relieves you of surprises and  small instances of overspending.  You place money in this category on purpose to alleviate these financial surprises.  The amount varies depending on your income and your spending tolerance.  You can thank me for this advice later.

Prepare for Lump Sum payments.  These are non-monthly payments which can put a snag in your entire plan if not accounted for.  The answer?  Convert them into monthly savings to avoid strain when the payments are due.  For example, your auto insurance is due in June with a payment of $550.  Since we are currently in the month of January, you have five more months to save up for this large payment.  To calculate the monthly amount to set aside, you would use the following calculation:  $550/5 = $110.  So, you must allocate $110 each month in your budget for auto insurance.  This example holds true for ALL lump sum payments (ex. Real Estate Taxes, Homeowners Insurance, Home Repairs, Medical Bills, Tuition, Vacation, Christmas, etc).

Be patient and flexible.  Just as Rome wasn’t built in a day, your budget won’t be perfect in one day, but it will be your guide for spending.  You may at sometime during the month have to change the budget, but it still has to balance zero. For instance, if you have an unexpected expense that requires a $100 payment, you will have to adjust the budget to spend $100 less in another category.  This will keep your budget balance at zero instead of $100 negative. 

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Will you still have to encounter speed bumps?  Probably.  But when issues arise, you will be better equipped to handle them.  Don’t waste time on minute details.  There are plenty of resources available to you to help you reach your financial goals.  Feel free to ask questions.  Matter of fact, I encourage them.

Tell us about your budget bumps or successes in the comments.  We’d love to hear from you.

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When my husband and I decided to dump our debt, I wished that there was a button we could press that would make it all go away.   Reality was that we had to have a plan.  

We’d read a couple of books related to personal finance, but the one book that really made paying off debt simple was The Total Money Makeover by Dave Ramsey.  Most books give all the fluff and theoretical processes related to debt elimination.  The Total Money Makeover was the most simple “how to” book I’d ever read related to personal finance.

So to begin the course of action, our debt elimination involved five initial steps:

1. Accessed the problem.  We sat down together and listed our debts and the balances for each.  Those debts included two car loans, medical bills, a credit card, and a home equity line of credit.  It was a shock to realize that we owed approximately $93,000.  Yes, that’s right….$93,000.  It absolutely took our breath away.  The questions that arose were…how did we get here?  Does everyone have this much debt?  How long is it going to take us to get out of this?  O.k., after the initial shock, let’s move on.

2. Created the Snowball.  After we accumulated the damage, we listed the debts from smallest to largest balance.  Known more commonly as The Debt Snowball Method, this became the order in which we would pay the debt.  You may ask, “Why not pay off the balance that has the highest interest rate?”  Well, for us the debt snowball method allowed faster victories and the motivation to continue with the plan.  I couldn’t imagine paying on one debt for two years and it be the first successful payoff of the plan.  I know I would have given up.

3.  Stopped the bleeding.  We had to immediately stop using any form of credit.  If we couldn’t pay cash for the item, we could not purchase it.  This included any recurring payments that were being made automatically by the credit cards, i.e. subscriptions, memberships, etc.

4. Created a budget.  Yes, the dreaded “B” word.  You may want to call it a spending plan.  Either way, this I believe is the most important factor.  Instead of winging it every month, we actually became the boss of our money and told it what to do.  EVERY DOLLAR of our paycheck was accounted for.  The budget was not just for bills, it included everyday expenses such as eating out, purchases for the children, grocery, dry cleaning, etc.

5. Started an emergency fund.  Ideally, the minimum amount for the emergency fund would be $1000.  The money should be in a savings account, not easily accessible for daily use and is earmarked for “emergencies only”. 

After we started the process, we could immediately feel a sigh of relief.  Even though debt freedom was the goal we were working towards, the initial victory was that we finally had control of our money.  There was a plan, a workable plan.   We were now going to be debt free!!!!!!  Debt freedom is truly possible, not a dream, but a reality of what can be achieved.

Where do you stand currently with your debt?  Feel free to share stories, tips, or questions in the comments.

Thanks so much for reading!!!

I have been using the envelope system since my husband and I started paying off debt.  Next to creating the budget, it has been one of the most important systems I used in conquering my debt. 

What is the envelope system?  It is a very basic method used in parallel with a budget.  Within a budget, there are categories.  For example: hair care, groceries, gas, restaurants, clothing, etc.  You then create and fund an envelope for each specified category.  Money is then spent out of that particular envelope (for the month) until the money is gone. 

Four benefits of using the envelope system:

1.  Break the spending cycle.  Many of us get our paycheck, pay our bills, put some money in savings and have some left over in the checking account.  Let’s say the amount left over in the checking account is $600.  Well, what if I wanted to buy a new dress, buy grocery, get my hair done, purchase gas, and go out to eat a couple of times this month.  I could easily overspend by just winging it.  With the envelope system, I’ll know at the beginning of the month what I have to spend in each, for example, $200 (grocery), $100 (new dress), $150 (gas), $50 (hair), $100 (eating out).

2. Ease of use.  You need envelopes and cash.  That’s all.  It provides a simple way to keep track of your money.

3. Forces the use of cash (not credit).  The only way to stop the vicious cycle of credit card debt is to use CASH ONLY. 

4. Better management of your checking account.  Have you ever received that dreaded statement from your bank stating that your account is now “overdrawn”?  You now have a hefty NSF fee from the merchant as well as an overdraft charge from your bank.  So much money is given to merchants and banks monthly due to the oversight of being overdrawn.  The envelope system stops this common practice.

When I started using this system, running out of money close to the end of the month was a distant memory.  You know the feeling of, ”Oh God, I can’t wait until the next payday”, and it’s a week and a half away.  This is a more simple and relaxed method to spend money.

Do you use the envelope system?  Have you tried and failed at it?  Do you not see the need?  I’d like to hear from you.  Share your insights in the comments.

This is going to be a very short, but very informative post where I will discuss the basics of budgeting.

The cornerstone of creating your peace financially begins with a budget or a monthly cash flow plan.  It is a very simple and easy system to use. 

The best and most detailed monthly cash flow plan I have seen is the one created by Dave Ramsey.  I’ll link to it here.  This plan doesn’t allow you to forget about anything that is attached to your monthly income.

When I created my first budget, I typed everything in Excel just as it is on the cash flow plan.  I kept it very simple though and listed my total monthly “Income” at the very top and subtracted all total monthly “expenses” following.  The final row was the “Balance” which should be zero as we are creating a “zero based budget”.  Because we were paying off debt, I also included a row for “Extra Money to Pay Off Debt”.  I kept this separate so that I could on purpose put money towards paying off the debt. 

Again, this is a very basic system that can also be done with just a pencil, paper and a calculator.  It’s all up to you and what you are comfortable with.  What’s important is that you get started.  Get it done today and let’s see what you can accomplish.

Thanks for reading and enjoy creating your life of freedom!!!

Stay tuned for more info and feel free to subscribe via RSS or E-mail!

About four and a half years ago, my husband and I took a look into what I’ll call our “Financial Mirror” by calculating our Net Worth.  Our “Financial Mirror” was a true reflection of ALL financial decisions we’d made up until that point in our life.  Needless to say, we were very disappointed.  Not only were we not where we were supposed to be, but we were a little behind.  Why?  We were top heavy.

What do I mean by top heavy?  Take a look at the picture of the pyramid on the right.  It has a great foundation because it is bottom heavy.  The pyramid’s size decreases with each step up.  If you were to turn the pyramid upside down, it would be top heavy and unable to stand.  Which could be an example of anyone’s financial position.  If your position is currently top heavy, it will not be able to stand and will collapse at anytime.  Continue reading to find out how to have a great foundation…

How To Determine Your Net Worth

Your net worth is a snapshot of your financial position at a particular point and time.  It is a great practice to calculate your net worth at least once a year.

Calculating your net worth is a very simple process.  It is determined by subtracting your liabilities from your assets as indicated below:

Net Worth = Assets – Liabilities

Let’s cover the definitions of assets and liabilities.

Assets – everything you own that has a dollar value.  Examples include:  Cash (checking/savings accounts, CDs, etc), automobiles, boats, etc. (estimate value at nada.com), home (estimate value at zillow.com), furniture, appliances, clothing, jewelry, stocks, bonds, IRAs, etc.

Liabilities – your debts.  The amount you owe to others.  Examples can include: personal loans to others, credit balances, unpaid taxes, past due bills, auto loans, boat loans, home mortgages, student loans, etc.

Now let’s take a look in your financial mirror.  Grab a piece of paper and calculate a rough estimate of your net worth.  Where do you stand?  To get an estimate of what your net worth should be, click here for a great tool at  CNN Money that can be used.  Entering your age as well as your income will give you an rough calculation of how far ahead or behind you are.

So, create new goals today.  Write them down and keep them at the forefront of all your purchasing decisions.  Let’s see what you can accomplish!!!

Respond below with any concerns or opinions.

Wishing you Success,

Patrenia

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