The one thing that most people aren’t willing to do to win financially is sacrifice. They are willing to sacrifice the little extra’s in their life that keep them from gaining control of their spending. They aren’t willing to say no (today) to their children, so they can eliminate the cloud of debt that keeps them down.
On this day of Independence, remember those that willingly sacrificed for your freedom. Remember those that willingly volunteer to step into harms way each and every day, so you can feel safe at home. Understand that without sacrifice, it is almost impossible to enjoy freedom.
We hear so much about the future of our children and grandchildren being mortgaged away because of the spending of the government. I say that for a lot of families that future was already mortgaged because of the spending of the individual family.
Today, commit to a new level of sacrifice so you can gain independence in the area of personal finance. Commit to a new level of sacrifice so your children will not have to experience the bondage of debt. Enjoy this 4th of July, but do not forget the sacrifice that is required for independence both from a financial and from a country perspective.
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We hear a lot about the importance of starting retirement savings early, but for those that are late coming to the ‘retirement savings’ dance, what do they need to do differently? Someone asked me that very question just yesterday. The answer for the most part is nothing. Whether you start early or late the desired results are the same…dignity during retirement. Unless you are going to inherit a retirement account (or you play the lottery), dignity means saving/earning enough money so that you can retire.
I receive Dave Ramsey’s “Investing Minute” newsletter. This month, Dave dealt with this very topic. The following three points are from Dave Ramsey, not me…although I agree with them 100%.
Delay retirement for two more years.
The more you work, the more you save. According to the Center for Retirement Research at Boston College, most people who work two extra years after qualifying for retirement can lower the amount of savings they need by about 25%. Plus, the extra income will be an added bonus!
Get serious about investing.
Don’t give up. It’s time to put all you can towards your retirement. Even if you’re 40 or 50 and don’t have a retirement account, it’s never too late to start. If you are 40 and save just $2,000 a year in a 12% mutual fund, you will have nearly $334,000 by age 65—or more than $425,000 if you wait until 67 to retire! While you won’t have the most luxurious retirement, you can draw a decent yearly income—about $48,000—from the interest by leaving that money alone.
Stay out of debt!
Think of all the extra money you could be putting toward retirement if you didn’t have those car payments, student loans, and ridiculous credit cards! The average car payment is $464 a month. You could be using that $464 to build wealth for the future, rather than putting it toward a vehicle that declines in worth every day. If you’re not “gazelle intense” about paying off your debt, now is the time to get started.
So where are you? Are you starting your retirement savings early in your career? Maybe you did start early, but the downturn in the economy has taken a chunk out of your nest egg. What are you doing to correct the situation? Remember, personal finance is your responsibility. The government cannot take care of everyone. Decide today to increase your retirement savings. If you haven’t started yet, then commit to getting out of debt, fully funding an emergency fund, and then start putting away money for your retirement future.
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A couple of days ago I was asked by two different people about debt consolidation loans. I will state up front that I have used a debt consolidation loan in the past. The process of getting the loan was easy (because my credit was good), it was very organized (because the business has been around for quite a while), and I immediately felt a lot better about my financial situation (because I didn’t know any better).
I am sure there are people out there that have gone through debt consolidation loans and everything worked out very well. I would say that if that is you, then you are the exception not the rule. For most people everything that is wrong with debt consolidation begins a month or so after you complete the deal.
First, let’s look at why debt consolidation loans are so attractive. All of these benefits are offered in a general sense. There may be some outliers, but for the most part, the following list is what is promised and what draws people into the debt consolidation trap.
- you will have single loan rate that is lower than the average of the debts you are consolidating
- you will have a single payment that is lower than the sum of the payments you are consolidating
- you will be working with a single creditor – often a bank – instead of credit card companies
- you will have extra money each month, to do those things that make you happy
After reading that list again, I can really understand why so many people use the debt consolidation as a means of managing their financial picture. However, the problem isn’t what is on the list, the problem is what is left off of the above list. The problem is what gets people into trouble in the first place – overspending.
People that need debt consolidation loans are people that have more debt than they can (reasonably) pay back. They have either dealt with an emergency situation that caused them to borrow money (because they didn’t have an emergency fund) or they simply have been living a lifestyle that exceeds their paycheck. Either way, the one thing that gets most people in trouble with debt consolidation is lack of discipline.
Not having creditors calling anymore, not having to worry about which bill to pay, and the feeling that you are finally on the right track to getting things under control is all an illusion. Unless you have dealt with the overspending that caused you to need the debt consolidation loan in the first place, it is very likely that you will continue with the same lifestyle. That lifestyle will in just a few short months look like three credit cards with a monthly balance and you wondering what just happened.
So what should you do? Run! Run away from the idea that a debt consolidation loan is a wise decision. Run away from the lifestyle that is out of control with spending. Run away from the friends that aren’t looking out for your best interest…and while you are running, look for someone that will hold you accountable for your decisions. The best alternative to a debt consolidation loan is a budget and if necessary a second (temporary/part-time) job.
Financial freedom is possible, without debt consolidation. Either way it will take time, but the first step must begin with a decision to start living on a budget that is designed around your actual take-home pay. Don’t think that borrowing money is the way to get out of debt. That is the plan the government is on right now, and look how that is working out for your tax bill.
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