Most people wince when they see every single step and not be afraid, it wont hurt I promise. Remember I said the steps were simple, I never said that they would be easy. Start with a piece of paper and write down all the money that comes into your home every month. Its good estimate if you do not know the exact numbers, but to be conservative. In this case, a low score is better than a big one.
Next to all the accounts that you pay each month and write down everything. Mortgage, car payment of electricity bill, trash bill ... you've got it. Your doing great. Now subtract the accounts of its income and what is left is your disposable income. ' One quick side note, if the number is negative, you have to find a way to cut monthly bills or increase your income. We're going to talk about ways to reduce the bills come in stages, but you never get ahead financially if you spend more than you do.
Disposable income is the money we need to do fun stuff. Movies, restaurants, coffee in the morning. An important step in the budget is tracking what you do with your disposable income. My challenge to you is to watch him a month. Every time you spend money, keep the receipt and take all of 30 days after the appearance of revenues. You'll be surprised what you find. This is a very successful experience, realize that you are buying a $ 100 value of coffee on the way to work in a month or $ 300, because you do not want your dinner, if you smoke or drink alcohol regularly be ready to see a shocking number.
Once you figure out your disposable income to put it into your budget. Is there any money left? Probably not, most people spend what they do, but if so good. We're going to take this money and put it to work for you. If there is no money left to search a number of simple ways to free up money to use more action. Would you like to refuse a cup of coffee at night, or your lunch to work once, and become financially free. I'd love to. Take another look for your budget and look for ways to invest in your future.
Step 2 - pay down debt
If you have a debt or the debt issue at this step, it seems silly and difficult, but if you are disciplined and stick to it, this is a great way to pay back the debt quickly. In my career I've seen this technique used many times and do any number of different ways. This is my favorite. Find all debt payments have to include everything but your mortgage. Look for credit cards, personal loans, student loans, vehicle payments, and balance them to sort from low to high. I've seen people advise customers to sort their debts interest rate so you pay the debt with the highest rates first. Therefore, I ask you to sort them balance when you start and you find yourself to pay things off quickly you are more likely to stay motivated and keep going.
So now you have your list. Take the money set aside in its budget, and with a minimum payment for a minimum loan. Continue to make more payments, together with the minimum payments on all your other loans, while the minimum loan is gone. Continue to take the amount you paid on loans for small and put that with a minimum payment of the next largest loan is gone. When the loan is gone you take a payment was made and add it to the minimum payment for the next largest loan. Continue until all your debts are gone. Please be disciplined and give this process a try. I saw a credit counseling companies charge their customers more than $ 2,000 to use the same process. Stay focused, you can do it.
Step 3 - Create a personal savings
Look at your budget now, it seems that you do not have any debts. What are your monthly expenses? Include all of your utilities, your mortgage payment, the cost of their disposable income. How much money do you spend per month? Take the money used for debt payments and put it into the savings account. Most experts say you should have at least three to six months of expenses to save for emergency situations, but in this economy, who knows what could happen, and since you are debt free, and your costs are low, I recommend at least six months and possibly as many as 9 up to 12 months of expenses. Go ahead to build the savings account and once that money is saved you will not be inclined to go back to credit cards when someone is coming.
Step 4 - to save for retirement
Ok, at this point you are debt free and have saved a lot of money for emergency aid. You're in good shape. Now is the time to focus on retirement. The best way to save for retirement is through your employer, usually 401k. Therefore, it is the best because it is automatic and it comes from your paycheck pretax. What does this mean to you? This means that you can contribute a lot of money into your plan so even noticing. In addition, many employers match employee contributions up to a certain extent. So, how should we help you? Most experts say you should contribute 15% of your average salary over their career. I say you should contribute, at least, and any employer match does not count as a contribution to this should be just the premium. The money is for you and your retirement, except in so far as you can, contribute the maximum you are allowed, if possible. You will thank yourself later.
So there you have it. Four simple steps to financial security and even financial freedom. Again, the steps are simple, but they are not always easy. With a little discipline and determination you can achieve financial situation was never thought possible.