Money Management

DON’T MESS WITH OTHER PEOPLE’S MONEY

You must be 100 percent accountable in all money matters. If you owe someone, they must be paid. If you write a check, it is the same as cash. How do I do this?

INTRODUCTION

The financial system is designed to separate young people from their freedom as rapidly as possible. This is accomplished by getting them in debt up to their eyeballs. People deep in debt have a constant fear of losing their JOB. Debtors cannot see the big picture nor do they dare to be free thinkers. If they question the system or “rock the boat” their job might be lost.

The world will always be a place of extremes (Right or Wrong that is the way that it is). There will always be those that feel that they have a right to profit from the misery of others. Most may not recognize these tendencies as enslavement but the results are the same. The mad desire to have control and power over others has not changed since the beginning of time. The current method of enslavement and control is the economic system. It is no longer necessary to exercise physical control. The ability to control the emotions and the mind with financial pressure is now real.

Buy now and pay later allows the control of the people. Why should you wait for something until you can afford it. The truth of the matter is that if you can’t afford to pay cash, you can not afford to buy.. My personal opinion is that the only thing that you should go into debt for is a house. THE RICHEST MAN IN BABYLON states that you only rent your house until you have paid for it in full. This is a truth, however by making payments on a house you generally will gain something of value that will have value remaining after it is paid off.

The debt system can be made to work to your advantage by strong self-discipline and by paying cash. Many times when you pay cash for major purchases you can get a better price. Don’t be deceived by the argument that you can buy for a low interest rate and keep, your cash. In the end you pay more. It is obvious that if you were to put the same amount in savings each month that is use to make the monthly payment you will be far ahead at the end of the payoff period. Two things happen when you pay cash and put the amount of the payment in saving. You save the interest you would pay on the contract and you make the interest on the saving. If the interest on the purchase is 6% (this may be the advertised rate) and your savings account pays you 5% then you are making 11 %. Even if you subtract the two you are still saving 1%. For example:

You purchase a washing machine for $500 at 6% interest for three years. Your payments on the declining balance system are $15.21 per month. Your total cost is 547.59. However if you pay cash and put $15.21 in saving each month your have in three years $547.59 in saving plus the interest earned is $40.87. You total saving at the end of three years is 588.46 and you have the new washer. In reality you have made about $50.00 for paying cash. You ask “What about inflation?” If the inflation rate high is the interest you pay won’t be 6 percent. The real interest rate will be more like 20 percent which is approximately what you pay if you buy with a credit card

I can’t pay cash. I don’t have any money. Maxine and I have been married for 25 years we brought out first new washing machine a few years ago and paid cash. The others, were all used (three I think). I believe that one of the used ones was better than the new one. We bought our first new dryer this year and I know the old one was better and used less electricity. My point is with a little shopping about you can find good used items. Then put the money for the payments in a saving account.

An excellent example is the way a friend finances his cars. His Father gave him a car in high school and asked that his son put the amount of the car payment in the bank each month. He has done this faithfully all his life. His wife drives a Jaguar Cabrolet and he drives a new Jeep’ Grand Cherokee. His Automobile savings account is still healthy and well

This beats the debt system and the system of economic slavery. You are in the drivers seat not your creditors.

Checking accounts are a trap for today’s lower income folks. When you are making just enough money to get by a small mistake in your checking account can cause bankruptcy. I know of one instance where a 50 cent error in a checking account cascaded to over $500.00 for one young man. He had over draft protection tied to his savings account. The bank charged him 18.50 for each overdraft item that came in as a result of the 50 cent error and each of the returned checks which the bank sent back anyway cost him $25.00. The grand total of charges was over $500.00

SIMPLE MONEY MANAGEMENT

Can I avoid all of this pain and discomfort? The answer is yes. The method to put your self on a cash basis is simple. There are four basic things that you must do. (At this point I will give you the perspective of a member of The Church of Jesus Christ of Latter Day Saints. PLEASE USE THE GROCERY STORE METHOD, IF YOU NEED IT TAKE IT HOME, IF YOU CAN”T USE IT LEAVE IT ON THE PAGE].

1. Pay your tithing of 10 percent.

2. Pay your self 10 percent.

3. Track all of your expenses and income.

4. Review monthly your expenditures and income.

The information and insight of these four actions will allow you to devise a plan to get out of debt or to say out of debt. Look over your expenditure to see what can be eliminated. Use this money to pay off your bills. Take the bill with the smallest balance and pay the money that you saved through tracking your expenses as an additional payment. When this bill is paid off take that money plus what you are saving by being aware of your expenses and pay off the next smallest bill. Continue to do this until you are debt free. This seems like a simple process and it is but it is not easy. This simple plan requires a great deal of self-discipline.

TITHING

Tithing is how we pay back for all that is given to us. Personally I know where to pay my tithing. How you pay it and to whom is up to you. It is a natural law that we must give back ten percent of all of our increases.

The first words out of you mouth were “I can’t afford to pay 10 percent tithing.” The second thought that you had after reading those four actions is, “If I could save money I wouldn’t be in debt.”

THE VALUE OF TRACKING YOUR EXPENSES

You can follow this plan. I had a friend made a substantial income each year, nearly $100,000 a year. He was broke and is the perfect example that being broke is an action that is not related to how much money you earn. Tracking of his expenses showed that he was spending $83.00 per week for espresso coffee. My friend decided to switch to water. He saved $332.00 per month. This paid a good chunk of this tithing. Then he decided to quit smoking as this was another $50.00 a week expense. He found another $200.00 per month from his cigarette bill. The drink after work with the “boys” was costing him another $400.00 per month.

This man saved himself $932.00 each month by just cleaning up his life. Guess what else happened, he told his insurance agent what he was doing. His car insurance went down over $100 per month after he had established his new life style. He decided to cheat a little at this point. His take home pay was only about 60,000 per year. He reasoned that he needed to save $6000 dollars per year. He had saved enough to pay 10 percent tithing and a portion of this saving by cleaning up his life style. As my friend reviewed his other family expenses he and his wife found another $4000.00 per year that could be saved. They applied the plan and at the end of four years had money in a savings account and no credit card debt. (They also did not buy new cars each year).

It this story a myth or a plot of a creative imagination. No it is not, these kinds of experiences are in all our lives. If you will apply the simple four step plan you will get out of debt. It is clear that each of us can become financially independent.

Tracking your income and expenses is a simple thing but difficult to accomplish. My method of tracking is to keep a small note book in your pocket or purse. Wal-Mart has these for less than a buck. Write down every thing that you spend to the last penny. Include the date, what it was for and the amount. Write down every penny that you receive as income. Include the date, where it came from and what you did with it. Did you put it in your bank account or in the dresser drawer?

REVIEW OF INCOME AND EXPENSES

After tracking all of your income or expenses for about a month look over the expenses and see which one are necessary and those that are not needed. Decide what you are going to do to cut those expenses. Develop a spending plan. You must first provide the basic need of life for your family, a place to live, food in the cupboard and heat in the winter with clothes to wear. Each family must determine its basic needs (kids, this does not include a cell phone, a computer in every room and all the cool clothes). Your spending plan must be developed by the family. All members must be allowed input. The Head of the family must make the final decision.

As you proceed in financial planning the family net worth should be calculated. This is a simple process, just add up all that you own and subtract all that you owe. Not really as simple as it sounds but you get the idea. After you have calculated your net worth you have a figure that can be tracked. Each month the family net worth should be figured and the progress noted to the family.

SUMMARY

In summary managing your finances is simple but not necessarily easy. It takes discipline to track your income and expenses and to stick to your spending plan. You can do it!! An excellent reference to this plan is THE FOUR LAWS OF DEBT FREE PROSPERITY. (I bought my last copy from Amazon.com).

This seems like a really simple plan for getting out of debt. It is simple and the action to make it happen is yours. You must take the action. As you complete these four actions other things that you can do to improve your financial situation will appear. Don’t ask too many questions: Just Do It.