Hi everyone, I've decided to begin a series of financial advice post to share with you. Now, first of all, the reason I am doing this because this is the subject of my greatest interest. Second, even though I am in a financial restart for myself, I feel I can help give financial sense to people. In today's Economy, things appear to be in chaos and in a downward spiral. What we see in the economy and what is found in the majority of Americans, we must remember the importance to have our own houses in order. I hope the things I will be sharing with you will make good sense and make finances a little easier. Enjoy.
Here are some general Myths and Truths of Personal Finance:
Debt
Myth: Debt is a tool and should be used to help create prosperity
Truth: Debt isn't used by wealthy people nearly as much as we are led to believe
Advice:
Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. To my opinion, there should only be one thing is acceptable to go in debt with, that is a home. Cars and any other recreational vehicles depreciate the moment you buy it. They should be paid in cash, and if you don't have the cash, you can't afford it. But it should not be burden on you. Your monthly mortgage payment should not be more than half of your take-home pay. If it is, don't buy it, you can't afford it. If you're in debt, then you're a slave because you do not have the freedom to use your money to help change your family tree. It takes a lot of will, discipline, courage and help to slay the debt monster, but it is possible. Just think, how much wealth you can build toward retirement if you didn't have a stupid car payment? If you have wondered how the wealthy got where they are, they didn't do it by being in debt. Our nation has become the worshipers of the Holy FICO score. It has become a routine for people to be proud in how high their FICO score is. For a lot of people, they feel that it is the only way of living. Being debt free is the way of feeling rich, without actually being an millionaire and earning an average income in an America. If you are in debt, get out of it! I will probably give other posts that will give detail on debt reduction, but here are some simple advice. You should pay off the smallest debt first, not necessary the one with the highest interest rate. The math appears to make more sense to pay the ones with higher interest rates first, but personal finance is 20% knowledge and 80% behavior. By paying the smallest debt first, it gives you the momentum towards debt freedom.
Credit Card Debt
Myth: Aren't there positive uses of a credit card?
Truth: To the majority of America, responsible use of a credit card doesn't exist. Credit Card debt is a major problem in America.
Advice:
There are probably several different opinions for the use of credit cards. If you can't control your spending, credit cards should not exist in your life. You will spend more if you use credit cards. When you pay cash, you can actually see and feel the money leaving your hand. You can't feel that with a credit card. A lot of times it feels like invisible money being used. On average, you will spend 12-18% more on purchases if you use a credit card instead of cash. Just think if that money was put into savings instead. If you absolutely need to use "plastic," use a debit card. When you use a debit card it is a direct use of your money in a bank account, not a charge now, pay later scenario. On a side note, when you use a debit card to make a purchase and you are given the question, debit or credit, what do you chose? When ever you have this option, use debit. This is a direct withdrawal from your account. When you use credit, the credit card company charges fines to the company you are using your check card to purchase with. Interest rates in credit cards are also the worst in the world. Plus they have the ability to change them at anytime. Just remember you can't build wealth and financial freedom through credit cards. For those very few in an America that use credit cards responsibly, I'm sure they never use them for a certain amount of money that doesn't exist in their bank account. They would also always pay them off every month, as well.
2 comments:
Great Post! Thanks! I appreciate your understanding of the subject and desire to share your knowledge in a kindly manner.
If I may, I'd like to add to your post a little. From Joseph B. Wirthlin, “Earthly Debts, Heavenly Debts,” we learn some important priciples concerning finances.
Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs.Interest is a good servant but a terrible master. President J. Reuben Clark Jr. described it this way: “Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation. … Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you."
May I suggest five key steps to financial freedom for your consideration.First, pay your tithing. Do you want the windows of heaven opened to you? Do you wish to receive blessings so great there is not room enough to receive them? Always pay your tithing and leave the outcome in the hands of the Lord.
Obedience to God’s commandments is the foundation for a happy life. Surely we will be blessed with the gifts of heaven for our obedience. Failure to pay tithing by those who know the principle can lead to heartache in this life and perhaps sorrow in the next.
Second, spend less than you earn. This is simple counsel but a powerful secret for financial happiness. All too often a family’s spending is governed more by their yearning than by their earning. They somehow believe that their life will be better if they surround themselves with an abundance of things. All too often all they are left with is avoidable anxiety and distress.
Those who live safely within their means know how much money comes in each month, and even though it is difficult, they discipline themselves to spend less than that amount.
Credit is so easy to obtain. In fact, it is almost thrust upon us. Those who use credit cards to overspend unwisely should consider eliminating them. It is much better that a plastic credit card should perish than a family dwindle and perish in debt.
Third, learn to save. Remember the lesson of Joseph of Egypt. During times of prosperity, save up for a day of want.
Too often, people assume that they probably never will be injured, get sick, lose their jobs, or see their investments evaporate. To make matters worse, often people make purchases today based upon optimistic predictions of what they hope will happen tomorrow.
The wise understand the importance of saving today for a rainy day tomorrow. They have adequate insurance that will provide for them in case of illness or death. Where possible, they store a year’s supply of food, water, and other basic necessities of life. They set aside money in savings and investment accounts. They work diligently to reduce the debt they owe to others and strive to become debt free.
Fourth, honor your financial obligations. From time to time, we hear stories of greed and selfishness that strike us with great sorrow. We hear of fraud, defaulting on loan commitments, financial deceptions, and bankruptcies.
We hear of fathers who financially neglect their own families. We say to men and women everywhere, if you bring children into the world, it is your solemn obligation to do all within your power to provide for them. No man is fit to be called a man who gathers around himself cars, boats, and other possessions while neglecting the sacred financial obligations he has to his own wife and children.
We are a people of integrity. We believe in honoring our debts and being honest in our dealings with our fellow men.
Fifth, teach your children to follow your example. Too many of our youth get into financial difficulty because they never learned proper principles of financial common sense at home. Teach your children while they are young. Teach them that they cannot have something merely because they want it. Teach them the principles of hard work, frugality, and saving.
There are those among us who have been blessed abundantly with enough and to spare. Our Heavenly Father expects that we do more with our riches than build larger barns to hold them. Will you consider what more you can do to build the kingdom of God? Will you consider what more you can do to bless the lives of others and bring light and hope into their lives?
Joseph B. Wirthlin, “Earthly Debts, Heavenly Debts,” Liahona, May 2004, 40–43
Thank you Tahsha for the wonderful addition to my post. I really love Elder Wirthlin. Even though he graduated from the U, he did graduate with a degree in Business Administration, so he knows his Finances. Another analogy I would use for debt would be comparing debt to sin or the lack of light and truth. When one lacks light and truth, he/she is not truly free, same as having debt controlling your life. You want money to work for you, not you working for your money. Love You!
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