Some of our new year’s changes/adjustments are getting dusty already and we are only just over one month into the new year. Here are a few more thoughts to help us survive the economic recession and improve our economic status.
1. Assemble a personal financial statement. Create your own balance sheet, measure your assets and assess all your personal liabilities including credit card debt and short term loans. Get to your real net worth.
2.Analyze your liabilities. Divide you liabilities into two columns: current balances and what the same balances will be one year from now; use an amortization schedule for each loan. Be sure to include home mortgage(s), home equity loans, car loans and all credit cards. Include interest rate next to each loan type, balance and amount.
3.Analyze your short-term debt. Credit card balances and home equity loans; what principal payments can you make during the next 12 months to decrease the liability/balances. Can some of them be converted to lower interest/longer terms?
4.Create a monthly budget. It should already be a part of your household and
business plans; Assess your average monthly income and include realistic expenses for each week: groceries, utilities, car payments, mortgage payments, entertainment, medical and education costs. Keep an eye on your checkbook and bank statements for help in constructing your monthly budget.
5.Forecast your income. I know, it’s very hard but it should motivate you to prospect a lot more for new business! After you create your budget, take a hard look at it and do the best you can to have extra income available to pay down your short term debt. If you do this you will be, at a very minimum, fully aware of your weak and strong areas and you can go to work at it from that angle.
6.The credit card freeze. Open up your wallet or purse and pull out all those credit cards and lock them up somewhere out of your reach. Keep only one credit card for real emergencies and Starbucks is not one of them! Stick to your checkbook, debit card or cash: they remind you of actual balances as you try to use them. Just try it for 30 days and you will be amazed at how much less you will spend.
7.Show discipline. All of the above is totally meaningless unless you make a strong personal commitment to it. We are all guilty of financial waste and unnecessary expenses but we still need to be realistic at some point and end the needless costs. Try eating out less, buy only what is absolutely necessary, forget that bargain; only look at keeping money as your first real savings and there will always be bargains and “final sales.” Worst of all is to keep paying interest only on high credit cards balances, where will you be or go to next?
8.Save money. In an economic recession, along with our well known
real estate pains, everyone is struggling to survive and talking about savings, retirement and plan contributions seems almost comical; however, it must remain a real part of every monthly budget. We must continue to contribute to all of our plans regardless of how little we can afford; as long as we put something in, it will add up. At the end of the day we all know that it’s not how much we make but what we get to keep that really matters.
A monthly/yearly financial statement and budget will accomplish three very important goals:
* Make you realize your real net worth
* Keep you focused on how much you are spending that you could do without.
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