This Article is About
money
assets and liabilities
pocket notebook
household services
money in your pocket
spending habits
living expenses
debts
Control Your Money Part 3
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Control Your Money Part 3

From the previous 2 articles we have learned why people fail in handling their finances. We have also learned to start tracking our spending habits. We now know about the success six technique . We have also found some savings by reviewing our household services. So, lets put this money information to work for us.

First we need to understand the difference between assets and liabilities. I have heard many different definitions for these words but my favorite is simple. Assets put money in your pocket and liabilities take it out. Which means that if you are carrying a home mortgage right now that home is a liability. Oh, I can hear the bankers and the accountants going crazy over this. Mortgage interest makes the bank rich not you. Income tax break by having a mortgage? Really? Spending a dollar on interest to protect 20 cents of income? It's your money. Let me repeat this again; assets put money in your pocket but liabilities take it out. We are always going to have living expenses but liabilities are not necessary.If you lose your job you will not have to worry about having a lender foreclosing on your home if it's paid for.

In order to tackle that debt you need to eliminate all other debt first. So line up those bills and put them on paper in order of smallest balance to highest.

Since you are already making payments on those debts you will keep all payments the same except the one with the smallest balance. You then take the money you saved by making changes to your household services and apply it to this debt in addition to the amount you where paying them to begin with. It looks like this: Balance $500. original monthly payment $25. plus additional $50. You just tripled the amount you were paying them without changing your monthly income. Pretty neat trick wasn't it. Let's find some more cash.

The pocket notebook you have been using to track your spending habits is where we will find that money. If in that book you discover that you can't get to work without that $3.50 cup of flavored coffee, stop. Go to one cup a week. Take the $56 a month savings and apply it to your smallest bill balance also. You are now putting $131.00 a month on that bill. You still haven’t changed you monthly income.

Are you starting to see the picture now? If you are married, both of you need to track your spending habits to double your efforts. It is very common to find an additional fifty dollars a month in there also.

Now, the first debt is paid off and you have been making the monthly payments on the others all the way along. So, it's wash, rinse and repeat the cycle with the next smallest bill balance. You are now seeing progress and you still have not increased your monthly income. It all goes back to the false believe that there just isn't enough.

Your financial success depends on your willingness to stick to it and work for it. Avoid making any more debt any way you can.

Next time we will look at preparing for the inevitable. Tires wear out and hot water tanks spring leaks. Imagine how it's going to feel to pay cash to solve life's inconveniences.

It's your money tree so make the best use of it you can.


Street Talk

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