Financial Success Principle #1

It may be easier to say it, than actually apply it, particularly if you consider you are not making enough money. But the thing is, it effects individuals and families that have low income and much higher income.

What’s the principle?

It boils down to simply spending less money than you make.

Obviously, this implies two directions towards managing your money:

a) Spend less
b) Create more income

Some would argue that they cannot spend less and some would argue that they cannot expect more income. If either were true (and they are not), then such a person, or family, would be doomed to financial disaster.

Continually borrowing against credit cards or other personal loans, and hoping that you will become solvent by winning the lottery or finding an unidentified money sack on your front porch are not viable options for successful living.

Spend Less

Reducing one’s expenses may be uncomfortable, but it’s vital if you cannot pay your monthly bills. Look for any recurring bills that represent services that you can do without – and reduce or eliminate them – at least until you create more income. Only you can determine the priorities of what are absolute necessities and what you can live without, but certainly, on a very fundamental level, you need food, clothing and some form of housing to survive. But even those basic needs may be reduced, if needed. But what about everything beyond that?

Of course, instead of reducing expenses, the better solution is to create more income.

Create More Income

On a temporary basis, creating additional money could mean doing extra work, whether that be working longer hours at your job (for hourly workers), or taking on a temporary or seasonal part-time job, and/or taking on a longer-term second job, if that is what it will take to handle your finances.

However, working two jobs for the rest of your life may not be what you consider a successful living arrangement. Ideally, it might only be necessary for a shorter period of time, perhaps no more than several years, depending upon your financial circumstances.

If you are particularly industrious, starting a secondary source of income that is a part-time business could be a potentially viable way to handle your finances. This is easier said than done, and there is no shortage of business failures. So, this is not for everyone.

But if you are a persistent individual and can truly deliver a product or service that people will pay for, and you can get that product or service known by people who will pay, you have the basis of a business.

In some cases, you might even find that, over time, your business provides a greater income opportunity than your job.

Reduce Your Debt

You have one more option to reduce your debt. You can reduce your existing debt by way of a professional debt negotiation service. To find out more, click “Contact Effective Financial Solutions” for a no cost, no obligation consultation on you can benefit from a professional debt negotiation service to substantially reduce your existing debt load.

It also shows that some states are worse off than others, including Mississippi, Texas, Nevada, South Carolina and Louisiana.

“We’re collectively about 27% riskier credit bets than we were a decade ago, according to the TransUnion credit bureau. The firm’s national Credit Risk Index for the first quarter of this year clocked in at 127.3 compared to the 1998 start-point of 100. The index is based on the average weighted probability of 90-day delinquencies on mortgages, auto loans and credit cards.”

Click here for full Credit Crisis article.

These are not happy times for consumers, creditors or the economy. Consumers are having a hard time making their debt payments, and those that have money are saving more. Of course putting money in the bank is always a good idea, even if it has not been a tradition for many Americans in the past few decades.

In this era when “cash is king,” if you have money, good deals can be had. But if you are barely making ends meet, cutting back may be the main way of getting by.

And if you’re over your head in debt, then this may be the time to learn more about debt settlement and debt negotiation. Just click “Contact Effective Financial Solutions” for a free and no-obligation personal debt consultation to get you on the road to a debt free life.

Click the following link to to read the full Bloomberg article entitled, U.S. Consumer Credit Fell for Fourth Straight Month

As we have seen, this has resulted in widespread foreclosures and bankruptcies for investors, entrepreneurs, business owners and everyone else directly impacted by the ramifications of previously inflated assets dropping precipitously.

The way such institutions handle their reckless ways is to reduce the availability of credit. Heck, we have seen lenders unable (and/or unwilling) to lend further, even with government bailouts, as a result of the banks’ earlier losses.

As a loose comparison, it’s somewhat like a business owner who has such a gambling problem that he failed to make payroll and adversely effected all his employees. And then, after receiving a loan from the government, didn’t want to spend the money because he is still crippled with other complexities resulting from his gambling.

That comparison is flawed for an important reason: In spite of his gambling problem, the business owner may very well be presiding over a business that provides fair exchange and value to its customers.  The credit industry is not based on such a premise, even in the best of times.  Its entire purpose and reason for existence is to mire consumers into debt problems so that the credit card companies can ensnare  consumers within a never-ending debt trap and keep them paying high fees and interest rates for the rest of their lives.

If you are caught in that trap, and would like to get out of debt, without bankruptcy, click “Contact Effective Financial Solutions” for a free and no-obligation personal debt consultation.

That is good news for the economy.  But it may not translate into immediate help for your debt burden.

Click “Contact” to call or email for a free consultation on how to best handle your personal debt, without filing bankruptcy. In many cases, your unsecured debt – especially credit cards – can be negotiated lower to significantly reduce your financial stress and put you on the path towards financial solvency.

DEFINITION OF ECONOMY

You’ve heard the word “economy“, in fact, it’s probably just part of the continuous hum that is in the news.

But, what heck does it mean?  Why is it so complicated?  How come it is made to be something only well educated people seem to know about and yet, it gets all messed up when they get their hands on it?

I’ve learned that when something is really complex and perhaps too complex to understand, there are many lies in it and it’s those lies that make it seem like only geniuses can understand it.

So, here’s what economy really means per the dictionary – “the management of money earned and spent in a home, business, etc.”  Webster’s New World Student Dictionary.

Ok.  How hard is that?  You manage the money you make and the best way to handle money is to spend less than you make.

If this is so damn easy to understand, what happened to our country’s economy?  Well, you get a few “know-best” people that are out to make their own money and have no vision of the consequence of their actions and voila! you have an economic mess!

You think that’s too simple?  We have a client that is a professor of economics in a major university – a professor, mind you – and he was not only $150,000 in debt, but he was blown away when I went over these terms with him.  I told him about this stuff before I knew he was an Econ professor.

MONEY!!

With economy being really so easy to understand, what’s money?

Well, you can say that money is currency and stuff like that, but that doesn’t say what it is.  Money represents goods and services.  Rather than a farmer walking down the street with a bunch of cows so he could buy stuff (trade his cow for bread and other things), he has money that represents goods and services.  That way, a chiropractor doesn’t have to adjust the store owner in order to buy clothes, though that could happen.

Money represents energy – the fuel to keep things going or to start things going.

If you took a $20 bill out of your pocket and really looked at it, it’s just complicated paper, complicated so people can’t forge it.  But, beyond that, it is paper.  It’s what it represents that gives it value.

So, you need money as energy in order to get the things you need.

MONEY AND ECONOMY DO THEY GO TOGETHER?

Let’s put money and economy together and see how they relate.How to manage your energy (money) is what economy is all about.  Should you spend money that you don’t have in order to get the things you “need”?  Well, how well does that work?

First, understand that the goal “to have lots of money” is a bit shallow.  It’s like saying that your goal is to have an electrical power plant.

What do you want money for, and don’t be corny by saying that you want to be able to get lots of stuff and not have to worry about things.  What is your GOAL with your money?  What do you want to accomplish that money will be able to help you?

Money is energy, not the goal itself.  We are a money motivated society and so, with stupidities about money and economy in place and silly goals to “have lots of money”, we have our current economic mess.

In order to work the 2 together, money and how you spend it (economy) you have to have a goal, an objective, that you are trying to achieve.

Then, you use money to help you get to that goal.  But, money is not the goal, it’s a tool that can help you get to the goal.

There’s nothing wrong with wanting to make money, but as an end goal, it’s silly.  Making money so you can accomplish an objective that is valuable for you and others is important.

See, you have to see that money is a tool to help you and that managing your money so you spend less than you make, sensible economy, is the way you can achieve your dreams.

GOOD DEBT – BAD DEBT

It’s been said that there is “good debt” and “bad debt” and this is true.  There is debt that helps you to make money.  For example, if you have a good product to sell on the market place but you need some investors to help manufacture it,  then you can say that the investors put you into good debt.  Your goal is to make money by using money.

In the past, Real Estate has been another source of good debt where you put down 20% of the purchase price and the bank puts down 80%.  You make the profit as the value of the real estate increases.

Those are examples of good debt – money borrowed that helps you make more money.

But, what about credit card debt?  Is this good debt or bad?

Well, if you use credit cards to buy clothes and other such treasures that don’t give you a return (of more money) for your investment, then that would be bad debt.

So, you borrow money to make more money – that’s good debt.

Spend money for stuff that doesn’t give you an increase in money – bad debt.

DO YOU HAVE A BALANCED BUDGET?

But , you say, you are living within your ‘budget’ so what’s the big deal!  You’re able to pay your bills.

Ok. You are living within your budget, but that is based on your income being at the level that it is at.  What happens if you have a medical situation, or your wage is cut, or you lose your job?  Where is that balanced budget?

See, creditors want you to go into debt based on your budget.  But, you have to ask yourself this question, if you had to, could you pay off all of your debt with money that you have saved? If you can, then you truly are living within your budget.

If you can’t pay off your debt all at once if you had to, then you are definitely not living within your budget and you need to get yourself out of debt.

Living within your budget means you have the means to handle all of your debt in an instant if you had to.  It doesn’t just mean you now make enough money to meet your obligations because should your income change and go lower, you would have a problem and immediately your budget would be in bad shape.

You need to do 2 things: One, focus on reducing your debt and Two, create and execute a plan to make more money.  Then, you will get yourself completely under control of your finances and you will truly live within your budget.

Maybe you’ve never heard of “deflation” because it’s not popular for businesses, but it does exist.

Recently, the gas prices hit the roof going up as high as $4.50 a gallon.  That dramatic increase in price is called Inflation.

But, the price of gas suddenly went down to $1.80 a few months later and that is deflation.

INFLATION AND DEFLATION -MONEY OR LESS MONEY

So, yes, you can say that inflation and deflation are what happens to the price of things – they go up or they go down.

There’s another way to look at both of them and it is from 2 other ways: One, there is more money (inflation) or there is less money (deflation) in the system and Two, there are more product in the market (deflation) or less product (inflation).

Let’s clear up the idea of more or less products in the market place.

Each basketball costs $1 and you have $4 and there are 4 basketballs to buy.  Using this as an example, let’s create an INFLATION where there are less products.  Take away 2 basketballs and still have $4.  Now, each basketball will cost $2.  The price for each basketball went up because there were less products available.

Now, let’s take the 4 basketballs and the $4 and add more basketballs, like 4 more, so there are more available to sell.  You still have $4, but now there are 8 basketballs.  That means that each basketball now costs 50 cents, the price for each went down.  That’s DEFLATION.

We can do it from the increase and decrease of money to make inflation or deflation.

With the 4 basketballs and $4, let’s add more money.  Let’s have $8 and 4 basketballs.  Now, each basketball will cost $2 rather than $1, because there’s more money.  That’s INFLATION

If we take away money, so it drops from $4 to $2 and still have the same number of basketballs – 4 – each basketball will cost 50 cents.  That’s DEFLATION.

With the drop in gas prices from $4.50 to $1.80, that is a DEFLATION (but you never heard of that in the news).

The solution by the oil companies was to create a scarcity meaning, announce the fact that there is less oil available so that there is less product which brings the cost of oil back up.  And, you have seen the price for gas increase over the past month.  That price increase is INFLATION and it is based on lowering the amount of product on the market.

This should help you better understand these 2 words, Inflation and Deflation.  That way, when you see prices go up, it means 2 things could be happening: More money in the system, or less product in the market.

Feel smarter?

Great!

PAY LOANS AND CASH – WHAT TO DO?

Payday loans are a great way to get cash right now at the sacrifice of your paycheck, meaning, you will not get all of your paycheck when you have to repay your loan, you will be charged for the loan.

That can mean that if you are short because you had to pay back the quick loan, then you might be short again in your next pay period.  In other words, it is costing quite a bit to get that short term loan.

Oh, but you really need the money!

I understand and that’s why companies like that exist – to give you the fast money.

BUDGET AND EXPENSES

What you really need to do is to live within your budget and more exactly that means, spend less than you make.  Just do that and you will avoid the emergencies that lead to needing to get a Payday Loan.  I have seen many a person come to me to settle their debts and amongst them is a Payday Loan.  Not a good thing to do to have to settle that type of loan.

My strong suggestion is to avoid the Payday Loans and just spend less than you make.  That way, you have planned into your budget a possible emergency.  If it comes, you’ll be ready.

The word, “economy”, means the management of money. It began with money management in the household, then it grew to governments, etc.

“Philosophy” is a word that means a description of living, why things go up and down and how to explain life.

When you couple the 2 words together, you get “economic philosophy,” which would mean an explanation of how to best manage finances, the philosophy being what a person or group feels is right.

In truth, “economy” is not spending more than you make. It is now fashionable to spend way more than you make and that shows itself in credit cards.

ECONOMIC PHILOSOPHY AND CREDIT CARD SPECULATION

Here’s how it works with credit cards – you don’t have the $2,000 to buy the new furniture, so you put it on your credit card. The monthly payments are made and your whole economic philosophy is based on the fact that you can keep up the monthly payments. That’s speculation because you are hoping that everything in the world will continue to go as it has been going.

However, then you have a pay cut, or a medical condition or even divorce. Something happens that throws off your certainty that all will continue to be good.

SENSIBLE ECONOMY

“Sensible economy” would mean that you don’t spend money until you actually get it in your hands.

There is a lot of economic philosophy out there that, as you can clearly see, is not sound, sensible philosophy, but one based on profits for the business and some corny idea that if we provide a way for people to spend more money than they make by charging it to their credit card, then the economy will be better and people will have more jobs and on and on.

Well, you just look around and see how well that “philosophy” is working and see that it isn’t. Then there’s confusion on what should really be done about the economy and then there’s new philosophy on top of the old one and the lies just get built up.

SUCCESSFUL ECONOMIC TRUTH

The truth of any successful economy is to spend less than you make.

How hard is that?

Not very hard at all.

Work back to that economic philosophy – spend less than you make – and things will be fine no matter what happens to the government and their “new” dribble down economy, or the balanced budget philosophy or any of the other stuff that comes and goes.

Make it, then spend it and don’t spend before you make it. Then, take a bit and put it aside for a rainy day and then never spend it.

It’s as easy as that!