There is no simplistic answer to getting out of the trap that many have created by choosing to consume before choosing to save. The reasons why someone makes the choices that they do early on in their professional career are many and varied. Some people own certain homes and automobiles because the bank said yes ,not because they had the money to outright purchase them. In that sense for most people the idea of signing up to 30 year contracts on houses and up to 6 year contracts on cars seems like a great idea at the time. It is about ten years into these decisions that we start to feel a little trapped by them. They are limiting our freedoms, limiting our travels, and limiting our ability to change careers. At least that is what we begin to believe.
It’s very common to say that debt is economic slavery but no one makes you get the credit cards , cars or home loans. On the reverse side of that statement, no one can make you keep going forward in those bad decisions.
Your freedom is in changing course quickly and with as little damage as possible.
Don’t do anything crazy, crazy got you here, so let’s do something practical. Let’s sit down and figure out what we want to accomplish with our money and second if our current actions are moving us toward that goal.
Our money does two things very well. It can enrich our lives and the lives of our families or it can enrich the people we owe obligations. The money you save enriches you. The money you pay in bills enriches others.
At this point in life, what do you want? I’d like to expand my career in financial education and make a huge difference in how my people build wealth, realize dreams, and transfer knowledge to future generations. I’d also like to have as few monthly bills as possible and no personal debt. In addition, I’d like to travel at least 8 weeks a year for pleasure outside of business. Most importantly, I am building a system that will provide my family the income and information to generate wealth for generations to come.
Your goals are the fuel to get you through any of your past missteps so start with them. If you start by looking at your errors you may become distracted and unmotivated. Defend these goals with all your might. Taking your eye off your long-term goals can get you caught up in short-term money traps. Owning a series of cars can keep you from owning your dream car and owning a series of ever more expensive homes can keep you from ever purchasing your dream home. Add up all the car payments you have paid for all the cars you have ever owned. For most people by the time they are 45 yrs. old you have paid for a Bentley with all the car payments. Break the cycle and pay cash for the next car even if that means going to the auction and buying an affordable car.
Where is all the money going?
What is your salary or income? How much is going to taxes? How much is going toward housing? How much is going toward your car or cars? How much toward household expenses? How much toward education for children? How much toward charity? How much is going toward long-term savings? Right it all down because it’s all going to help free you from bondage.
Don’t just look at these numbers and come to the conclusion that you need to earn more money. Thinking you just need to make more money without getting into the proper relationship with money will just cause you to make much bigger and more costly mistakes when money begins to come in. I have seen households with over $200,000.00 a year in earning that can’t save 20,000.00 a year. This is because when there are no strong goals and plans to get there, all you have left is consumption.
Now that you see what your money is going toward you reduce the big money items. Maybe you should sell your house and get a more affordable house to create cash. If the house is worth less that you owe now is the perfect time for a short sale. I am seeing clients reduce their housing expensive by 1500.00 dollars or more a month just by selling and going to rent in a smaller home but a better neighborhood that meets their needs. What would it mean to your stress level to go from a $3500.00 mortgage payment to an $1500.00 a month rental payment. How much financial pressure is being relieved.
What about the car
Can you trade your car and car payment for one that is totally paid off or much more affordable? I have had clients trade in their cars with big car payments for used car in great condition. Don’t be afraid to turn in a car if the payment is killing you financially. I hear people saying but that will hurt my credit. Being broke will mess up your life and it’s only a matter of time before you drown in your payment. What would it feel like to go from a $700.00 car payment to a 150.00 car payment or no car payment?
Reduce Your Income Taxes by Starting a business
This is a whole other topic but the easiest way to reduce taxes is to start a small business on the side to create expenses that can be deducted from your gross income. Seek the advice of a great accountant and you will be amazed at how many of your travel, food, entertainment, transportation, and housing expenses can be written off. Reduce your tax basis, this is huge! The system in America was set up to favor small businesses and land owners not working people. Remember this at all times.
While you are considering the move make sure to move to a great school district
It is better to rent in a great school district than to own in a bad one. Many will disagree it is their right but great public schools pay for themselves in two ways. First private schools can cost $1000.00 to $1500.00 per month. many people have more than one child and 12 years of schooling is the difference between them retiring with millions of dollars for retirement or retiring in poverty. Your kids need to be educated well and unless a private school is going to give your child a scholarship, save yourself a fortune and move to a great district. I’ve seen people move from $500,000.00 single family home communities to large townhouses in a great school district and save $2000.00 a month on housing and another $2000.00 per month on school. How much faster could life get better if you were able to save $4000.00 per month?
1. Unless you are saving money in your account you are working for free, what you keep is what you earned the rest belongs to the banks
2.Write down your life’s goals
3. Write down where your money has been going, now and what it could earn you if it was going in your savings
4. Until you can afford to buy the house and the car your dreams only buy foreclosures, distressed property, and vehicles from dealer auctions. This will save you hundreds of thousands in payments and interest
5. Reduce taxes by opening a small business
6. Live in a great school district and educate your kids for free
7. The more money you save the more free and secure you become, personal debt equals economic slavery
8. Remember if you can’t get out of economic slavery your children won’t be able to get free either
Get help with reducing your large expenses now. Call me if you need help 410-908-5987.
Wishing you Well Wellness and Wisdom
Manager of Wealth