This is a guest post from Mary Hunt, author of Debt-Proof Living. She also runs the Debt-Proof Living website, and is an inspiration to many frugal folks.
Recently, I got a message from Natalie who explained that as part of a financial preparedness night, she’ll have ten minutes to speak about financial freedom. Her question to me was, “What would you talk about if you only had ten minutes?”
Only ten minutes? I find it difficult to introduce myself in that little time, but I’m up to the challenge. So fasten your seatbelts. Here’s a ten-minute crash course in financial freedom.
SAVE. Don’t confuse saving money with spending less, as in “I save money when I buy things on sale.” You’re not saving at all; you’re just spending less. Saving money means that you actually put money into a safe place for some future time. Do that. Starting right now and forevermore make it a rule that you will put some amount of your paycheck into a savings account before you spend any of it. Make it automatic and you won’t miss what you don’t see. Goal: 10% of all you receive goes straight into savings.
GIVE. Give away the same amount as you save. Just give it away — no strings attached as an act of gratitude for what you have, how you are blessed. Goal: Give back 10%.
LIVE. Rein in your lifestyle so that it fits into 80% of your net income. Reduce your spending in every area of your life by a small amount and you’ll be able to achieve this, and probably sooner than you ever dreamed.
CREDIT. You need only one credit card. Put the others away so you can’t use them. If you have a balance on the one card you keep, don’t carry it with you. You’ve given up that privilege until you’re able to pay it down to $0 every month.
DEBT. The only debt that is safe for you to carry is secured debt (mortgage, car — anything with collateral). All others are dangerous to your wealth. Make a plan to pay off all of your credit-card debt quickly. See this as critical to your financial health.
CASH. It’s proven that you’ll spend about 30% more if you depend on plastic to pay for day-to-day spending. Leave the plastic at home. Live as much as possible with cash. Inconvenient? Yes. That’s the point.
PLAN. Society wants you to believe that living spontaneously brings freedom. Just the opposite is true. You need a budget (which is just a way that you “pre-spend” your paycheck on paper) so that you know ahead of time where your money will go. Write it down and then stick to it.
GET SUPPORT. You need to know that you are not alone; there are thousands of people getting control of their financial lives, too. Find a website like Debt-Proof Living or one of countless personal financial blogs like Get Rich Slowly. Sign up, visit daily. Get involved to stay on track.
There you go. If you follow these eight simple steps to manage your money, I guarantee you’ll find financial freedom. Whew! Did we make it in under ten minutes?
Note: Sierra recently reviewed Hunt’s How to Debt-Proof Your Marriage. In the past, J.D. has written about Hunt’s notion of using a freedom account to prepare for the unexpected.
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Related Articles at Get Rich Slowly:
- Why Pursue Financial Freedom?
- How Do You Define Financial Freedom?
- Free Crash Test Videos from Consumer Reports
- One Uncle’s Advice About Money
- Use a Freedom Account to Prepare for the Unexpected
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