I would like to suggest some practical and possibly challenging but rewarding tips to get ahead financially.
In the past month I have been dismayed, challenged and inspired by the financial struggles many 'normal people' have. Watching a news story about planning for retirement and also a program called 'Til debt do us part' has opened my eyes to the position some people get themselves into financially.
The news story covered two sides of the spectrum in planning for retirement. Two men planning to retire at around 40 were interviewed at length about their strategy to reach this goal and how effectively they were progressing. Meanwhile, in between the interviews with these men, a grandmother openly confessed she and her husband had no money to retire on even though they were just years away from retirement age. This woman admitted her retirement planning was simply not to talk about it because it scared her.
'Til debt do us part' is a Canadian TV program that features a financial advisor confronting couples who are in extreme money trouble. These couples are presented with challenges that address the root issues of their financial difficulty, so they can overcome their debt and get onto a path of financial success. Most of the couples featured on the show are heading towards hundreds of thousands dollar debts (apart from their mortgage) within 5 years if they don't take hold of their situation.
While I am not qualified to deal with finances I have successfully saved and spent money throughout my life and listened/watched financial experts on this topic. I am able to say something about 'common sense'.
Common sense starters
To start the process of a winning financial position, a discussion about finances is essential, and the sooner the better. You may choose to talk with a qualified financial advisor, a person you respect in financial matters or just talk with your partner about it but we all need a game plan. If you are single you can make the decisions by yourself but you must also prepare an action outline.
This discussion should be a realistic look at your current financial situation including debt, savings, income, and estimated expenses. Following this you should make a proposed budget for the future that will prioritise the things you want or need to pay and savings plans that will allow you to live comfortably all your days and meet unexpected needs as they arise.
I am strongly convinced that God will provide for my needs but I believe His word calls us to be good stewards of what He gives us. Our responsibility for the stewardship of our money, which has been given to us by God, is the foundation of why we need to enter into a discussion about our financial situation at present and set goals for the future.
Common sense on credit cards
As your financial position is brought into the light there must be a game plan established. The plan of action will depend on the individual situation but reducing and becoming free of credit card debt and saving for short term needs, an emergency fund and for retirement should be priorities.
In 2011 the Reserve Bank of Australia released new statistics of our credit card debt. Their statistics indicate the nation is almost $50 billion in credit card debt, with an average card over $3000. This has jumped up 42% in just 5 years. (www.news.com.au )
For two thirds of those who owe money on their plastic card they are being charged the average interest rate of almost 20%! This leads to an almost never ending debt, even if minimum payments are made, unless the card owners aggressively attack the money they owe. Although credit cards are an easy way to purchase goods and the banks provide plenty of incentives to use them I believe it is unwise to swipe them unless you have the money in the bank. If you aren't able to do this you may want to consider cutting up your cards.
Rather than using a credit card for the things you want it is much wiser to establish a short term savings goal to buy this item. While you may have to wait a bit longer for your purchase the final amount you pay will be dramatically reduced and you will have time to reconsider your 'need' for the purchase. Short term saving goals are a great way to become disciplined with your finances and appropriately budget for the things you really want or need, instead of just flushing money down the drain with your 'magic' plastic money.
Common sense on saving plans
Saving for the longer term is essential because there will hopefully be a couple of decades we have to enjoy time with our grandchildren rather than go to work. This is called retirement and should be planned for as early as possible so we can feel comfortable about our living standards in the final years of our life.
Another important savings account to create is an 'emergency fund'. This money should be used only when there is an immediate and unexpected need or when a sudden loss of income is experienced and living expenses need to be covered. The money should therefore be accessible if necessary and be worth 3-6 months of living costs.
Once an action plan has been created the next step is to follow through. This will take discipline to record spending and possibly some lapses in spending before you are able to successfully stick to your proposed budget. Whatever happens try and stay with it and be flexible with your budget because it is only an estimate and may need to be altered as things arise.
Common sense on daily budgeting
One good idea to help you maintain your spending within the new guidelines is to create a system of cash for everyday expenses rather than simply swiping your card. This method involves withdrawing money each week according to your budget and being careful to spend only this cash. Money for each category can be placed in marked envelopes or jars and any change at the end of the week could be used for the following week or set aside for a bigger item within that category.
For information regarding money matters and some great practical tools and tips visit www.daveramsey.com/home Dave Ramsey is a well-known American Christian financial advisor who has written books, conducted many seminars and hosts a radio show about this topic.
Please take the time to consider your financial position now and into the future with some good old fashion 'common sense'. The way of our society works, means that people work for 40 years or more, to acquire the money needed to live after that time. However, due to the average amount of debt each person has we must take action for our financial situation now or retirement may not become an option.
If you need to overcome fear do so quickly because it's best to discuss this issue now before it's too late. Also, attack credit card debt with maximum resources and minimal or no usage and save for the short and long term.
Tim Wilson is married with two children who served with YWAM for five years in Brisbane and now serving in mission in Canada.
Tim Wilson's archive of articles may be viewed at www.pressserviceinternational.org/tim-wilson.html