First Step to Financial Security - Budgeting!!!
By Ed
O'Neill
Most individual’s financial decisions and plans are based on avoidance. It is not easy to face hard personal financial decisions so we plainly avoid them. Some people hate doing dishes, and only do it when there is no where in the sink or counter to put another dish, or they have nothing to eat off of.
Avoiding your financial decisions is much worse than a stack of dirty dishes. People just do not know where to start. For the majority of my clients this is budgeting. People are crippled by debt, everyone it seems, young or old, middle class and down. How did this happen? No one wants to budget. It is probably the least fun thing one can do. Why would you ever deny yourself something? That is something authority figures should do.
Cutting things you truly enjoy in life for a positive outcome is very difficult. Where else do we do this…oh yeah that four letter word Diet. That is what the saying “health, wealth and happiness” means. Don’t you achieve the first two by taking a little away from the third? The saying is not “happiness, health and wealth”. If it was we would all be jolly, slightly obese over spenders. Oh, I guess most of us are for now but that is what this is for. Let us rearrange the phrase to the correct order “health, wealth, and happiness”. That would make us long living, responsible spending, truly happy and free individuals. That’s better; see we are making a difference already.
Credit cards have to be the greatest wealth thief in the world. I had a client who lost 21% on their $10,000 401k in 2008. They were devastated. How could this happen, inexcusable! Then I started a financial plan for her to put it in perspective. She had $21,000 on a Visa bill where she missed a few payments and her percentage was…21%. That means she lost $2100 through the market downturn and an additional $4410 on non deductible interest charges. When I told her the wealth she lost by not paying down her credit cards, she came with a reaction of complacency, everybody has credit card debt. This is a true sign of avoidance which I learned to expect from most clients.
Most people blame things they can’t control, such as the stock market dropping, but avoid facing the reality of what they can control, such as credit card balances. This was not a subconscious slip; no it was total conscience avoidance because in order to face credit card balances meant change.
RULE #1 YOU CANNOT HAVE ANY SAVINGS PLAN WHAT SO
EVER IF YOU HAVE UNCONTROLLED ROTATING CREDIT CARD DEBT.
Receiving interest of .25% on a savings account and paying interest of 21% on a credit card makes it a significant loss. There is absolutely no way to rationalize it. I am not a nutritionist but if you eat 2100 calories and burn 21 a day, I positively feel you will not lose weight.
Page 1 | 2
Return from Financial Decisions to Financial Planning
Related Articles:
- Credit Card Applications – How to Manage Cash, Credit Card Debt
- Credit Card Offers - Student Credit Cards and Money Management
- Managing Your Debt through Debt Consolidation
