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Wednesday, February 25, 2009

Save Yourself Some Cash

I have always been a big proponent of financial freedom. The only way to be financially free is to owe as little money as possible. This way you can poke "the man" in the eye with your thumb when he tries to play games with you. If you are beholden to a bunch of debt, you can NEVER be truly free.

Everyone likes stuff, we all like stuff and we all like the stuff other people have. The first way to become financially free is to stop needing stuff. There is a huge difference betweeen needing and wanting. Many times we confuse the two. You need things to stay alive, you want things...well...just because you do. It is as simple as that. You need someplace to live, you need food & water, you need clothes, you need transportation. Everything else is optional if you think about it.

Let's face it we are a nation of consumers and it has been that way for quite some time. We are like druggies we can't just stop we have to be weened off off our drug otherwise we are doomed to fail.

How do we do this?

To start reevaluate everything you spend money on and start with the really simple that magazine subscription you never actually READ - cancel that. Actually subscriptions are the best place in general to start paring down. Get rid of magazines, memberships and subscriptions. I used to a be member of a bunch of stuff and had a ton of magazine subscriptions.

I have a total of three subscriptions now:
NRA Member - Gets me American Rifleman magazine
Subscription to Popular Mechanics
Netflix 2 at a time unlimited subscription.

That is it....

Get rid of ALL your credit cards except one. The wife and I each have a debit card and an American Express, that is it. We pay the entire balance of the American Express off EVERY month without fail.

If you own a home pay the equivalent of 1 extra payment a year by paying a little extra each month. For example if your payment is $1200 bucks send $1300. That extra $100 dollars adds up to one extra payment a year. That will shave 7 YEARS off your mortgage and could potentially save you tens of thousands of dollars in interest.

Start an emergency fund and have the money come out of your check automatically. This is not the cash on hand type of emergency fund but the 3-6 months livings expense because I lost my job type emergency fund. Start with as much as you can and have it go into a separate bank account from the rest of your money and DON'T TOUCH IT. Let it continue to build until it is the equivalent of 3-6 months worth of bills. This will be your insurance policy against job lost and could prevent you from entering the downward spiral many people experience when they have a sustained period of unemployment.

Once that is fully funded start your, the car needs a new transmission and I am screwed emergency fund. I typically keep this in the same account as my other emergency fund but seperate the two logically. If I need $20,000 to have 3-6 months living expenses everything over that is the everyday emergency fund. In other words don't let that account drop below your set amount, but certainly tap it if you have the need. If you don't have to touch it all the better, you will be in a good position when a true emergency arises.

This all could take time and in the cases of emergency funds years to reach...the key is you'll never reach the goal if you don't START!

...that is all.


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