Money Management

# Back To The Basics Part 1

Are you tired? Hot? Has this been a super-long summer for you? Are you ready for the cool breezes of fall? Have you fallen off of the budget wagon, spent too much on vacation, lost your taste for financial discipline…?

Wake up! It’s time to get BACK TO THE BASICS.

Back to the Basics Part 1:

1. Create a budget. A zero based budget. Need some budget worksheets? Click here for an awesome budget program from my friend at YNAB Personal Budget. This is a simple, easy to use Excel budget program.

2. Get current on all of your bills! You must stop going backwards before you can go forwards!

3. Build up a 1000 dollar emergency fund. Why do you need an emergency fund? Why not just put all of your extra money towards debt reduction? Because, if some minor, unexpected “emergency” comes up (think a.c. in your car, or washing machine breakdown) you will need cash to pay for that emergency. If you do not have an emergency fund, then you will have to borrow money to pay for your emergency. The object of debt reduction is to get out of debt and to avoid borrowing!

4. Create a debt snow-ball. My method? List debts lowest balance to highest balance, pay minimums on all accounts, and put as much as you can towards the lowest balance. Once you pay-off one account, put the amount that you were paying to that account towards the balance of the second account. Work your way from balance to balance, lowest to highest. Another method? List debts highest rate to lowest rate, pay minimums, and continue the snow-ball from there. My method works on the psychology of getting out of debt (you see accounts go bye bye faster) while the other method works with the mathematics of getting out of debt (but, your accounts open may hang around longer, thus creating a feeling of discouragement…)

Back with Part 2 very soon…

GO, GO, GO!!!!!!!! GET STARTED!!!!!!