What makes budgeting boring for some people is that a lot of us don’t have the correct knowledge and experiences when it comes to budgeting. For example, if you went to a bowling alley and, because you had no idea how to bowl, every time you’d throw the bowling ball it would go in the gutter, then bowling would be pretty boring too right? It’s the same with budgeting. If you know the right way to do it, you gain positive experiences and budgeting can become fun. You see results (more money in your bank account) and this is definitely a fun thing!

What happens is that you start to feel accomplished in your new routine of living on a budget and the benefits that it entails. You may even look back at the “bad old days” when you used to spend your cash wildly and look back not too fondly! You take a look at those old bank statements and wonder where all the cash went.

What your new budget-conscious mindset will give you is new opportunities to do fun things in life without having to run over to the ATM machine every other day for a fresh infusion of cash into your wallet. Does frugal have to equal being bored? Not necessarily.

In order to get your new budget-conscious mindset right, I suggest you track your budget for the first few months. You can use either standard pen-and-paper or you can use any of the assortment of computer programs for this (Mint.com, Intuit Quicken, etc). After some time following your budget (again I recommend at least a couple of months writing everything down) you can think about dropping the written records and not having to write every expenditure down. The human mind takes a minimum of 30 days to get used to any new mental habit, so make sure you don’t give yourself any leeway during that first month or two to deviate from your planned budget! Once you get comfortable with your budget, you’ll be able to figure out how much you’re allowing yourself to spend on any particular category and how much you’ve already spent, all by heart. One of the big tips about fighting temptation during that first month is that whenever you feel an urge for something not budgeted (ex. new LCD television) remember what you’re saving for (ex. winter trip to Puerto Rico), imagine yourself doing that and walk away! Then replace that “urge” with something constructive (ex. watching the sports game at a friend’s house).

The bottom-line is that in order to budget effectively, you must have “budget-awareness”. This means you need to be aware of how commercial society influences people’s spending habits and you must fight these urges. A huge contributor to our materialistic culture is television – studies actually demonstrate that the more that a person watches television shows, usually the more that person will spend. Television constantly bombards the viewing public with messages of ultra-luxury beyond the grasp of the common middle-class, leaving the majority of people in debt trying to “catch up with the Joneses”. Even your friends and neighbors may affect your spending habits! Try to develop friendships with people also trying to build a debt-free frugal lifestyle in order to support your new ways. Remember that budgeting and frugal living doesn’t have to be forever – remember to reward yourself for your good work following your budget and reaching your goals!

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Advertisers are perfectly aware of the messages they are bombarding you on a daily basis. These messages are tailored to do one thing: persuade you to spend money in the way they want you to. Marketing and advertising executives spend their days discovering new and innovative ways for you to spend money on their products and services. That’s the whole point of advertising and marketing! What’s more, advertising and marketing has been around since the beginning of time and we’ve been doing our own form of advertising and marketing even if we don’t realize it. Think about finding a love partner – you need to market and advertise yourself. Every single successful business uses top-notch marketing and advertising teams to sell their products and services. Even if you’re going to a job interview, you’re going to be marketing yourself as the best option for the hiring company. The only difference is that many companies have million-dollar marketing and advertising teams working for them!

You’re going to need to be able to consciously sift through the many messages you receive regularly and then ignore the messages trying to persuade to buy a product or service you don’t really need. One of these negative messages you’re going to have to block out are “jealousy messages”. This is where that phrase “Keeping Up With the Joneses” rears its ugly head. Who cares about the Joneses? The truth is that most people look at the neighbor’s new Hummer and they feel like they have to get one too. They go to a friend’s home and they notice their friend has a jet ski, so they need to get one too.

Where does that impulse to spend and spend come from? One of the biggest culprits is from television, specifically television shows. Researchers have found that most television shows (with the general exception of comedy sitcoms) are set in the world of the upper class. The average income person watching these shows feels an urge to get some of those items featured in the show. Maybe you’re watching one of these MTV reality shows with uber-rich people driving their $200,000 cars and Armani clothes. Maybe you’re looking at an ultra-sleek living room in a television show, you look at your own living room and you start feeling inadequate. The research showed that the homes that had the highest rates of viewing these shows had the lowest rates of saving money. Possibly these households spend all their cash on consumer goods and don’t have money left over to save? Food for thought.

Television commercials are another big culprit. Commercials are designed to make you feel like you absolutely need to have items that the typical household can’t afford. Commercials cause the average household to compare their lives not with others in the same economic bracket but instead with those at the very highest income levels.

I’ll tell you right now the absolutely easiest way to disconnect from this pressure. Here’s a step-by-step for you:

1. Get up from your couch. Put your beer/soda down at the coffee table.
2. Walk over to the television.
3. Unplug television.
4. Pick up television.
5. Walk to window with television.
6. Open window.
7. Throw television out the window.

Ok, maybe you don’t have to throw your television out the window… you could just unplug the television. Or you could just watch the occasional movie, not watch television, and read a good book instead (and yes, you can actually learn from books! Unlike television, which is generally mindless entertainment….). You could meet with friends and have a good time. You could take a walk with a loved one.

The bottom-line is to not put yourself in situations to get tempted! Think about it this way, if you’re trying to lose weight, would it be prudent for you to have brownies and ice cream in the refrigerator? I know some are going to think my suggestions are ridiculous. Some might think there’s no way they can reduce the time they spend with their “best friend” – the television. I would prefer you eliminate it from your life, but if you can at least limit your watching to a little bit a day or week it’s best. Even better, try to only watch educational channels, like Discovery Channel. I personally do my best to watch educational and enlightening seminars on DVD that I’ve rented from Netflix so I can learn something. Of course, I love watching comedy movies as well. It’s all about moderation and remembering that life isn’t just about distraction – it’s about living your life to the fullest!

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Some of life’s greatest rewards are free.

Rewards and fun activities don’t have to cost tons of money. Your idea of a cheap thrill may be spending some time reading a book in the park near where you live, sitting in front of a fireplace with a loved one, or having a late-night session of Monopoly (or my recent favorite Apples to Apples) with friends.

This means you watch your money grow and still have fun doing it – what a concept! Seriously though, you may end up finding out that the things in life that really do make you happy aren’t found by maxing out your PayPal account on eBay or in your local shopping mall. By changing your spending habits, not only will you be getting your bills paid off but you’ll break that horrible habit of running up those bills in the first place!

A lot of people mistakenly believe that only middle-class and poor people have to budget and save money, rich people just spend and spend and don’t have to worry about that sort of thing. It actually couldn’t be further from the truth. The rich actually tend to save money much more often than other income levels – which is a major key to their financial success. This means that if you want to be taken for a rich person, make deposits more often in your savings account and other investments and less on luxury items.

I’ve noticed there seems to be two types of spenders: big-time spenders and those that waste their money away a dollar at a time. We all know how big spenders waste their savings away. That huge SUV, that enormous plasma television, etc. The other type of spender spends their money consistently a little bit at a time on relatively meaningless items. Let’s say you’re rushing out late to work, so instead of making your own coffee, you buy a $5 frappuccino at Starbucks. Then at lunch you’re bored, so you buy a $4 Sports Illustrated magazine. Then at night, you head out to the local nightclub and spend $22 on a couple of drinks plus $20 cover charge because you forgot to get on the guestlist. You add up these little expenses – that seem like nothing at the time you’re spending it – and it can make the difference between having more money at the end of the month or more month at the end of the money. One of those ways you can counteract this tendency is to write down all your expenditures – this allows you to see where your money is really going.

By taking the steps to live on a budget, you’ll be living a higher quality of life. I know most people think that spending money on frivolous luxury items equals a better life, but a lot of times it actually may mean the opposite. You’ll have pride in knowing you can handle your personal and family finances and never feel afraid you may be revealed to be financially incompetent. You’ll be able to watch the server at the restaurant run your credit card through the machine without having to be worried it’s going to get rejected. You can sleep great at night without being worried about how you’re going to pay that impossible bill. You can live in a home where money isn’t issue because you’ve compromised on a budget with your partner. You can feel secure that if a financial emergency comes up you’ll have the reserves to deal with it. You can give yourself little and big treats once in a while, without feeling any of the guilt of thinking you really can’t afford that item. You can feel comfortable in knowing you can look forward to a peaceful retirement.

The bottom-line is that getting a budget together and living according to what you’ve outlined in it can give you a peaceful night’s sleep and a positive view of the future. Don’t feel like budgeting and living on a budget means you’re depriving yourself! By living within your means and having money left over at the end of the month you can afford those little treats and not feel like you have to deprive yourself. Most marriages end due to husbands and wives fighting about money – so get started now to live on a reasonable budget. Do it not just for your sake, but for the sake of your loved ones, and for the sake of your future.

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In fact, it’s the furthest thing from the truth! There’s a lot of reasons why you might want to live on a budget and for the most part they’re all good reasons.

Think about it. Would you rather be spending more than you earn and going to sleep worried at night wondering how you’re going to make your rent or mortgage payment? Or would you rather live within your means, invest your extra money wisely, and sleep soundly at night knowing that you’re on a solid financial path?

Living on a budget doesn’t mean you’re going to start living in a shack and spend hours a day pouring over spreadsheets of financial information with a red pen. You don’t have to write anything down in spreadsheets if you don’t want to. You don’t have to cut out all the good things in life. You don’t have to bring a plastic bag full of coupons to the supermarket. You don’t have to start eating 50 cent top ramen soup every day.

If you do choose to live on a budget, you’ll be living a better life. You’ll be able to invest a portion of your income into any investment vehicles you may so choose – including real estate investing or your retirement fund. Check out the posts The 10% Debt Reduction Plan, How to Escape Your Mounting Credit Card Debt Financial Situation, and The Debt Destruction Technique: Destroying Debt One at a Time for more information on this. Financial freedom is the goal – controlling your finances consciously is the solution.

Stop trying to keep up with the Joneses by getting caught up in the whirlwind of consumer spending. Live within a budget and invest smartly and you’ll be passing the Joneses by in your Maserati GranTurismo (my personal favorite sports car – insert your favorite car there if the Maserati isn’t your cup of tea).

What’s most fascinating about living on a budget is that once you get into the budgeting lifestyle you really won’t notice the difference in your quality of life. In fact, you may actually improve the quality of your life because you won’t be worrying like mad like you used to about the huge credit card bills piling up on your kitchen table.

What we want to do is make financial lifestyle changes on a day-to-day basis by taking fresh eyes to the way you live your life. We’ll make the shift from the place you are financially to where you want to go.

The challenge with “living on a budget” is the actual phrase, “living on a budget”. Sounds rough, doesn’t it? Maybe the phrase makes you imagine eating rice for breakfast, lunch and dinner, reusing your kitchen paper towels, and washing all your clothes in the local river. It doesn’t have to be like this (unless you really like the river life).

Living on a budget is about discipline – a choice you make to notice what you’re spending and making per month. That’s basically what it’s all about – budgeting is not about living in a van down by the river.

People want to live on a budget for different reasons. Maybe you want to retire early. Maybe you want to save up for a home or a car. Maybe you want to increase your savings by dropping your expenses. Maybe you want the pleasure of wanting the balance in your bank account grow. Maybe you want to purchase a multi-unit property for real estate investing and you need that capital. Maybe you want to get to the point financially that you wake up in the morning knowing you have the freedom to not go to work if you don’t want to because you’re financially free. Whatever the reason, budgeting will get you to your financial goals!

Have you ever checked your savings or checking balance, nervously noticed the balance is close to zero, yet realized you have a mountain of bills to pay? If you’ve never felt this feeling then feel lucky because millions of people have! It affects your mood, your relationships, and your sleep. For some people, this is a situation that plays itself out on a monthly basis. The solution is to create a simple budget plan and disciplining yourself to stick with it. It’s about overcoming the negative financial spending habits that have put you in the situation in the first place.

Most long-term relationships end because of money. It’s sad but true. This holds true across socio-economic levels – from the ultra-rich to the less financially fortunate. In fact, 7 out of 10 couples do not agree with each other on financial issues – mainly on credit card spending! We find a partner that likes going to the same nightclubs yet we forget to see if we’re financially compatible! The basis of the fighting between couples on financial matters can be due to power struggles, emotions, love or otherwise. The way out of this cycle? Yes, you got it, budgeting. You’ll hear that word a lot in this article.

Remember when I said that budgeting doesn’t mean you have to become a monk and forgo all modern luxuries? Well, I’ll tell you right now – budgeting also means to treat yourself. If you budget correctly, you’ll actually be improving the luxury aspects of your life in the long run. Budgeting can bring you that huge mansion on the corner lot. Budgeting can bring you a two week long stay at an ultra-exclusive resort.

One of the interesting aspects of budgeting is that you may just realize that the best things in life really are free. You may realize that instead of your old treat of a Starbucks triple ultra-mocha choco-latte crapuccino you actually prefer going for a walk in nature, perhaps with a home-made cup of tea. You may realize that instead of your tri-weekly visits to the local movie theater, you prefer reading a book at your local public library. You may realize that instead of “making it rain” at a South Beach nightclub and spending $500 on a bottle of alcohol (yes, that’s how much it costs in South Beach for a bottle of vodka or whatever type of spirits you prefer), you might instead enjoy spending some time with friends and family at a house party playing music together.

The bottom-line is that budgetting is something we all can do – no matter what our economic level is currently. The first step is budgetting is making the decision to live consciously when it comes to your finances. Then all it takes is some smart habits and financial techniques and you’ll be on your way to financial freedom!

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If you’re in debt currently, debt didn’t just happen to you overnight. It was a process that took time and involved specific action steps which eventually resulted in the debt you’re now facing. Just like how you got into debt is the way you’re going to get out of debt – with a specific process.

One of the most important steps for you to take in order to overcome your debt is to organize all of your debts together in a pile. This means grab all of your loan paperwork, mortgages, credit card bills and any other debt which must get paid. Take a look at that pile and realize this is what is keeping you from a future of financial independence – and removing this pile of debts from your life is your key towards achieving that future.

Take all your debts, write a detailed account of them, and find out which debt to pay off first. The way you will do this is by creating a form for yourself with the following information from each of the debts that need to be paid – this will be your Debt Destruction Technique (DDT):

Name of Debt: This is the entity that you owe this money to.
Balance Total: This is exactly what you owe total for that particular debt.
Minimum Monthly Payment: This is the minimum amount that needs to be paid for this debt per month.
Payment to Debt Ratio: You get this number by dividing the Balance Total of the debt by the Minimum Monthly Payment. For example, if the Balance Total is $6,000 and the Minimum Monthly Payment is $500, then the Payment to Debt Ratio for this debt is 8.33.
Debt Importance: You get this number after you complete the above 4 steps for each of your debts. The Payment to Debt Ratio will guide you in selecting the Debt Importance for each of your debts. The higher the Payment to Debt Ratio the lower the Debt Importance and the lower the Payment Debt Ratio the higher the Debt Importance. You number each debt 1, 2, 3… until you have a Debt Importance for each debt you have. The debt with the lowest Payment Debt Ratio among all of your debts is number one in Debt Importance for you.

Start paying off your debts, starting with the debt with the #1 Debt Importance. Remember The 10% Debt Reduction Plan? In that article we talked about saving 10% of our gross monthly income and using that as our financial bodyguard. Now we’re going to put that money into action. Take that financial bodyguard money and add that to the minimum monthly payment of your debt with the highest Debt Importance. Make the minimum monthly payments on all of your other debts – do not create any other debts. Keep this process going – moving down to the next Debt Importance debt as you pay each off – and you will free yourself from your debts. Don’t let yourself be worried too much with the interest rate of each account. The Debt Destruction Technique will eliminate debt so quickly for you that the interest rate won’t matter as much as it does for those people who constantly just make minimum payments each month. The way the Debt Destruction Technique works is by using positive momentum in your favor – you see your debts disappear so fast that you get pumped and want to keep it going.

Once you’ve paid off your debts, take that 10% of your gross monthly income and invest this money. Whether you’re looking to start real estate investing, stocks, or some other investment, this will be key to reaching true financial freedom. Free yourself from your liabilities and gain assets. Don’t work for money; let money work for you!

Do you remember the old pesticide DDT (Dichloro-Diphenyl-Trichloroethane)? It was a chemical used in the second half of World War II to control the mosquito population that was spreading malaria and lice transmitting typhus. The use of DDT, helped dramatically reduce the incidence of both cases. DDT was later found to be too powerful, affecting other wildlife. But our DDT, the Debt Destruction Technique, will be purely focused on obliterating your debt – resulting in absolute freedom.

The truth is that people in what seems like hopeless debt situations are basically giving away money. If you’re paying $3000 a month in debt payments, you’re losing that money. It’s cash that’s going to be gone for eternity – all to pay for stuff that we think we need. I’ve seen people lose thousands of dollars in a matter of minutes at the casino, pay hundreds of dollars in bills for alcoholic drinks at nightclubs in South Beach, and overreach themselves by purchasing homes and cars that they truly cannot afford. But they do these things because they think they need to do these things – whether due to peer pressure, lack of financial education, or poor spending habits.

When doing this plan of using 10% of your gross monthly income and applying it to your highest Debt Importance debt you’re going to feel good when you finish off a debt. Real good. In fact, you may even be tempted to use that cash to treat yourself to something nice, because you know, you paid off a debt and why not? Resist the temptation! Do something else to reward yourself – maybe taking a trip to the beach, going to the museum, take a nice walk, etc. In the Debt Destruction Technique you must use your 10% and apply it towards your debt each and every month until all of your debts are paid off. Then you take this cash and apply it for investing purposes. You need to understand that the only way you can have the freedom and security of financial independence is by paying off all of your debt. This is the only way to escape the vicious downward spiral of the debt cycle.

By paying your debts using the Debt Destruction Technique, you’re taking money that you’ve pledged to your creditors and debtors and eventually you’ll have this money back, available for investments that will take you to financial freedom! Instead of wasting this money on bills and interest, you’ll be able to invest in your future. With the power of real estate investing and compound interest, there’s no doubt you’ll eventually have the opportunity to become net worth millionaires and more – you just need sound strategy and sensible discipline. Think about that – people can go from the brink of bankruptcy or beyond all the way to becoming multi-millionaires. The path is simple – it just takes desire and discipline, but it can be done!

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However, if we can pay the minimum monthly payment on all of our debts and also add some extra money to help pay them off, we’re going to see results.

Here’s a proven debt reduction plan that’s going to give you results if you consistently place it into action. It does require some discipline but you’ll see that the positive momentum from the way you’ll be reducing debt will give you fantastic results.

First step you’re going to want to do is to take a detailed look at all of your debt and add up the minimum monthly payments together. You need to know where you’re at right now in terms of debt. Yes, it can be scary to find out exactly how much money you’re spending monthly on just your debt. But you need to have this information in order to get a firm grasp of the immensity of your financial challenge. Notice the word I used; challenge. You have to think of this like a competition: you vs your creditors. Are you going to let this debt take over your life? Or are you ready to implement a debt elimination plan that’s going to reduce and eventually eliminate your debt from your life? If you’re ready to take this step, even if it means some sacrifices in the short-term, then get ready to look forward to a life in the future with financial freedom.

My debt elimination system is followed by adding 10% of your monthly gross income to the minimum monthly payments you make to creditors.

For example, let’s say you make a monthly gross income of $5,000 and you make a monthly minimum payment of $2,000. By using this system of adding 10% of your gross monthly income, you will now pay $2,500 total ($2,000 minimum + 10% of $5,000 which is $500).

One of the most important points to take away from this is that you don’t want to just add this 10% to the whole minimum payment you have to make per month. You want to strategize this by using this 10% ($500 in our example) on the debt that you can get rid of the fastest. This has a psychological benefit – you develop positive momentum of reducing your debt, you feel good about one less debt on your back, and you see results fast. Quick results mean you’re going to much more likely to stick with this quick debt-reduction strategy.

This 10% is a magical number. This 10% is your financial bodyguard. Just like how multi-billionaires and celebrities have a bodyguard, you now have a financial bodyguard working hard to fight off your creditors. This 10% will not stop until it gets the job done, which is eliminating your debt. As long as you keep feeding that 10%, you will destroy your debt – utterly and completely.

Yes, when I say gross income I do mean gross income and not net income. You might ask what’s the exact difference between gross income and net income. Gross income is what your total personal income is before taking taxes or deductions into account and net income is your total personal income after deductions, credits and taxes are factored in.

This next option is only for dire financial cases. If you absolutely cannot pay 10% of your gross monthly income to your debt payments, then at the very least devote 10% of the total of your minimum payments to pay off your debts. So, in our example, you would pay the $2,000 minimum monthly payment plus an extra $200 (10% of $2,000). This is only for a short-term period until you get your finances in check. As soon as possible, switch over to the 10% of your gross income debt payment plan we outlined earlier in this article.

Like any battle, you need to have a plan in place to attack the enemy. In this case, we’re taking the offensive on debt. You can’t just keep paying the minimum monthly payments on your debt and expect them to magically vanish or hope that you somehow hit the lottery. You have to take action. I’ve given you a plan to attack your debt directly. It’s up to you to work the plan.

Try my debt reduction plan and let me know how it works for you!

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The best option is always prevention. The easiest way to live free of debt is to not get into debt in the first place. Even if you’re already up to your neck in debt, there are ways to climb out and ways to reduce the amount of debt you currently have – you just need to have the right strategy.

Always pay the full balance of your credit cards each month when you receive your credit card statement. Otherwise, don’t use your credit cards! If you think you’ll be unable to pay the balance off in full when you get the statement in the mail, then you don’t need that item or service you were thinking of buying. If you think you won’t be able to pay off the balance yet you still feel that pressure inside you wanting to buy that item ask yourself what’s more important, your financial future or more stuff in your life?

If you aren’t disciplined enough yet to be able to pay your full credit card balance each month and not spend more than you can a month on credit then there’s only one option for you. Grab a scissor, take all your credit cards, cut them into miniature pieces, and throw them in the garbage. Just keep that one emergency credit card mentioned in the previous article and throw out the rest.

If you’re deep in debt, you know you won’t pay off your balances each month, yet you don’t want to cut up your credit cards then the reality of the situation is that you’re heading straight down the path to financial disaster. You have to be able to stop this vicious cycle of credit card indebtedness.

The way to getting control of your credit card spending is to learn to associate your present negative financial situation to the virtual slavery of credit card debt. Take out your wallet or purse, pull out all your credit cards and lay them out in front of you. Realize that these credit cards are like keys locking you into a virtual cage of financial prison. Visualize all the negativity that these cards have brought into your life due to faulty spending habits. Remember the debt that these credit cards have caused; remember the huge monthly payments that seem to keep growing and growing. Grab the nearest scissor and cut these cards up. This is the first step toward financial freedom.

Once you’ve destroyed your credit cards, find yourself a no-fee credit card with great rates so you can start on your new financial strategy of Pay-It-In-Full. Now you can transfer as much of your old credit card debt into this new card and take advantage of the usually very low fees for the first year or so (sometimes you can even find no interest credit cards that offer this for the first twelve months). This can significantly drop your credit card monthly payments and allow you to start paying down the total balance as well as everything you used the card for in that month. This allows you to pay more of the principal and less of the interest. Just be aware that this is a true transfer and not a cash advance which usually carries high interest rates.

There are also many credit cards out there that offer great rates if you use that company’s services or products. For example, the Health Care One Mastercard allows users to save from 20% to 40% on health care and physician visits, the Amazon.com Rewards VISA Credit Card gives you points that can be redeemed for gifts (including flight tickets, airline miles, hotel stays and more), and uStudent Credit Cards offers credit card matching for students to get credit cards that meet their needs.

Cashback bonuses can also sometimes be a big incentive to use a particular credit card that you know you’ll be paying in full anyway when the statement comes. The Discover Business Card gives you 5% cashback bonus on office supplies, 2% cashback bonus on gas and up to 1% cashback bonus on all other purchases. Another credit card with an interesting premise is the Discover Motiva Card that pays you a full month’s interest for paying ontime and with no annual fee.

Whenever you’re applying for a credit card make sure to read the fine print and never sign up for a credit card when you don’t understand the terms. Call the company and find out directly from the company representatives.

Bottom-line in improving your credit card financial situation is self-discipline. Only order a new credit card when you’ve paid off your old ones via balance transfer. Once you’ve done this, cut up the cards and cancel the account in writing with a subsequent phone confirmation.

Keep yourself disciplined and you, not the credit card companies, will be in control of your finances.

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• Rule to Grow Rich By #2: Refinancing Your Home

The truth is that 75% of Americans are in debt – with an average debt in the household of $35,000! It gets worse – Americans owe $2,000,000,000,000 (that’s 2 trillion dollars) in non-mortgage consumer debt. That amounts to about $7,500 in consumer debt for everyone in the United States. With 500 million credit cards issued by banks to Americans, there’s more than $600 billion in credit card balances out there. Of course this isn’t just an issue for Americans, it’s a world-wide challenge we’re facing here. Most people think the only way they can get out from under their massive consumer debt is by hitting the lottery or somehow inheriting a huge amount from a long-lost rich relative. Problem with the lottery is that lottery odds are about 18,000,000 to 1. Compare this to 4 golfers hitting a hole-in-one on the exact same hole – the odds of this are only 17,000,000 to 1.

Most people are out there feeling so strangled by their debt that they feel like the ever-rising mountain of debt they have will never disappear. A lot of people feel like their drowning – and that they’ll paying bills and consumer debt payments till the day they die or they hit bankruptcy, only to start the cycle again. If you’re in this situation, this doesn’t have to happen, but you have to act now!

If you’re in a debt situation, what you need is a systemized plan to pay off your debt. It may take you a few years to pay it all off if you have a lot of debts and loans to pay off – but just imagine how good it’ll feel to go to sleep knowing you won’t have to worry about your bills anymore or owing money to other people. You only have to think about your regular expenses like food, insurance, and utilities – and you can spend your income the way you want to, not the way your creditors want you to!

Imagine that sense of freedom you’ll have once you’re out of the virtual slavery of consumer debt. You’ll have the freedom to buy what you want, when you want, however you want.

There are many reasons why average people like you and me get locked into the destructive cycle of consumer debt. In fact, it may surprise you to know that there are a lot of people on this Earth whose job description includes getting people into debt. Now, I’m not saying at all that these are bad people, that they’re trying to get you in debt for malicious reasons, or anything like this. But just understand that the organizations they work for make a profit by getting people into debt. You don’t have to be a victim – you just need a strategy.

These people wanting to get you into debt are three, with a neat acronym to categorize them: BAA. Just like the sound of consumers constantly consuming products like sheep, the sound “BAA”. This stands for:

• Banks (and Lenders)
• Advertisers (Marketing)
• Advisors (Financial Advisors)

Banks

Banks are in business because they make money. They make this money by doing everything they legally can to make a profit – with no regard to your own personal best interests. The lending industry is based on this – of course, individual bank tellers or bankers are usually great people – but the business itself revolves around pure profit. This profit by banks and lenders is attained through major interest charged to you and the little fees that gnaw at you little by little. The goal is to get you to be a debt slave to them. It’s all about the monthly payments on a regular basis from you to them – and then from your heirs when you pass away.

Credit cards are a huge money-maker for banks. They’re given to you with small monthly payments on purpose. This is so you’ll never pay your cards off. It’s in the banks best interest for you to never pay your credit cards in full. If you only pay the minimum payment every month, the average credit card would take 15-20 years to pay in full. Even worse is that you’ll end up paying about 4x what the item originally cost, due to the high credit card interest fees. Think about this one: a brand new LCD television costs $1500. You purchase it from a local consumer electronics store with a minimum monthly payment of $30 a month with an interest rate of 20%. This means it’s going to take you 9 years to pay this off if you pay the minimum every month. Of course, that TV set isn’t going to be worth anything near than $1500 and will most likely not even be functioning while you’re still trying to pay it off. It’s also going to cost you more due to the interest – you’ll have paid $3243.24. That’s the power of the bank using small monthly payments with a high interest. The moral is this: be careful when banks try to seduce with low first year credit card interest rates or easy monthly payment financing.

Residential real estate debt is one of the biggest debt burdens on families today. Most households take out 30 year loans on their home. This is great for the low monthly payments. However, know that the typical homeowner moves every 7 years on average. The worst time to be paying your mortgage is in the first few years, as the borrower is paying almost 100% interest. The longer your mortgage, the more the amortization schedule favors the lender in the first few years of your loan. The way you can win is by reducing the length of your mortgage – this increases the amount you’re paying on the monthly payment that’s going to the principal instead of the interest. If you’re going to be taking on a mortgage make sure to run the numbers to see how much you’d be paying monthly on a fixed 15-year loan term as opposed to a fixed 30-year loan term.

Advertisers

Most consumer advertising is made for one thing: to get you to need whatever it is being advertised. It’s everywhere. You turn on the television, the non-stop McDonald’s commercials are there. You turn on the radio, you hear the commercials telling you the perfect gift for your husband or father on his birthday is a Rolex watch. You open the newspaper and you see the ads for the latest sale at the local Lexus dealership.

A lot of times, these ads really make you think you need – desperately – that item that’s being advertised. How about the slogan: “Charge it!” Of course, everything has the “flex pay” option, with “easy monthly payments”. Almost all commercials for luxury commercials base themselves on a few psychological topics. These center on making you feel “lesser than” or “not as cool” if you’re not using that company’s products (think the PC vs Mac commercials). Or they base themselves on the premise of: “Don’t you deserve this item? You’re worked hard enough, reward yourself with this!” It’s all about consume, consume, consume and spend, spend, spend and want, want, want.

What you want to do, if you want to live without debt in your life, is to only buy what you can pay for in cash. What you can actually afford. Don’t fall for the “flex pay easy monthly payment plans”.

Advisors

Financial advisors, generally speaking, are salespeople. Many times these financial advisors are in worse financial situations than the clients they work for! A lot of the advice these advisors give their clients is the same regurgitated material that’s handed out to them by big companies and it’s the same misinformation given for years. For example, don’t be fooled into thinking that your mortgage is a pure investment and is an asset. Sure, the equity is extremely valuable. But I find it hard to accept that something is an asset when you have these huge monthly payments with massive interest! Over the course of your mortgage, this ‘investment’ is costing you big if you purchase your home without having a solid financial foundation in place. Don’t be fooled that the tax benefits are great on getting a huge home loan – no consumption debt is ever a good thing.

I’ll give a piece of advice that’s usually contrary to what most financial advisors suggest – and I know there’s going to be people that disagree with me. The first thing you should do when you get any sort of surplus cash is to pay off your consumer debt. You do not have the luxury of storing 3-6 months of emergency funds in your bank like most advisors suggest. Once you get your consumer debt under control, then you can take the safe route. But if you’re struggling with mountains of debt it makes no sense to hold a reserve fund. If you want to feel safe, keep a credit card that has no annual fee and keep it just for a true emergency – but make sure to only use it in case of emergency. Remember that financial advisors usually work for big corporations so you can guess what’s top priority for them – yes, profit is number one, not you. These advisors are usually getting big commissions for recommending you to their company’s products.

The point is to make conscious buying decisions. Don’t let other people control your financial future whether directly or indirectly – you always have full control over the direction of your personal finances.

Related Posts:

• How to Escape Your Mounting Credit Card Debt Financial Situation
• Using Your Home Equity Loan to Pay Off Credit Card Debt
• The Debt Destruction Technique: Destroying Debt One at a Time
• Should I Refinance My Home To Pay Off My Debt?
• The 10% Debt Reduction Plan
• Getting Prequalified For Your Home Loan
• 8 Ways To Improve Your Credit To Get a Mortgage
• Rule to Grow Rich By #2: Refinancing Your Home
• Inside the Reverse Mortgage: Is It Right for You?
• What is a Subprime Loan?

There’s been a lot of talk on television, radio, and print about the power of reverse mortgages. Some people say it’s the cure to your financial troubles. Other’s say that reverse mortgages make your financial problems even worse. So who’s right? Is a reverse mortgage really the answer for seniors?

You may remember my previous post on the topic of reverse mortgages titled Reverse Mortgages: How Much Money Can I Receive. I covered a question posed by one of my readers and I talked about the 3 parts of the reverse mortgage formula, what happens if you outlive the reverse mortgage, and some helpful tips – I suggest you read that post to get some background on reverse mortgages.

Is a Reverse Mortgage the Correct Option for You?

To keep it simple, reverse mortgages may be a helpful option if you’re at least 62 years old, you need tax-free income without any monthly payments, and you plan to stay in your home for at least 5 years.

The reverse mortgage is a mirror image opposite of an amortized mortgage which would require you to make monthly payments over 15-30 years. The reverse mortgage actually pays money whenever it’s needed by you – plus, you don’t have any repayment obligations unless you sell the house or condo, you move out for more than 12 months or you pass away.

Now, if one of those 3 events happen (selling, moving out, death), the reverse-mortgage principal and accrued interest matures and must be paid in full. If you pass away, then your heirs have one of 3 options:

• They can pay off the reverse mortgage and keep the equity that remains
• They can get a new mortgage loan to pay off the reverse mortgage
• They can sell the home

Mythbusters: Reverse Mortgage Ownership

I’m going to mythbust a common thought about reverse mortgages right here. Many people think that the reverse mortgage lender owns the home. This is not true! Your lender, if you do a reverse mortgage, can never force you to sell or move out of your home. Reverse mortgages are non-recourse. A non-recourse debt is a secured loan that has been secured by a pledge of collateral, typically your home, but for which you are not personally liable. So if you default on this loan, the lender/issuer can seize your home (the collateral), but the lender’s recovery is limited to only your home. Let’s say your property is insufficient to cover the outstanding loan balance. Well, that’s tough luck on the lender as you are not personally liable.

Reverse Mortgage Eligibility and Age Advantages

You’re eligible for a reverse mortgage if you, as the homeowner, are at least 62 years old. If you’re going to have a co-owner, then that person must also be 62, otherwise your residence will not be eligible unless that under-62 person signs a quitclaim deed conveying their interest to you. Reverse mortgage eligibility is always based on the age of the youngest co-owner.

If you’re of a mature age, then your advanced age may be a advantage for you as a borrower. Your life expectancy will determine the amount you can receive. An 85-year-old homeowner will almost always receive a larger reverse-mortgage payment than a 62-year-old would.

Reverse Mortgage Choices: Monthly Payment, Lump-Sum Payment, and Credit Line

If you decide to go with a reverse mortgage, you have 3 ways to receive your money:

• Credit line for future borrowing (not available in Texas)
• Lump sum payment
• Lifetime monthly income (also known as tenure)

You can select a combination of any of these three options. For example, one-half lump-sum payment, one-fourth credit line, and one-fourth monthly payments. You also have the freedom to change your choice just by calling up the loan servicer.

Reverse Mortgage Details

Keep in mind that a reverse mortgage, due to its nature, has a growing balance. This is due to the accrued interest and principal advances. Thus, it is recorded legally as a first mortgage.

If your home already has a first mortgage on record, then you can pay that off with a reverse mortgage lump sum payment. However, if your existing first mortgage plus any liens on the home such as a home equity loan or IRS tax lien exceed 40% of your property’s market value, then your property will not likely be eligible for a reverse mortgage.

The cash you’ll receive from a reverse mortgage depends on several factors and eligibility criteria:

• Age of the youngest homeowner (minimum 62 years old)
• Adjustable interest rate when the reverse mortgage is originated (reverse mortgages always use adjustable interest rates)
• Lender’s appraised market value of the home
• Lender’s maximum mortgage limit

Reverse mortgages are not available for you if you are currently in bankruptcy proceedings and your property must meet minimum standards.

Reverse Mortgage Lenders: How Much You Can Get With Each

FHA has the lead in this with over 90% of the reverse mortgage market controlled by them. But if you go with FHA know that their lending limits are very low! If you live in an expensive high-end community you will likely be very disappointed with what they’ll give you. FHA does have higher lending limits available through the Fannie Mae “Home Keeper” reverse mortgage program – up to $417,000. Fannie Mae (FHA) also has a “reverse mortgage for home purchase” program where you can buy a home as a senior citizen and you won’t have to make any monthly payments.

The Financial Freedom Plan (FFP) might be the best choice for you if you need higher lending limits. Their “jumbo cash account” reverse mortgage has no maximum limit.

Whichever way you decide to go with reverse mortgages, talk it over with your co-homeowners, your possible heirs, and a respected legal professional so you know your options.

Related Posts:

• Reverse Mortgages: How Much Money Can I Receive?
• How To Find the Best Mortgage For Your Home
• The Positives and Negatives of Negative Amortization Loans
• Nine Tips to Obtain the Best Mortgage Loan For Your Home Purchase
• 8 Ways To Improve Your Credit To Get a Mortgage
• Bill Approved to Help Stop Mortgage Foreclosure
• Using Your Home Equity Loan to Pay Off Credit Card Debt
• 8 Steps to Getting Your Finances in Order For a Mortgage
• Consumer Debt Worst Offenders: Banks, Advertisers, and Advisors
• Getting Prequalified For Your Home Loan

One week before tax time is NOT the time to organize your paperwork. You should start way sooner – like now, for instance?

Now that I’m talking to you about getting organized with your tax paperwork, the first thought that might rush into your head is, “I gotta get me some containers, folders, files, and binders!” You might even get these in a variety of wild colors including neon green and hot pink – among others.

You set these crazy amounts of organizational equipment on the floor. Now what? Where do you go from here? Now you have to organize the organizational equipment and you go even crazier than before! What’s the solution?

How to Clean Up a Huge Organizational Mess

Well, there’s a solution. There’s small companies that have sprung up recently to help out with this growing financial organizational problem. These companies help instruct people on how to get the best storage products and how to use them correctly.

The way these companies run their business is buy producing specialty organization items that have instructions on how to use them correctly. They then support the use of their products by writing in their company blogs, sending out instructional newsletters, and running organizational intensive workshops that immerse students in organizing their finances in the right way. If you think about it, whether you’re a tax veteran or a college kid in your dorm that’s just getting started, it’s important to always improve your organizational skills.

“By making products more user-friendly and offering consumers compelling reasons to use their products, businesses can set themselves apart from the competition,” says Parkland Group founder and president Larry Goddard. Parkland Group is a Cleveland-based business consulting firm helping businesses succeed and grow.

Get Your Life Buttoned Up

Buttoned Up is a startup company that was founded with the confused user in mind. The founders, Alicia Rockmore, 42, and Sara Welch, 36, started the 11-employee Ann Arbor, Michigan company four years ago because they themselves needed the service they now provide but there’s wasn’t anything like that out there at the time. The Buttoned Up co-founders say that they used to spend tons of money at stores like Target, Wal-Mart, and the Container Store and when they got home with all these organizational products they had no idea what to do next.

It’s rare for someone to instinctively know what specific items to put in specific containers or what important documents and files to put into your filing cabinet or organizer.

“They needed a road map to give them the tools to actually do it,” says Rockmore.

The Buttoned Up Product Line

The company currently has more than 20 organizational products and can be found in nationwide retailers. One of the hottest ones right now is the Life.doc, which is a bright red binder where you can put your emergency, insurance, and other important documents in one spot. When you open the $29.95 binder, the first thing you see is the “Welcome Letter” that talks about the Buttoned Up philosophy of focusing on the most important 20% of organizational tasks – it’s an organizational remake of the 80/20 Pareto Principle, which is that 80% of consequences stem from 20% of the causes. It also includes forms to fill out that include emergency, financial, and insurance information. The entire binder is covered in transparent plastic and is labeled colorfully with details on how to use it correctly.

“This way, consumers can see and understand the product before buying,” says Rockmore.

Other Buttoned Up products include Valuables.doc, Do&Delegate.list, and the Moving.kit.

The two women also have a newspaper column, a company GetButtonedUp.com blog, and an e-mail newsletter with advice and tips. They talk about tax tips, organizing computer passwords, making to-do lists, and why organizing is important for your entire lifestyle. They feel that this content “deepens the relationships we have with consumers, which leads them to our products… or from one product to another,” says Rockmore. They have also just released a book titled Everything (almost) In Its Place: Control Chaos, Conquer Clutter, and Get Organized the Buttoned Up Way.

Other organizational startups include See Jane Work, which sells organizational products online and through their California store and The Paper Princess, which sells stationary, bookplates, and calendars.

Related Posts:

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