3 Money Ideals to Live By

Jul 22, 2019 by

Imagine yourself debt free1. Don’t Live Below Your Means—Aim to Live Far Below Your Means

I know: Much easier said than done. Please note the word “aim” above. If you have a lot of debt or have made decisions in the past that have locked you into expenses that match your income or been unable to secure a good job in this poor economy, then you’re not living below your means today. Don’t beat yourself up or point the finger of blame. Instead, put your energy into making a plan that aims for getting where you need to be over an aggressive time period. Start with a budget, and settle on the best way to attack your debts: A Debt Management Plan, a Do-It-Yourself Payoff Plan, or Debt Settlement—alone or in combination—may work well for you.

2. Develop a Hatred of Paying Interest on Borrowed Money

Almost no one can make very large purchases—a house, a new car—without borrowing money. But, candidly, you’re throwing money away when you borrow at 29% or 18% or even 11% interest from Capital One, CitiFinancial, or similar lenders. You’ve probably seen similar figures, but take thirty seconds to contemplate this:

Borrow $5,000 at 14% APR, then pay $100 per month on the debt.

Time required to pay off the $5,000: 76 months (6 years + 4 months)

Interest paid = $2,548

In this example, borrowing the money to make the $5,000 purchase, even at an “affordable” 14% interest rate, essentially increased the price of the item by over 50%, from $5,000 to $7,548. Few can get ahead financially paying a 50%+ premium on purchases.

3. Run Fast From Anyone Who Asks How Large a Monthly Payment You Can Afford

Remember when you last shopped for a car and the salesperson cheerfully asked “So how large a payment can you make?” Or how about the realtor who “needs” to know the highest mortgage you’re approved for and then shows you homes only in that price range, or even a bit more.

In the face of nonstop, high pressure sales pitches designed to separate you from as much of your money as possible, keep a polite but firm “take control” mentality.

So your answer to the realtor who asks how much you’ve been approved to borrow? “No offense intended, but that’s between my family and our lender. We’ve put together our household budget and long-term goals. With that plan in hand, we know we need to keep our mortgage payment below $X per month. So please show us houses priced below $A.” Now who’s in control?

Your Ideals

What’s your favorite money ideal to live by?

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