Financial Success, Guaranteed!

Aug 17, 2015 by

debt trapI first published on Money Counselor a slightly different version of this article in June 2012. The message is well worth repeating! – Kurt

Live by these three ideals, and say hello to financial peace of mind and a comfortable retirement.

1. 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 high expenses or you’re underemployed, then maybe you’re not living below your means today. Don’t just give up and hope for a miracle. 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—work well for many.

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, straight up, you’re throwing money away when you borrow at 29% or 18% or even 11% interest from credit card companies and similar lenders (not to mention payday lenders @600+%!). Contemplate this:

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

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

Interest paid = $2,548

In this example, borrowing $5,000—even at an “affordable” 14% interest rate—jacked up the price of whatever the money went to buy by over 50%: from $5,000 to $7,548. Hell yes, it’s tough to get ahead financially if you pay 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.

Your answer to the realtor who asks how much you’ve been approved to borrow: “No offense, 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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