Personal Note: While the insights Carl shared in this article are probably not different from those we’ve always heard, they are priceless enough to be reemphasized again and again. I really agree with his view on the importance of setting desired goals before making any serious personal finance decisions – as the goals act as guideposts and motivational tools.
However, although I also agree with Carl’s overall take on the “good debt, bad debt” concept, I don’t agree debt on a home or an investment property is always a good debt.
By [http://ezinearticles.com/?expert=Carl_McLean]Carl McLean
What do we all want when it comes to attaining and securing wealth? We want a sense of long-term security and the peace of mind that it brings including lifestyle and advantages to our family.
What do millionaires do that others don't? They do not over consume. They are ready to sacrifice something today in order to achieve greater wealth and prosperity in the future.
Does this paint a good picture of who we are and what we want? This then leads me to say that money must be managed and if you spend more than you make, you surely are heading for trouble, that simple. So where to begin? Many people would say to make a budget and save money. However, in addition to that, I would suggest that prior to making a budget; you should set realistic and attainable goals. Once goals are set, you can then set a budget that will enable you to reach them whatever they are. Make sure that you write your goals down and put them up where you can see them every day.
To begin with, you should monitor your expenses over an entire month. This little exercise will give you the framework for your budget template. Ultimately, you want to reduce your debt load so you must put serious thoughts into curbing bad spending habits, differentiating between good and bad debts and establishing an emergency fund.
For some people, bad habits to consider would be smoking, consuming too much alcohol. For others, it could be that $4 or $8 a day latte fix. Other items to consider could be, collecting CDs and DVDs, what about eating out, buying expensive clothing, going to the movies, buying brand new cars, flying first class, dry cleaning clothes you can wash and more. Remember that I am not saying not to do some of these things but simply keep it reasonable.
Next, would be to differentiate between good and bad debts. A good debt is one that produces cash flow and the bad debt doesn't. Good debts grow in value such as a home, an investment property or a business while bad debts are loans made on depreciating assets such as cars, boats and trips. I do not say that you must not do these things; I am only saying to exercise good balance and not be tempted by excessive consumption.
Finally, set up that emergency fund that will take you through tough times. The problem here however is that some people think that an emergency fund is a line of credit, bank overdraft or a home equity loan. What I suggest doing is have between $1,000 and $2,000 in a saving account and have up to six months worth of you current income in a NON RRSP investment account that can be easily liquidated. That way, your money will grow a bit faster than in a regular bank saving account. An emergency fund is a test of your willpower and discipline. It's hard to build but once built, it is easy to upkeep.
Saving money is easy to say but not so to do. There are constant temptations out there that play with your mind so remember what millionaires do and sacrifice something today for greater wealth tomorrow. It does not take much so set yourself up on a monthly saving plan and stick to it so do not put it off, do it. I would add that a good saving plan is not purchasing your monthly quota of 6/49 tickets. Remember that everything is about balance so enjoy.
Carl McLean CD, BCom AMP specializes in residential mortgage financing and credit management in Victoria BC. He is an Accredited Mortgage Professional with Dominion Lending Centers Rochar Financial, 2950 Douglas St. [mailto:carl@rocharfinancial.com]carl@rocharfinancial.com 250-405-4352 http://www.carlmclean.com
Article Source: http://EzineArticles.com/?expert=Carl_McLean http://EzineArticles.com/?Managing-Money&id=3407560
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