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7 Simple Yet Powerful Steps to Financial Success and Peace of Mind

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In these tumultuous times, it is easy to fall into a financial tailspin. However, with a little thought and perseverance, we can avoid the devastating mistakes that can result in years of financial misery. Here are 7 suggestions that almost anyone can achieve. Following these 7 simple financial laws will allow you sleep at night and avoid financial calamity.

1. Spend Less Than You Make. This is the most fundamental and important of all of the seven laws. If you can not or will not abide by this law then please read no further. It doesn't matter if you earn $1,000 per month or $20,000 per month. You can always live beyond your means. Conversely, you can almost always live within your means, no matter how modest. If you can't live on $3,000 per month without overspending your budget every month then you won't be able to do it at higher levels of income either. This is a fact. Because the true measure of financial success begins and ends with the ability to generate a surplus each and every month. End of story. For more help on making this happen read on.

2. Know Where Your Money is Going. To achieve true financial success you need to know where virtually every penny is going each month. This may seem like a tedious and stingy mentality. The reality is that if you are like most households, you fritter away hundreds of dollars each month that you are completely unaware of. At the end of the month you scratch your head and wonder where it all went. After all, it was just a few dollars here and a few dollars there. Guess what? By the end of the month it adds up to real money. By knowing exactly where each dollar is going, you are in a position to take control of your day to day financial decisions. Cut back on those discretionary expenditures that suck up large amounts of money without your realizing it. They are sabotaging your ability to comply with Rule #1 above. You must get to the point where you bring your spending in line with your income and generate a surplus for investment. This is the ultimate financial magic bullet.

3. Pay Yourself First. Taking some money off the top of your paycheck and squirreling it away into a safe investment each pay period is the surest way to get ahead. When the money comes out before you see it (and more importantly before you get the chance to spend it), you are forced to live on a modestly lower income. One of my favorite tricks is to put a larger portion of each raise I receive into this automatic savings plan because again, it is new money - money you will not miss if you (and your spouse) never see it. Automatic 401K deductions work nicely for this. It helps if there is a matching feature attached to your employers plan. You should always get in the habit of maxing out the matching options offered by your employers. This is free money and a quick way to increase your nest egg.

4. Limit Yourself to One Credit Card and Pay off the Entire Balance Each Month. This is absolutely critical to your financial solvency. Maintaining a hoard of credit cards increases the likelihood that you will begin to max out all of the balances and find yourself in a highly leveraged financial situation. A credit card should ONLY be used as a convenience - not as a loan vehicle. Consumer debt is the enemy of financial freedom.

5. Pay Cash for Everything Except Your Home. Even Cars? Yes! Especially cars! This may sound like a heresy, but if you begin by purchasing a modest used car for $3,000-$4,000 and then sock away the money you would have put into a car payment into a special account just for auto expense, you will be surprised at how quickly you will be able to save enough to buy a nicer car. Oh and don't trade in your used one. Either keep it or sell it yourself, you will get a lot more for it than a dealer will ever give you.

6. DO NOT TAKE OUT A SECOND MORTGAGE ON YOUR HOME! This practice has been the kiss of death for millions of Americans. This is a great time to buy a cheap home. There are abundant foreclosures and short sales for record low prices. In many cases these homes are selling for far less than it would cost to replace it. You can do the math but it won't be long before the prices will go back up to at least replacement value. It is a no brainer to buy now if you DON'T OVERDO IT. Like our car example above, buy something you can afford NOW. Don't take on a burdensome debt (if you are wondering if you can afford a particular home, refer back to Law #1!!). With interest rates at historic lows, you should be able to get into a home purchase for about what you would pay for rent. You get instant equity, a tax deduction, and a home of your own. Over time you will pay down your loan and end up with a free and clear home!! Now that is the ultimate Freedom and still a big part of the American dream. And it is totally within your reach. Just resist the temptation to EVER add a second mortgage to your home. This will cripple you for life!

7. Establish an Emergency Fund. This is one of the things that will bring you the most peace of mind as you navigate through an uncertain economic environment. Having three to six months worth of income set aside in a safe interest bearing account will do wonders for your stress levels, peace of mind and overall financial and emotional well being. This will obviously not come overnight, but it can be done if you set an aggressive goal to add to an account a little each paycheck.

There you have it. This is not rocket science. Most people who get into financial distress (which includes almost everyone at one time or another) do not realize that these very simple financial laws are so easy to follow. It just takes a little resolve to set yourself apart from the crowd. Good luck!

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