We all are faced with new economic situations and we all need to change the way we think about banking. Saving needs to become the new chic thing to do, and doing it without ignorance will keep the investment portfolios of the world full. What we need to stop doing is consumer spending on crap the Kardashians of the world tell us we need.
First Step is to get an emergency fund of at least $1,000. This is just for those unexpected things that pop up when we aren’t expecting them. Job loss, an oops pregnancy, you blow a few tires driving home from work, the list continues. This will help you manage the unexpected without traveling further into debt which will allow you to stay on top of the debt you have now.
Second Step is the pay off debt waterfall. Make a list of all the debts you have minus the house payment. Put them in order from smallest to largest and start with the smallest. Pay no mind to interest rates simply amounts of debt. The reason is because paying debt is a mind game and you need some quick marks in the ‘w’ column. Plus once the little guys are gone you can make larger and larger dents in the big stuff.
After you are done with the first two steps and only AFTER, you will be like the great Lakers teams of the past, great momentum, and chemistry in your finances, so it’s time for a bigger goal; saving anywhere between three to six months worth of expenses in a separate account. This money is not an investment and shouldn’t be treated as such, it simply acts as a barrier between you and life. If you need to take an extra job working as a pizza delivery man to make this happen than do it, you can easily make $5,000 in six months delivering pizza part time. It will suck but what would suck worse is losing your current job for 6 months and losing your house.
So at this point you should be debt free, so if that takes 6 months of following the above steps or 6 years you shouldn’t be investing money unless you aren’t losing it in debt interest. This is where you build the wealth with investment. Make sure you consult a financial planner before making any big steps with your new financial attitude and make sure you get a high interest savings account to earn interest on your emergency funds.
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