(Written by guest contributor Loral Langemeier)
In times of economic uncertainty, people tend to reexamine their relationship with money. Those who are avid wealth builders make necessary adjustments to maintain their lifestyle and stay above water. For those caught in a \”make /spend\” cycle, these can be very scary times indeed, splashing about without a life preserver. If you\’re making bad choices with money, now is the time to evaluate your situation. You and I both know if you\’re stuck in this cycle, finances can turn bleak pretty rapidly.
So what can you do today to make changes?
First of all you won\’t hear me telling you to stick with a rigid budget. Budgets don\’t work!
Get Some Perspective
The first thing you must do is gain a true perspective of exactly where you are financially right now. It\’s time to roll up your sleeves, my friend. Sit down with a pen and paper (and your spouse) and crunch the numbers. And I mean get out all the paperwork. One of the basic steps in my wealth building strategy is to create a financial filing cabinet and keep it current and organized. If you\’re the kind of person who throws your important papers in a drawer, you\’ve got a little more work ahead of you. GET ORGANIZED.
Here are the five basic categories you need in your Financial Filing Cabinet;
1.) Bank Statements, Credit Card Statements, Cash Expenses, etc.
2.) Personal Expenses (Utility Bills, Mobile Contracts, etc.)
3.) Insurance Policies (Home Car, Health, and Life)
4.) College Funds for Children (if applicable)
5.) Investment Portfolios (Retirement Funds, Real Estate, etc.)
You might have more or fewer categories, but you see where I\’m going, right? Get everything together.
Figure out how much you have coming in versus what\’s going out. Be clear on how much you owe on all of your assets versus how much they\’re worth.
Knowing where you stand will give you a true perspective on where you need to be and that\’s the start in setting your Financial Freedom Day. Your Financial Freedom Day is the exact day you will be able to maintain a lifestyle of financial comfort for your family.
This process brings you to your financial \”gap\”. The gap is defined as the space between where you are right now and your Financial Freedom Day. How will you know what needs to be done without this kind of information? You won\’t — and this is where so many people go wrong. They get caught up in a make / spend cycle, the gap turns into the Grand Canyon, and they\’re forced to make very drastic changes (usually based on panic).
If things look on the scary side, remember it\’s not the end of the world. People turn things around every day. Don\’t get stuck in your story. Crying \”woe is me…\” will get you nowhere. Once you start feeling sorry for yourself, your obstacles become your focus and you\’ll lose sight of the prize ahead. The only way to turn it into a positive is to learn from it. Think solution!
So now what? How do you start closing the gap?
To create real change, you need new information. I believe most of us were never really taught the facts about personal finance and wealth-building strategies. If we\’re lucky, we learned this early on; unfortunately most of us haven\’t.
You need a strategy. Plans, like maps, work best when you know where you\’re going. You have to be creative. Immerse yourself in new ideas. Be in a cycle of continuous learning. Stay focused on goals and new opportunities. And know that they will come. The entrepreneurial spirit is awakened in times like these. It\’s that spirit of resilience that creates change in the economy. Be part of the change.
Accept that traditional forms of creating wealth no longer apply. My message has always been to create new money. New cash is the answer. Did you know that everyone has the ability to bring hundreds of dollars (or more) of new cash into their home each month? It\’s a fact! EVERYONE has marketable skills and talents that can earn them more money.
The truth is most people do for free what they could be making money doing. Think about that. What are you doing now that could bring in more income?
Next time, I\’ll share with you how to identify your hidden skills and talents, and turn them into a sustainable cash cycle that we call the Cash Machine.
Action Steps:
– Get organized by creating your Financial Filing Cabinet.
– Define the gap between you and your Financial Freedom Day.
– Develop a strategy that will help you create new money.