My personal goal is to make every reader of this website financially secure.  I want us all not to lay in bed at night and wonder how (or even if) we will pay our electric bill.  Money is not the most important thing in our lives, but when we don’t have it…our worlds crumble.

“Financially secure? Sure, if I made six-figures!”  The truth is that it does not matter how much we make, it is our margin that matters.  Basically, I am talking about living within our means.  Take fish for example.  For the most part, a fish will not grow larger than the aquarium in which it lives.  Instinctively, they live within their means, or they have a comfortable margin.

We are the opposite.  We see the shark next to us in a huge tank with castles and envy  her “crib.”  Next, we pretend we are that shark and try to live like our budgets are that expansive.  All of a sudden, we have overstretched our means and are fighting to stay afloat.

You know that two-thirds of America’s millionaires are self-employed.  Not that interesting until you factor in the average salary of a small business owner is $233,000.  Compare that to the average Doctor’s of $250,000 per year.  Why are more small business owner’s actually richer?

Margin.  Small business owners are used to being frugal to ensure the doors stay open and employees get paid.  The ones who spend lavishly, go under.  Doctors have a status they must maintain.  They need to look and act the part of the shark.  Therefore, many overstretch their means.  Both make the same, but one is wiser.

If you make $30,000 a year, you can be rich.  You just can’t act like you make $60,000 yearly.  My grandparents lived by this philosophy.  My grandma was a school teacher, and grandpa ran a small manufacturing business.  Neither teachers or middle managers are notorious for being rich, but they respected the margin.

Naturally, they weren’t rock star rich with private planes.  However, they were able to travel all over the world and were still financially secure.

Respect the margin!

What a crazy time in our history!  Our economy is in turmoil.  We have soldiers at war.  For the first time since 1776 a non-white man has been elected as president.  Gas is affordable.  Tiger Woods and GM end their endorsement partnership to pinch pennies.

Many corporations are scrambling to find ways to keep the doors open.  One of the first reactions is to cut personnel.  Save on costs.  What is your gut reaction to weather this storm?

Mine is to cut costs and not get involved in new ventures.  I scrubbed my household budget to examine where I can save some extra change.  Just four years ago, I did the exact same thing as my wife and I were saving for our first home.  At that time we found over $700 a month.  There I said this wouldn’t happen again…

Never say never.  My latest scrubbing uncovered $200 each month.  Sure this was not as bad, but the point is that I was making a conscious effort and still got up to this point again.  Even those of you who think you have no room to grow…look again with an open mind and B.E. H.O.N.E.S.T.

Bills; Essentials-Housing, Outfits, Num-Nums; and Extras-Savings, Throwaway.  Quick translation.  Break down budget into needs and wants.  Needs are bills, housing, clothing and food.  Wants are savings accounts and luxuries like travel and entertainment.  I cover making a budget a little more in another post.

My goal here is to get you into penny-pinching mode.  Really dig to see where you can save a couple of bucks each day/week/month/year.  One blogger commented, “Buy the paper towels that come in smaller sheets (the 1-2-3 sheet).  Most often you only need a small one but take a whole sheet.”  What a simple cost-cutting idea!

Over the past five years I found a collective $900 each month by pinching pennies.  How much can you find?  Instead of getting into debt over your head, get free from it.  I used my extra money to buy a home and save for my future wants and needs.

Give me some money saving ideas.  What will you do with the extra $$$$?

What if everything we thought had value was really worthless?  This is a question that my pastor asked this week in church.  Don’t worry, I am not going to get religious on you.  I am going to explore this question and give you some practical applications to better your finances, though.

Pastor Greg Surratt gave the example of a flat-panel plasma TV costing only a few dollars while a pack of underwear was $1,000.  We would buy the television that we did not need and ignore what we really needed.  This made me question if I ever have done this in my finances…I did.

I recall in the not-so-distant past, putting a trip on my credit card because I knew about future cash in my pocket.  I chased my wife out to Los Angeles while she was on business and made it a vacation for us also.  The whole trip went onto our credit card because I counted my chickens before they hatched.  Thankfully, they hatched, and the trip was paid off as planned.

Have you ever done this?  Acted on a hope?  We like to charge things or take financial leaps of faith all the time and often on things that don’t matter.  We must first, not spend money we don’t have.  Then evaluate what the best use for our money will be.  To do this we must think about where we place our value.  Do we focus on being entertained?  Do we focus on our family’s financial futures?

What is the most important thing in the world to you?  Your family or seeing Hollywood?  As much as I hate to admit it, the trip was not needed.  We could have waited for the money to come in and use it responsibly.  I could have put that cash towards paying off my car.  Once paid off, I could reward myself with a vacation I could afford.

More often than not, we are going to use our money for things that are not needed and ignore the things that are.  The only way around this is by evaluating our values.  What is most valuable to you?

Every time I check the news, I get bombarded with analysts that are terrified about the economy.  There are one thousand Chicken Littles running around sparking fear.  Let’s get them back into the hen house.

For starters, no one is certain about what will happen to the economy, and that is scary. Change and the unknown are very scary, and that is why suspense movies make you jump out of your seat. Currently, we are in one of these movies without a script.

Why should we not be afraid? The economy moves in natural cycles. The “Roaring Twenties” was capitalizing on the stock market. People were making fortunes off of their portfolios. Then the market crashed, and all those that were over-leveraged were left with nothing. The ripple effect carried throughout the masses, and the panic further hurt those doing well and businesses collapsed. This in turn resulted in lost jobs and ultimately the Great Depression.

Then the US auto and steel industry was insanely powerful. Millions of jobs and vast economic booms were experienced. Foreign competitors kicked our complacent butts and that industry collapsed again crushing the populace. Now there is something similar happening with oil prices and the housing industry which were booming in the recent past.

Again we got over-leveraged. Greedy companies were passing out credit as if it were in the “take-a-penny” tray. We were greedy and took the credit and bought useless things that we could not afford. Mortgage companies gave us loans that forced us way out of our means. The companies experienced a boom in sales. The GDP was up and everyone was officially winning.

Until…the rise in oil prices. Now, our paycheck to paycheck strategy was collapsing. The banks started suffering and wanted their money to pay for their expenses. Interest rates were raised on the adjustable rate loans, and people began losing their homes.  They got over-leveraged.

Why shouldn’t we be afraid? Every single financial crisis in our history has been overcome, and each time we have come back even stronger.

What are you doing to protect your fiancial futures? What advice can you give our readers?

A few years ago I was talking to my friend Matt Carman. Matt is a financial brain and has educated me and given me great tips since I have known him. As I was talking to him, a guy that can be best described as a cro-magnon commented on how dumb budgets were. This Masters degree-toting, knuckle-dragger went on to say, “Don’t spend more than you make.” His advice is actually the foundation of this posting. I figured if he could grasp the concept, any of us can.

These are chaotic times of banks closing the doors and the government being looked upon to save the economy because we have fostered a mindset of buying things we cannot afford. Our economy is failing because we are relying on credit cards to buy things older generations would have saved for OR not even bought at all. Then there are banks and companies handing out credit like candy bars on Halloween. I was buying a soda at a department store one day and was asked if I wanted to save 10% by getting a store card…on a soda?

To stop our personal financial turmoil, we need to break the cycle of spending first. I did a small-scale experiment to accomplish this by tracking everything I spent. I saved every single receipt for an entire month. At the end of the month I separated the receipts into wants and needs. A need is something I can’t function without, i.e. food, soap, etc. The wants were luxury items like music downloads, clothing, and anything of the sort.

I also included all of my bills into the needs column. The total of the needs was my baseline. I then took on the cro-magnon’s advice and compared the amount coming in to the amount of needs being paid. Everything leftover went into the want pile. Once I got the money separated, I racked and stacked my wants. What did I want most? Do I have enough to buy it? If I did, I bought it. If not, I saved up to buy it.

Remember getting that first credit card? It would be used strictly for emergencies. None of those ever really popped up, and you got a letter in the mail last month saying that you credit limit just doubled. All of a sudden temptations start to resemble emergencies.

Getting a pair of shoes, going out to dinner, going to a concert or buying a CD all of a sudden become easier and easier. This is free money! I can buy anything I want, without waiting and only have a small monthly payment. Perfect.

It is perfect until you run some numbers. That dinner you ate last year and charged has been paid for many times over. A balance of $1,000 at 18% would take 153 months to pay off, if you made the minimum payments, and you would have paid $1,115.41 in interest alone. That is enough money to buy everything that you charged twice. (Money for Tomorrow)

Credit cards sound pretty dumb now, don’t they? The solution is a savings account. If you open a savings account and start saving, you will no longer need a credit card. Simply put $20-$50 a pay period into your savings account the day you get paid. You probably will not even notice it gone. This will give you anywhere between $480 and $1,200 after a year.

An amount this small is not going to rocket you to early retirement, but it will replace your credit cards (aka the devil). Each year this amount is going to rise, just like your credit limit. You can put in more money if you choose to increase your balance at a faster pace.

How does a savings account replace my credit cards? Good question. Many people have what they call an “emergency” savings account. An account to be used for emergencies, just like that credit card you got in the mail. The difference is the interest actually works in your favor as opposed to being against you. Many of these accounts even have debit cards for convenience.

Create your own emergency account and cut up your credit cards!

No one wants to be plagued with debt. Unfortunately, despite your best efforts, you sometimes inevitably have to get a loan to pay for a particular need or an emergency. But you should always remember that being in debt will bring unwanted problems. If you are already in debt, here are some creative ways that will help you get out of it:

• Let your loved become aware of your debt situation. It is essential for your family to know that you have money problems. They will need to compromise on their expenses and budget according to your financial means. Take note that budgeting doesn’t mean that you have to deprive your family of other wants or needs.
• Be organized. Make it a point to list all expenses you need to pay on a monthly basis. Get a notebook so you can track where all the money is going. After knowing what your expenses are, you will be able remove unnecessary costs and amp up your savings.
• Make it a point to use cash when paying. Whether you are buying an appliance or if you simply want to dine out, never depend on the credit card. Unless you know you have the cash to pay off the debt, never use the card.
• Start a savings account. Opening an account is really significant for budgeting. Having a backup account will help tide you over during the hard times so you won’t need to fall into debt again in the future.
• Cut back on your spending. Remove the items or services that you don’t really have to pay for. Review the list of your monthly expenditure and eliminate anything that is not a priority if you are in debt.

Having some smart strategies in managing your money will help you get out of your debt situation and back on your feet.

Sometimes, the best way to stop a snowballing debt problem is to go back to its cause. If you have an uncontrollable credit card debt, then take a step back, and look into your previous mistakes. Knowing what your weaknesses are can help you prevent debt disasters in the future. Most of the time, people who are mired in debt commit the same financial mistakes that can be prevented by behavioral changes and self-discipline. Learn from your mistakes and start getting rid of your debts.

Mistake #1: Mishandling Balance Transfers

Transferring your balance from high-interest credit cards to those with lower interest rates is effective in theory. But it’s a good idea that can go wrong. Transferring the balance to a new card that has an introductory rate and waived annual fees can help you save money, but you need to focus on paying off your debts before the introductory offering expires. If not, you can wind up with an even bigger debt than before.

Mistake #2: Not Looking into Your Credit Report

Consumers assume that there is no need to look into their credit reports since they can’t do anything to change them anyway. This is a huge mistake because the report can contain errors and inaccuracies that can improve your credit rating. When these inaccuracies are detected, you will be able to enjoy better interest rates and even bag the job you want.

Mistake #3: Not Alerting Creditors of Your Financial Difficulties

People who are in debt don’t want to face their creditors. But don’t wait until the problem spirals out of control before doing something about it. Realize that the best time to negotiate with them is before the debt situations start to spiral downhill. The creditors might be willing to extend your deadline or temporarily lower the interest rate.

Lately, you’ve had some problems in getting your bills paid on time, and you now are wondering what you can do to improve your credit score. Well, you’ve certainly got plenty of company because it is estimated that around 30 million Americans suffer from credit problems that are bad enough to make applications for credit cards and other types of loans difficult to get approved.

On the other hand, your credit score might look alright but there are some fast and easy tips that can  make it look a lot better. Below are some effective credit repair tips:

Pay off your credit card debts – paying off your installment loans, like student loans, mortgages, and auto loans can improve your score. However, you will enjoy an even more significant improvement when you pay off revolving loans such as credit cards. Getting the outstanding balance to at least 30% below the credit limit is recommended.

Use credit cards lightly – high balances can hurt your credit score even if you do manage to pay your bills in full every month. The credit information that usually is reported to the credit bureaus is the balance on the last statement.

Check the limits – your score may look depressed if the lender “reports” a lower limit than what you actually have. For example, Capital One and American Express don’t report their client’s credit limit so the bureaus assume that your highest balance is your credit limit. The downside to this is that if you charge the same amount on your card every month, it will appear that you always are maxing out your credit.

Ask for some goodwill – if you have been a relatively good client, the lender might agree to erase some late payments from your history. You need to put this request in writing before “goodwill adjustment” can be considered. A long-term solution to this is asking them to “re-age” your account, especially if your credit history is badly damaged.

Dispute any errors – your score is calculated based on the information provided in the credit report. It may contain some errors that damage your score; if you see any inaccuracies with regards to charge-offs, late payments, “unpaid accounts” that were included in your bankruptcy, or any other negative items, be sure to report it to the credit bureau. You just might be able to get a significantly higher credit score because of this.

With the economy going…where it’s going, it’s time to start getting serious about protecting your credit. If you think obtaining a mortgage, buying a car, or getting a new credit card is a challenge now, imagine how hard it will become in the next few years! The only way to make sure that your financial future is secure is to do everything you can to protect your credit rating (or improve it).

Make all of your credit card/loan payments on time. This should be common sense, but you would be surprised how many people decide to let their payments slide a month or two when things get hard. If you have been doing this, stop! Even if you only pay the minimum amount due, make sure those bills get paid.

Monitor your credit. You can usually sign up for credit monitoring for a small monthly fee. Monitoring your credit is the best way to make sure that your payments are recorded correctly and that false information is corrected. You would be surprised how often errors are reported to the credit reporting agencies!

Start paying off your debt. Many financial experts advocate paying the most money to the account that has the highest interest rate. This makes sense from a math perspective. From a personal standpoint, I think that paying off the smallest debts first is better. The “paid in full” entry on your credit report helps to raise your score. It also gives you a sense of accomplishment, which will keep you on track while you work to pay off your larger debts.

Don’t take on any new debt unless you absolutely need. The goal is to prove that you are financially responsible—adding to your existing debt has the opposite effect.

Protecting your credit isn’t hard, it just takes dedication!