April 20


Managing Personal Finances

By Raymond Eaddy

April 20, 2018

Budget, debt, personal finance

Most people can manage to do their work jobs successfully. Many people can manage other people who work with them. But a lot of people have trouble managing the person they know best, themselves. This is especially true of family finances where so many people spend their entire lives wishing they had more money to do the things they want to do.

Yet, successful personal and family finance is well within their reach if they only get a few things right in respect to finances.

As part of your personal discipline, you need to adopt a policy of buying only what you can pay for in the current month. That means paying off your credit card by the billing date every month.

Banks want to lend you money especially on credit cards because once they get you to a stated maximum on your card, you are effectively paying them 18% to 29% on that amount every month. In effect you are cutting them in on approximately a fifty of all you buy. When you get yourself in that situation, they own a chunk of you. You are their personal slave.

Remember that while the banker might be friendly, the bank is not your friend. Ever!

So if you can not pay now, do not buy or you will pay maybe 20% more for each purchase. You would not buy an article if a merchant said that the regular price for it was $ 100, but for you I will sell it for $ 120. So do not pay more because you borrow and do not pay off each month.

A second thing to get right and keep it that way is if you have to borrow to buy a car, pay it off as quickly as you can. If you have a 3 year loan on your car, pay it off in 2 years. Then after it is paid for, keep it for at least 6 or 8 years. Modern cars are quite reliable for close to 300,000 miles (480,000 kilometers). Then make it a point to never buy a vehicle unless it is at least 1 year old. Combine these two practices and you will have four or five years without vehicle payments.

Live within your means. Lots of people making less than you are doing this and living better than you even though you have a higher income. Without you have 6 kids you can live quite nicely in a 1,000 sq. ft. three bedroom house and it will be much more affordable than the 2,500 sq. ft. house of your dreams. In fact the dream home may well turn out to be a nightmare for you because you do not need it and can not afford it. The same goes for a vehicle, buy one that gets good mileage rather than one that has an extra 100 horsepower that you do not need.

Apply the same principle to buying appliances and furniture. You do not need the top of the line stuff. the lowest cost automatic washer will last just as long as the highest priced one and get your clothes just as clean.

Ask yourself this question: If I could pay myself instead of a lender which would I do. If you are like me, you will always be the winner in that and the bank will always lose when it comes to a choice between yourself and the bank.

Think of it this way. Which class of people have the most money? Is it those pay interest or those who receive interest payments. The answer is obvious so do not borrow except for a home or possibly a vehicle.

Get them wrong, however, and you may make yourself poor and miserable.

Combine these decisions and you will have a lot more money to spend on yourself and your family, which means you can take nice holidays (and pay cash for them too) and have a better life style with less financial worry. All it takes is determination to pay yourself first. There is nothing wrong with buying smart and a lot right about it.

If you have flunked personal and family finance up to now, it is not to late to learn the smart way and pass the test now rather than never.

Raymond Eaddy

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