Most people can get their job done successfully. Many people can manage other people who work with them. But many 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.
However, successful personal and family finances are within your reach if you just do a few things right when it comes to finances.
It’s hard to buy a home without a mortgage, and most people can’t do it without borrowing most of the cost of a home. But even with a mortgage, assuming you get one that allows lump-sum payments from time to time, you can own your own house free and clean in much less than the 20-, 25-, or 30-year term of the mortgage.
To give you an example with a $15,000 mortgage years ago, when the house didn’t cost as much as it does now with an interest rate of 9% for 20 years, I paid $5,000 in a lump sum after 3 years and cut $17,700 in payments . $5,000 principal paid and $12,700 interest saved. With the interest saved, my family and I enjoy many other benefits and pleasures that we would not otherwise have been able to do. It takes a little determination to pay yourself first and the mortgage company only if you have to. We followed the same practice again and had the house paid for in 8 years.
It’s true that you can’t currently buy a decent home for such a low price, but applying the same principles to a home with a $150,000 mortgage will result in even greater savings in interest dollars.
As part of your personal discipline, you should adopt a policy of buying only what you can afford in the current month. That means paying off your credit card before the billing date every month.
One more thing about your home. Never take out a home equity loan for any reason. You are simply taking on more expensive debt and it can cost you your home if you lose your job.
Banks want to lend you money, especially on credit cards, because once they hit a maximum set on your card, you’re actually paying them 18% to 29% of that amount each month. In effect, you’re cutting them by about fifty from everything you buy. When you find yourself in that situation, they own a part of you. You are his personal slave.
Remember that while the banker may be friendly, the bank is not your friend. Ever!
So if you can’t pay now, don’t buy or you’ll pay maybe 20% more for each purchase. You don’t buy an item if a merchant doesn’t tell you the regular price is $100, but I sell it to you for $120. So don’t pay more because you get into debt and don’t pay every month.
A second thing to do right and keep it right is if you have to borrow to buy a car, pay off the loan as soon as possible. If you have a 3-year loan on your car, pay it off over 2 years. Then after paying for it, store it for at least 6-8 years. Modern cars are fairly reliable for about 300,000 miles (480,000 kilometers). So make sure you never buy a vehicle unless it is at least 1 year old. Combine these two practices and you have four or five years without vehicle payments.
Live within your means. Many people who earn less than you are doing this and living better than you even though they have a higher income. Unless you have 6 children, you can live quite well in a 1,000-square-foot apartment. foot three-bedroom house and it will be much more affordable than the 2500 square foot. walk home of your dreams. In fact, the house of your dreams can become a nightmare for you because you don’t need it and you can’t afford it. The same goes for a vehicle, buy one that has good mileage instead of one that has 100 extra horsepower that you don’t need.
Apply the same principle to the purchase of appliances and furniture. You don’t need top of the line stuff. the lower cost washing machine will last as long as the higher priced one and will leave your clothes just as clean.
Ask yourself this question: If I could pay myself instead of a lender, what would I do? If you are like me, you will always be the winner at that and the bank will always lose when it comes to choosing between you and the bank.
Think of it this way. What kind of people have more money? Are they the ones paying interest or the ones receiving interest payments? The answer is obvious, so don’t borrow except for a house or possibly a vehicle.
Get them wrong, however, and you can become poor and miserable.
Combine these decisions and you’ll have a lot more money to spend on yourself and your family, which means you can enjoy a nice vacation (and pay for it in cash) and live a better lifestyle with fewer financial worries. All you need is the determination to pay yourself first. There is nothing wrong with buying smart and a lot of it right.
If you’ve flunked personal and family finances so far, it’s not too late to learn smart and pass the test now instead of never.