The 7 New Rules of Money Management
After watching the financial world turn upside down in recent years, isn’t it time to flip the script on how you handle money?
Old School: “Using credit and being in debt is the American way!”
New School: “Eliminating credit card debt, car loans, and even mortgages is the best way.”
Don’t pretend to be rich when you know everything you’ve got is on borrowed time! Credit card companies are ruthless and doing their best to chop your credit limit in half. They are closing down accounts without warning, reducing credit card limits, and increasing interest rates—even if you’ve never been late with a payment. The best way to insulate yourself is to get out of credit card debt once and for all.
Old School: “I’ll retire when I’m 65.”
New School: “I might not be able to retire when I’m 65!”
Many of us recently watched our 401(k) turn into a 201(k). Most investment and retirement accounts shrunk 30 to 50 percent in value. You are probably concerned about whether you’ll ever be able to stop working. Well, unless you are rich, you may have to do one of two things: (1) significantly increase the amount you are putting away for retirement so you can make up for the recent decline in your assets, or (2) expect to work a whole lot longer. Remember, 75 is the new 65!
Old School: “I need a 9-5 job for security and benefits.”
New School: “I need to become an entrepreneur for independence and financial security.”
There is no such thing as job security anymore. You can be laid off, fired or downsized at the drop of a hat. Going forward, you must think and act like an entrepreneur. I’m not saying quit your 9-5 tomorrow, but don’t be content with just bringing home the bacon when you can own the pig! Start your own business, even if it is part-time!
Old School: “If I have a credit score of 667, I’m good to go!”
New School: “You need to improve your score to 700 or more if you want a loan with decent terms.”
Two years ago if you could fog up a mirror (breathe), you could get a loan! Everybody and their grandmother was qualifying for mortgages and credit cards! Today lenders are locking their doors on people with so-so credit. That’s true of mortgage loans, car loans, and student loans. A low score can mean no loan at all. It is imperative that you improve your credit score. Getting out of debt always helps.
Old School: “Owning a home is a great investment with enormous appreciation potential.”
New School: “A house is a place for you to live—and it ain’t gonna make you rich!”
Owning a home is a good savings tool but not a good investment. It is a place to lay your head, raise a family, and entertain friends and relatives. Gone are the days of dazzling real estate returns (at least for the next few years). The value of the average American home has recently declined over 20 percent. Most people who bought homes recently are “underwater” (which means they owe more on the house than what it is worth). In the future, building equity in a home will result by paying down the debt, not through appreciation.
Old School: “I only need a little money in my savings account for emergencies.”
New School: “You need to establish a 4-6-month ‘rainy-day’ fund that can rescue you in case of an emergency.”
In Matthew 5:45 it says, “it rains on the just and the unjust.” In other words, sometimes stuff happens! Being a Christian does not insulate you from unexpected expenses. That’s why it’s important to build up an emergency fund—preferably up to 6 months of your net living expenses. By the way, your credit card is not an emergency fund! I’m talking about real cash that covers the mortgage and puts food on the table should you lose your job. It may take you time to build up to that amount so start with some “baby steps.” Begin with saving $1,000, afterwards; shoot for three months, then four to six months. With God’s help and your diligence, it can be done!
Old School: “If I save and invest wisely, I’ll have financial security.”
New School: “Trust in God’s economy instead of in man’s economy.”
There is nothing wrong with investing in the stock market, IRA’s, 401(k)’s, and real estate, just don’t put all your faith in it! Hopefully the financial crisis taught you one thing: the only real security we have is in Jesus Christ! Stock markets can crash, banks can fail, companies can go out of business, and thieves with pinned-stripped suits can steal your money (does the name Bernie Madoff ring a bell?), but ultimately our trust has to be firmly rooted in God. He is our provider.
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