There are traffic lights everywhere: red, green, amber. Green and red are obvious: go and stop. However, what does amber mean? Our behavior suggests: “accelerate, go through the red light!” Simply, the amber light signals that we should prepare to stop.
Similarly, we have signs for our financial condition. We know when we have enough. We are safe when we have a little. However, do we know when we approach empty? Like traffic lights, there are several signs that appear early, telling us to slow down and be ready to stop spending. Unfortunately, when these amber lights appear, people speed up, take on more debt, and then run afoul of their financial institutions and families, while their health suffers.
Here are four amber lights that indicate your decisions are causing or will create problems with your personal finances. Reflect on each one and be prepared to respond appropriately when they appear:
- Giving to church, charity, Christian ministry, or other places or individuals, reduced or stopped.
- Routinely unpaid credit card balances.
- Capital fund or unconstituted focused reserve fund.
- Budget or spending plan not used.
Reduced or suspended donation
Sometimes some people feel overwhelmed by their financial state and feel like they need to cut back on spending. They know they have been spending more than they should, so they decide to cut back. The first area they cut is your donation to church, charity, Christian ministry or anywhere else. Unfortunately, they respond instinctively because this is the most visible and easiest discretionary item to cut. They stop or significantly reduce it, without a total review of all spending. And they continue to spend in other areas.
In these circumstances, when considering reducing your donations, understand that the pressure you feel is your amber light telling you to stop and review all spending immediately – the red light is here!
Look at your total budget, review your goals and plans, and remember why you were donating. You know the lifestyle choices you’ve made, so it’s easy to discover the source of the stress you’re feeling. Examine your spending decision procedures and recent spending decisions.
This is the first and significant sign that your finances are under pressure. Pay attention to him. Before you change your way of giving, reflect, pray.
Routinely unpaid credit card balances
A credit card gives you a minimum “grace period” from the date the item is charged to the day you pay the full amount due. Canadian regulations implemented in 2010, Require an effective minimum 21-day interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full.
Accept this grace period as your total credit period. Pay the balance in full monthly; if you can’t, this is your amber light. Watch it; stop using the card. Put it in a freezer bag and store it in the freezer. Do not “accelerate” to go through a red light; stop!
Unincorporated capital fund or targeted reserve fund
What causes more stress on the family budget? emergencies The car breaks down. The washing machine dies. The microwave, stove, or other household item stops working. You can’t predict when one of these items will sell, but you can expect to spend on one of them regularly.
That is why each of us needs a Capital Fund: A plan to avoid getting into debt by saving in an orderly manner for specific expenses with unpredictable times. It is a planned and directed saving.
Typically, people borrow, using their credit cards or lines of credit to first buy, replace, or repair major items, such as cars, refrigerators, stoves, furniture, appliances. This is a stressful, costly, and erratic item replacement and maintenance approach that the Capital Fund is designed to remedy.
The Capital Fund is an addition to your operating budget. Simply, to replace a $1,000 item with a useful life of ten years, set aside $100 a year for ten years. In year ten, if you replace the item, repeat the procedure. If you don’t, continue to set aside funds. Forecast major repairs over the life of the item and apply the same procedure. Imagine the interest charges you wouldn’t incur if you used an equity fund to pay for everything except a house in cash!
Are you without Capital Fund or equivalent? That’s an amber light screaming at you to stop and take notice. Will you reflect on this today?
Unused budget or spending plan
Everywhere you look, someone, a corporation, a group or a ministry is trying to get you to spend. In the mall, in the supermarket, on TV, on the radio, there is a commercial that invites you to buy that wonderful widget, get a useful book or an amazing service. It may cost as little as $5.00, or as little as $2.00, or as little as $10.00; so you buy it. You forget that these “single” amounts add up to a large sum.
Essentially, we allow advertising to drive our spending. That’s why we need a money map to use as a roadmap. A money map, spending plan or budget is a guide that we prepare before an event or period to plan how to spend the available funds at that event or during the specific period.
When you leave home without a money map or budget, it’s like leaving home on a trip to an unknown place without a road map. You’ll get lost.
Operating daily without a budget is another amber light. Slow down and be prepared to stop, otherwise you will sink deeper into debt. Decide today to start using a budget to help allocate your limited resources. you will be glad you did.
When any of these amber lights begin to flash, take a look at your lifestyle. You may need to modify your behavior. Bankers, insurance agents, and other salespeople calling themselves financial advisors will look at the symptoms and come up with money-centric solutions – remortgaging, refinancing, debt pooling, anything money-related – instead of addressing your attitude, behavior, and elections (ABC). ).
Changing your ABC’s is the only long-term solution to your financial affairs. Other remedies simply delay certain and necessary changes in attitude. Are you ready to make the tough lifestyle adjustments necessary to rebuild your finances for the long term? Always remember that money management means lifestyle management.
Copyright (c) 2011, Michel A. Bell