7 Steps Towards Financial Freedom

There are three basic rules for financial freedom. The first and the absolute most important of them is discipline. The second is effectiveness of allocations and the third one is getting value for money. These three rules sound so incredibly simple that anyone seems to understand them. Indeed, discipline means not to spend over you can afford; effectiveness means to spend more on what is more important and less on what is less important; and value for money means to avoid useless expenditures. Is anything easier than that?

You will probably say "This is common sense, Mister Mihai Cuza, there is no mystery here". But stop for a second and be honest: do you really apply these absolute common sense principles? And how many people you know to be actually free financially? In fact, all financial experts these days teach you how to get eligible for more and more nice attractive problem-solving credit packages that enslaves you even deeper. I am not an enemy of credits. On the contrary, I know that our overall well-being today is mostly due to this wonderful opportunity to borrow money. But you have to just know that if you pay a credit for your house, economically speaking that house is not an asset for you, is the bank's asset. For you is nothing more than a liability, as long as it takes money from your pocket instead of making any for you. What I say is to get the credits you really need, but get disciplined first!

Easy to say and hard to do, I know. But here are 7 simple steps anyone can follow, starting today.

1. Put your financial situation on paper. Hundreds of years o experience show that is totally impossible to manage your money in your head. So, take a piece of paper and write down just two numbers: how much you earned versus how much you spent this month. Make the difference between the two and now you have your balance. Do that as often as you can, because if there is a single most important reason why people get imbalanced is that they do not know what their balance is.

2. Establish a maximum sum you allow yourself to spend this month. Many ask me: and how am I supposed to know what this sum should be? If you got your balance right, you will know. Just set a limit which is less than you earn. It is that simple. The big secret here is to set this limit before any calculations of how much you will want or need to spend. Just put the number down and then absolutely commit yourself to respect it no matter what. That is the discipline. The next steps will guide you through the process of coping financially within this limit.

3. Fix your fixed expenditures. This is just another way to say that no bill should take you by surprise. You must admit that presently you are not quite prepared to receive bills. Wouldn't be easier if you received all that bills at once, on your pay day? Think of it. Well, they may not send you the bills on the same day, when you have where to pay them from, but this doesn't mean that you can not act as if they would. Just pretend, and put that numeraire apart.

4. Set your priorities. That is not as difficult as it may sound and is very important, I can assure you. If you just have your major objectives to spend for (on paper, again, do not trick yourself with daydreams) your money will tend to go mostly on what really matters to you, and it will not be lost on unimportant areas. Someone I know came up one day with this expenditures list:

"$2.00 - newspaper

$5.00 - sandwiches and coke

$4.00 - flowers

$450.59 - different stuff"

He did not even remember what he spent for! And that is as real as you and me. I know you don't want to end up like this guy. So, just have your spending priorities on paper.

5. Allocate sums according to your priorities. This is as natural as spending more on presents in December and more on holiday in July, but few people actually do it consciously. Even if you are not balanced yet, at least make sure you spend on what is more important to you. By the way, you can not do that properly without a written allocation of sums (sounds familiar?).

6. Get value for money. This is similar to saying that you must make sure that the product or the service you buy means a lot more to you than the money spent for it. Of course, this rule does not apply to drug addicts. A good way to verify the value you get for your money is to shortly look again on that list of priorities you've just made.

7. Enjoy the process. Make up creative ways to have fun while doing this monthly financial planning. You can imagine for example being a financial genius putting his business in order for a half an hour, and hey, who knows, you may just become one.

mihaidcuza@yahoo.com

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