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Is failing to plan really planning to fail? Personally, I do not think it is as clear cut as that. Nobody wants to fail and most people have a rough idea of what they are trying to accomplish, even if the plan is just in their mind. Having a plan is a good thing though. By having a road map or list of what you are trying to accomplish it will keep you focused and on track to accomplishing your goal. Plenty of tasks get done without a plan. Maybe not as quickly, efficiently or as cost effectively but in the end the job gets done.

At this point in the How to Get Out of Debt Guide it is time to devise an action plan that is specific to where you landed on the financial podium. The goal is to form habits that keep you out of debt and living a debt-free life. Our financial life is about income, expenses, assets and liabilities. By doing simple small things we will be able to increase our income, decrease our expenses, increase our assets and decrease our liabilities.

Below are the action items for each level of the podium.

Gold

  • Keep assets greater than liabilities
  • Keep expenses less than 65% of NET income
  • Donate at least 10% to charity
  • Freedom Fund should have at least 3 months of NET income
  • No consumer debt - credit cards, loans(personal, auto, boat) - mortgage is OK

Silver

  • Keep assets greater than liabilities
  • Lower expenses to less than 65% of NET income
  • Donate to charity
  • Freedom Fund should have at least 3 months of NET income
  • Remove consumer debt - credit cards, loans(personal, auto, boat) - mortgage is OK

Bronze

  • Keep assets greater than liabilities
  • Increase income or lower expenses
  • Lower expenses to less than 65% of NET income
  • Donate to charity
  • Freedom Fund should have at least 3 months of NET income - Backburner for now!
  • Remove consumer debt - credit cards, loans(personal, auto, boat) - mortgage is OK

Honorable Mention

  • Increase assets or lower liabilities
  • Increase income or lower expenses
  • Lower expenses to less than 65% of NET income
  • Donate to charity - consider your time as an alternative to cash
  • Freedom Fund should have at least 3 months of NET income - Backburner for now!
  • Remove consumer debt - credit cards, loans(personal, auto, boat) - mortgage is OK

Increase Income / Decrease Expenses

The easiest way to increase your income is by removing some unnecessary expenses. One major expense that is really not a necessity at all is the cell phone. Cell phones cost at least double what a landline cost. Think about it. How often do you need it? Telephones are everywhere. Borrow someone else's phone for a minute if it's an emergency. Cell phones have become such a drain on people's budgets that it should be looked at first and foremost. The second is Cable and Dish/Satellite TV. A cell phone and cable TV are not necessities. Eliminate those two things and you will probably find an additional $100+ dollars per month to pay down your debt.

Below is a list of unnecessary expenses taken from my book (How to Get Out of Debt). Boost your income by lowering your expenses.

Wants (Unnecessary Expense)

  • Car (that has a payment associated with it)
  • Cable/Satellite TV
  • Personal Care
  • Cell Phone
  • Sporting Events
  • Dining Out
  • Scrapbooking
  • Music CDs/Instruments
  • Vacations/Trips - consider a free alternative
  • Home Improvements
  • Toys
  • Full price Designer Clothing and Jewelry - try TJMaxx as an alternative
  • Gifts - make something instead
  • Children Investment Accounts - not a necessity but a huge plus!
  • Magazine Subscriptions
  • Computers/Electronics

By eliminating these purchases and bills on a daily basis you will save thousands of dollars per year. It is much easier to decrease your spending than it is to get a raise from your boss. If you take on each expense individually it will be much easier. Focus on the prize. What do you really want in life? Do you want the freedom to choose what type of work you do? How about the freedom to choose how you spend the majority of your time? Maybe your ultimate goal is to simply be debt-free. Keep your eye on that and it will make skipping the morning latte a lot easier.

Next Step: The KO Debt Plan

Previous Step: Where You Stand on the Financial Podium

This guide is about taking 6 simple steps to get out of debt. Of course, most will assume you need to be in debt to use it. That is far from the truth. Even if you think you are doing well financially you can still learn and improve your situation even further. We started in the first 2 steps with gathering our financial documents and then entering them into the NET Worth Calculator. Today we will look at the numbers and explain what they mean. This will establish our starting point; ground-zero. Regardless of where you end up on the financial podium remember there are no losers. This is just the beginning. From here moving forward you have the choice to go right or left, to say yes or no, to improve your financial situation or make it worse. The past is behind you. Learn from it and choose to live your best life now!

Your NET Worth

How did you do? Open the NET Worth Calculator and go to the Personal Financial Statement tab (it's on the bottom). Do you have a positive NET Worth? How about your Cash Flow? Which example below fits your PFS?

Financial Podium

In this short guide I am simplifying the principles and system I share in my book, How to Get Out of Debt. We are concentrating on the major items of your financial report card; your NET Worth and your Cash Flow. In my system I have created a podium so you that you can visualize where you stand. Unlike the Olypics there are 4 steps on my financial podium. There are no losers just Honorable Mentions at the least.

Being honest and understanding that we are just at the beginning of your new financial journey, where do you stand on the podium?

Gold

  • Positive NET Worth
  • Positive Cash Flow
  • Expenses are less than 65% of NET Income

Silver

  • Positive NET Worth
  • Positive Cash Flow
  • Expenses exceed 65% of NET Income

Bronze

  • Positive NET Worth
  • Negative Cash Flow
  • Expenses exceed 65% of NET Income

Honorable Mention

  • Negative NET Worth
  • Negative Cash Flow
  • Expenses exceed 65% of NET Income

There is one other scenario that I did not include and that is when you have a Negative NET Worth but Positive Cash Flow. If you fall into this category then put yourself on the Bronze step of the podium.

Do you see how simply changing a "greater than" to a "less than" or a "Negative" to a "Positive" can change your entire situation? The next thing we're going to dig into is the action plan you can take to start getting out of debt and living debt-free. We are going to concentrate on the small things that make the biggest impact. Think of yourself as David from the story of David versus Goliath. David was smaller, weaker and undoubtedly destined for defeat. Yet victory was his by being courageous, determined and using a few small rocks.

Next Step: Devising an action plan

Previous Step: Your Personal Financial Statement (PFS)

Now that we have gathered all of our paperwork in step 1 we are going to plug our numbers in and crunch them. Actually, I'll crunch them for you. I have created a simple spreadsheet for you to enter all of your assets, liabilities, income and expenses. As I mentioned before honesty is key. If you are not honest about your numbers then you will never know where to go from here or get out of debt. These numbers will determine your NET worth as well.

Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. - Benjamin Franklin

Day 2 - Your Personal Financial Statement (PFS)

A personal financial statement or as we will refer to it a PFS, is your financial report card. It gives an overview of the assets, income, expenses and debts of you or your company. It is often used by banks to assess a person or corporation's financial health.

I have created a simple Financial NET Worth Calculator for you to download. You will need Microsoft Excel to open this or you can use Google to open it. If you do not have Microsoft Office you can create a new Google account and then upload it to your Google Drive. Google does a good job at conversion but if all else fails a simple pen and paper will work perfectly as well.

Step 1: Download NET Worth Calculator

This is just step two to get out of debt and live your best life. Even in this simple form (our Simplified Personal Financial Statement from the worksheet above) knowing your NET worth and your CASH FLOW is a great start. The thing to point out here is that there are no losers. You may not be a Gold or Platinum on the podium but at least you made it. The Honorable Mention is just a starting point. God has big plans for you. Right here and right now you have the choice to make the next move for good or for bad. The past is behind you. Lessons learned. It's time to make the best of this life. It may not be easy but it will definitely be worth it.

When things got hard, you started looking for something to blame. Like a Big Shadow. Let me tell you something you already know. The worlds aren’t all sunshine and rainbows. It's a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it...

You've gotta hit as hard as life. It isn’t about how hard you hit, it's about how hard you can get hit and keep moving forward. How much can you take and keep moving forward? That's how winning is done.

If you know what you're worth, Go out and Get What Your Worth. But you gotta be willing to take the hits. And not pointing fingers saying you aren’t where you wanna be because of him or her or anybody. Cowards do that and that aren’t you. You're better than that. -Rocky Balboa (Rocky VI)

Next Step: Where You Stand on the Financial Podium

Previous Step: Getting Started

Do you struggle with managing your finances? Are you living paycheck-to-paycheck? Is it difficult to just make the minimum payment on your bills? Maybe you earn a decent wage but for some reason you just can't get ahead. In my opinion, the better question is do you want to live free of financial worry and debt? Do you want the freedom to choose what you do for a living or where you live or what you do with your time? If you are honest with yourself you will admit, regardless of how much money you earn, that you wrestle with making the most of your money. I am no different. That is why I continually share the solid principles that I have learned in managing my finances. Having control over your finances is empowering.

Experts agree that it takes at least 30 days to start forming a habit. That is, performing the same routine every day, day after day. Mastering finances can take a lifetime. I am going to share my system that uses the KISS methodology (Keep It Simple Silly). By the end of this guide you will be able to know where you currently stand on the financial podium, where you are heading, how to create an action plan and exactly how to power down your debt.

School systems do not teach how to manage your finances so the burden is on each one of us to learn as early on in life as possible. The sooner we learn, the sooner we can live a life that is free of unnecessary stress. God made each of us unique and special and he wants the best for us in life. Sometimes the best things for us are not what we want however. Selling a house that we can't afford is not easy. Driving a used "beater" car can be embarrassing... if we focus on the here and now instead of the big picture. So, let's be honest. We love honesty, especially me. (Dishonesty is probably my biggest pet peeve!) So, be upfront when we look at your finances. When asked for a "value" of something make sure it's comparable to what the market value is not what you paid for it. Keep it simple, round up if in doubt. It's always better to find hidden money than to find you still owe! Regardless of where we stand on the financial podium there is always room for improvement.

Before we begin, I want you to know that I am for you and want you to succeed! I am here to answer any questions you may have. I am here to help you live your best life. To restate the terms found on my website, I do it because I’m passionate about sharing with others what I’ve learned, both my successes and failures. My goal is to promote a positive healthy financial and personal lifestyle for my clients and followers. I have invested very successfully in businesses, real estate and stocks. I love to write. I am not a financial advisor, doctor, lawyer or psychic. My ideas are simply food for your thought to make good decisions. I share my experiences. Ultimately, I want you to use your informed opinion to make the best decision for you in your life. I earn money from my website. (That shouldn’t surprise you. I want you to do the same!) I take security very seriously and having over 18 years experience in Information Technology you can rest assured that I’ll do everything in my power to keep your data safe. The bottom line is, I’m all for you and want you to succeed in life both personally and financially. It all starts with 5 minutes a day!

Day 1 - Getting Started

I hope you are as excited as I am to begin powering down your debt and living your best life.  I know that finances can be boring and seem like a thorn in your side but rest assured I will keep this light and fresh with ideas that you can use from here on out as you master how to get out of debt.  Before we can create a plan for you we need to know exactly where you stand financially today.   Before we do that let me explain some basic financial terms.  You will need to refer to these when you fill out your Personal Financial Statement (PFS).  I'll get to the PFS in a bit.

Here are 4 terms that you should be familiar with.  Learn what they are and what they mean.

Financial Terms You Should Know

  • Asset: An asset is an item of value. Assets can include cash, stock, real estate (if you are not renting), vehicles (if you are not leasing), etc. Money is a liquid asset.
  • Liability: A financial obligation. Any credit cards, loans, debts owed, etc. Your mortgage is a liability as is any other real estate or rental properties that you may own.
  • Income: Any money you receive from your job, rental properties, stocks/bonds, dividends, businesses, etc.
  • Expense: Any monthly living expense. This includes items such as utilities, cable TV, Internet service, insurance (home/life/personal/renters), taxes (property), etc.

* Contact me if you are unsure of  what category an item fits under.  I'm here to help!

Step 1:  Gather Financial Papers

Now it's gathering time.  Time to gather all of your financial paperwork and get organized. Hopefully you have them all in a binder or folders. If you don't then stop here and head out to OfficeMax or Amazon.com and grab one.

We will use all of your financial papers to record the most accurate picture of where you stand on the financial podium. There are no losers on the podium so there's no need to be nervous. We will record your assets, liabilities, income and expenses on your Personal Financial Statement(PFS) and assess your starting point. Then we will determine your NET worth.

Next Step: Your Personal Financial Statement(PFS)