8 Steps to Help Cure Financial Insanity

8 Steps to Help Cure Financial Insanity

by Roman on January 14, 2009

This is a guest post by Matt from Pizza For A Dream

Insanity – doing the same thing over and over again and expecting different results

Today’s focus, most specifically, is on financial insanity and 8 ways to avoid it in your life. Are you financially insane? As the economy continues to crater, do you find yourself doing the same things that you’ve always been doing and expecting things to work out differently than they always have?

1. Read, Read, Read

I’m grateful to several mentors that have stressed the importance of continuing education! The education I’m referring to may not be the formal kind that might come to your mind, though. I’m talking about self-directed education through your local library or through the purchase of books on topics that will improve your lot in life. Most believe that formal schooling is the end of education, while it’s actually only the beginning!

Do you lack knowledge in a new skill or trade? Pick up some books and educate yourself! With focused study anyone can become an expert on any topic!

For example, some books I’m currently reading to eliminate financial insanity in my household include:

  • Basic Economics – Explains our economy and the basic principles that make it work
  • The 4-Hour Workweek – How to manage your time and design a desirable lifestyle Like me, you should have a specific purpose in mind for the books you read and know how each will help eliminate insanity in your household.

2. Eliminate Waste In Your Budget

Over time we all tend to get looser in our budgets and have numerous expenses that we continue to pay even though they’re no longer important to us. Cut these expenses and put yourself in a much better financial situation. Here is a list of several changes we’ve made to our household budget over the past few months:

  • Cut cable TV to save money and have more time for the family.
  • Signed up for an unlimited long-distance plan with our phone company. We found this would actually decrease our bills after we analyzed our calling history.
  • Canceled monthly TiVo subscription.
  • Eliminated collision insurance coverage as our vehicles aren’t worth enough to warrant this coverage any more.
  • Stopped eating out as much during the day while on the road.
  • Canceled the subscription to the radio talk show “Extreme Club”.
  • Started shopping smarter. My wife spends time scouring the grocery circulars to ensure we get as many things as possible on sale during our large grocery trips. She also uses coupons where they make sense.

While all of these personal examples may not apply in your household, we all have places we can cut back.

3. Increase Your Income – Get a Second Job

Swallow your pride and add another income through a second job. This will provide both added security and an additional income in the event you lose your full-time job (see my post Why Pizza For A Dream for the reason why I began delivering pizza as a “white collar” professional). My 12 hours a week (3 nights) pizza delivery job offers nearly $1000 extra a month which makes a huge difference for us!

4. Best Time To Start Saving Was Yesterday

Less than 5% of Americans have savings accounts – start by making sure you’re part of this 5%! Setup an automatic withdrawal from your paycheck, so that you never miss the money. Begin with a simple $1000 emergency fund and grow from there – you’ll never have to use credit for emergencies again once this is built up. Over time you won’t ever have to use credit for anything! You don’t need to worry about your credit rating if you have cash!

5. Start (or Increase) Giving

Though it may seem counter intuitive, the more you give the more you will receive. Take your eyes off yourself and make a difference in the lives of those less fortunate around you. The Bible and many other books cover this principle in much more detail than I ever could, so use them as your guide.

6. No Car Payments! Pay Cash for Used Cars

Your new car loses thousands of dollars in value the minute you drive it off the lot. Eliminate being stuck with this depreciation cost by purchasing cars that are at least 4 years old and let someone else pay that new car depreciation. Also, begin to pay cash for your vehicles and drive them into the ground! Your car will last a lot longer than you think! Our 2 cars (’98 Honda Accord and ’97 Taurus) have 260,000 and 210,000 miles on them respectively. We typically spend around $1000 a year for repairs (emergency fund) which amounts to a lot less annually than monthly car payments! We won’t replace either of our cars with the van that our family needs until we’ve got the cash to do it. It’s called the “one payment plan” and it is much better than the plans the dealers offer!

7. Start a Business

There’s no better way to take control of your future than by building something that you own! My job security becomes less and less of a concern as my business grows! How would you like to be the one who signs the checks on the front instead of signing them on the back? Aside from the income, there are tons of tax advantages that you’re missing out on if not running a business. The government created the tax law for business owners, not the employees.

8. No More Debt

The borrower is a slave to the lender. Strive to get out of debt in the next couple of years and completely change your financial future! A great program for help in this process is Dave Ramsey’s Financial Peace University. His program provides a simple and systematic approach to financial peace and independence. Liked what you read? Don’t hesitate to sign up for our free email updates or subscribe to our RSS feed.

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{ 8 comments }

OnuJack January 14, 2009 at 4:28 pm

Nice post :)

I would like to add one thing tough. Very important in terms of really making changes and taking steps towards what this post suggests – Start making changes now!!!

No excuses – otherwise, the situation is not desperate enough :)

And another thing – Not sure if it true but you can check it out yourself.

Here it comes: there is no law in US that requires an individual to pay income tax… There have been several court cases where the individual beats the system because the lawman has no law to get instructions from.

Corey January 14, 2009 at 6:35 pm

Pretty standard fare when it comes to improving your financial situation. Although, I think that savings can be a bit overrated since your money is only good when it is working for you in some way through smart investing (either in yourself or good companies). Overall though, this post is a full of good reminders that I couldn’t agree with more and worthy of being passed along to everyone you know that may not know.

ShirlT January 14, 2009 at 8:24 pm

There are a couple of things you could add to your things to save money…Start buying your clothes at a thrift shop, or do as i do, I volunteer 16 to 20 hours a week at a place called…Wastewise…it is a government sponsored recycled depot….I work in the clothing dept. Ask your wife if she recognizes the name Salvatori Ferragamo?
I picked up 2 Ferragamo sweaters, brand new….for $.100 each. I plan on selling them on ebay. If you do have a garden…start a produce exchange….too many apples but need potatoes….make a deal and switch.

ShirlT January 14, 2009 at 8:26 pm

And another way to save money…make your own meals from scrap….don’t buy prepackaged cooked food….it takes time but use a slow cooker. start it in the morning, ready for when you get home at night…..Homemade soup can be made with leftovers and a can of tomato juice or better yet , frozen tomatoes (put in plastic bags and kept in your freezer) from last years garden. Cost…next to nothing.

Hamdani Amin January 15, 2009 at 10:45 am

Best time to start is yesterday. This advice is indeed very true.

Nick January 15, 2009 at 10:08 pm

No matter how many times I’ve seen these tips and tips like them, I am always glad for a refresher on these things. Very useful pieces of advice!

PizzaForADream.com January 18, 2009 at 4:28 am

@Corey You’re right to a point on the savings, but most financial gurus will tell you that you should have an Emergency Fund that isn’t an investment. It’s purpose is to sit in the bank and be readily accessible for the emergencies that come up in all of our lives. 3 to 6 months salary is the standard recommendation. Until you’ve reached this point (I’m still working on this myself) then your money “working for you” shouldn’t be the goal. I recommend Dave Ramsey’s Financial Peace University or his books at http://www.daveramsey.com for an easy and systematic approach to finances and eventual “financial peace.”

@ShirlT Some great additions! I still get some of my clothes from Goodwill and my wife hasn’t purchase clothing for over 50% off since we’ve been married. Even sold thrift stuff on Ebay for awhile during one of my low financial periods.

jean michel February 17, 2009 at 2:15 am

erarehumanum est, persevare diabolicum !
or something like that…

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