Creating a wealth foundation by cutting corners where they matter

CREATING A WEALTH FOUNDATION : EARNING FINANCIAL FREEDOM
by CUTTING CORNERS WHERE THEY MATTER

 When it comes to wealth generation, another important factor that is hard to follow is " living within your means." For many people, living in debt has become the norm. It is common for the average person to be buried in debt before they reach the age of 25. A consumer driven economy based on floating credit also creates the impression that wealth means more products. After taking a hard look at your assets and income, now you have to check your lifestyle and see you can cut down on expenses.

1. Write down your expenses.
Do not lie to yourself. There is nothing like seeing it in black and white (or red). Keep track of your expenses on a spreadsheet or if you prefer, in a notebook. It gives you a concrete idea of where you are spending too much and where you are spending too little. If you are looking to save more, write down everything you buy and keep track of it. Do you really need to spend $5 a day on designer coffee? That amounts to $1800 dollar a year just on your morning cup of Joe. Is it paramount to have the latest car every single year when you are hip deep in auto loans?


2. Cut those credit cards.
The average person owns at least seven cards. The average number you need to sustain a good to great credit score? The answer is one or two. One well-managed card does more for your credit score than the dozen overextended cards you have. If you can manage without one, why not cut them all? Your credit score is not just affected by cards, but by other loans you have in your name, like your mortgage or auto loan.


3.Ruthlessly cut out all the services you do not need and monitor those you do.
One millionaire famously counted the sheets in toilet paper rolls because he thought suppliers were overcharging him. He was right.


4. Before you cut those cards however, understand the utilization ratio :
 the total credit used versus the total credit available to you. Many people keep multiple cards for fear that one or more lines will be cut, increasing the ratio over time. The goal is to have a very low ratio compared to debt, low balances and even lower interest.


5. Get free copy of your credit report. Dispute any outdated items.
Keep in mind that items should slide off, not stay on. Focus on judgement, liens and any items that undermine your potential to lenders.


6. Understand how interest affects your debt.
The wealthy understand how interest how interest works for investments, for loans and how it compounds over time. Those who are not wealthy do not. Compound interest is interest that is added to the principle at certain intervals on the debt. This means that the loan/balance of a certain loan gets higher over time and you en up paying more interest. Compounding rates differ but can be legally done on a yearly, quarterly, yearly or even daily basis. A loan with a starting principle of $1000 charged with 20% interest per year turns into $1200 at the end of the first year and so on. In contrast, simple interest does no add to the principal of the loan, but is the amount charged for use of that money or loan.


7. Pay Debt Off ASAP.
Pay more than the minimum on loans. Satisfy the interest and part of the principal - the debt amount will lessen over time and the bonus is you pay it off faster. The more you pay now, the less you pay later.


8. Keep records
 of any and all transactions over the internet or phone, especially if you are fixing your finances.

• Print or save any changes to your account.
• When calling customer service, ask for the representative's employee number and record the time of the call in the event you need to follow up on a request.
• Keep exact files and amounts.
• Keep copies of everything.

9. Be hyper-vigilant when it comes to cards, loans or mortgages.

 Look for ways to lower interest, increase payments and keep an eye out for changes that could affect your loans.

10. Make a budget and stick to it.

Think of it as a budget-it. Once you make it, you do not budget-it. Monthly and weekly budgets should be calculated to the penny.

11. The truly wealthy or those who want to be consider debt to be death to their portfolio.

They only allow themselves to go into debt when they need it, and in that case they often refer to it as capital or even better, they often get it from someone else. Keep the motto in mind when working with debt and get rid of it as soon as possible.

12. Separate your accounts

to keep track your money. Keep savings account, an investment account and an earnings account.

13. Know the consequences of forbearing or deferring loans.

The breathing room you get is often paid back threefold in capitalized interest or an increased loan principal.

14. Create an emergency fund or funds.

These accounts should contain the equivalent of 3 to 6 months salary using low risk accounts (savings, certificates of deposits or insured money market accounts) as a safety net not just for your finances but for unexpected events in your life. This prevents you from dipping into your earnings or cashing in other income resources when unexpected and unwanted events happen, such as sudden illness.

15. Remember that you can grow rich now on money that you are throwing away.

To be truly wealthy, you have to know that a simple dollar is an investment goldmine.

16. On average, Millionaires spend more time selecting what to buy than buying the product itself.

Why? Because they look for the best bargain before laying their money down - and ask for discounts before making a selection. Apply this principal to your life and watch your expenses go down.

• Instead of selecting the first brand-name product you see, take the time to check what exactly you are getting. For example, many commercially branded cereal and grain products have exactly the same nutritional content as their generic cousins, at almost twice the price. Remember that you are paying more for the brand than you are the product itself.
• Millionaires and the wealthy also know the value of patience. Many stay in the first home they bought long after they can afford a more expensive one.

17. Never accept a deal at face value.

Negotiate until you feel the terms are in your favor.

• The most important thing you should know is that without financial freedom, you cannot be truly wealthy. The most important thing is to create a base : a lower debt to income ratio and leeway to save and put money aside for investing later on.
• It also frees up your mind so you can implement the law of attraction. Implementing positive thinking in you life can draw in positive forces and creating more and more goodwill and luck. It is hard to think positive when you are constantly worrying about bills or making payments. By thinking positive and creating more positivity in your life, you bring in not just monetary wealth but wealth in your personal life as well.