The Clutter F**k Club is held every Wednesday until the end of April. Today’s topic is bad debt. Get rid of the clutter in your life so you can make room for positive, life-affirming energy!
I’ve lived with the same man for almost thirty-three years. When you live with a person for that long, you can almost read their mind after a while. It’s spooky.
This man I live with is a banker. He lends money to companies. He’s allowed to poke his nose into other people’s finances, tell them what they’re doing wrong and how to fix it. He has seen first hand what poorly managed finances can do to a company, a family and a person. It’s not pretty. There are some very smart people out there who are really stupid when it comes to their money. Money troubles are responsible for broken relationships and broken lives.
Most people appreciate his advice, but some people don’t, and they tell him to go fly a kite. Actually, they tell him worse than that, but you get the picture.
I hate math and anything to do with numbers. I prefer words. This is a good thing, since I’m a writer. Whenever my husband starts talking about numbers, financing, or budgets, my brain turns off. But he’s taught me 4 important money tricks over the years, and here they are:
1. Manage your cash flow – You must live within your means. Your monthly expenses should never exceed your net disposable income (income after taxes).
2. Manage your debt – There are 3 types of debt:
Green debt – When you purchase an asset, such as a car, a house, appliances or furniture.
Yellow debt – When you purchase short term necessities, such as a yearly vacation. These should be paid off within 12 months.
Red debt – When you buy impulsively, such as buying too many shoes or purses (why he chose those as examples I have no idea) or using a credit card for your morning latte at Starbucks. Red debt is dangerous, and should be paid off within 30 days.
3. Prepare for Disaster – You should put away a bit each month in an emergency savings account. How much? Enough to cover 3 months of expenses in the event disaster strikes, such as getting fired or getting sick.
4. Have some Fun – Spending money can and should be fun. Going on a shopping trip? Plan for it by putting money aside.
According to my man, if you follow these 4 money-managing tricks, you’ll avoid most financial pitfalls. Does anyone have other suggestions as to what works well? I’d love to hear from you!