Wednesday, August 24, 2011

Fester's financial advice

I could have been a personal financial planner, and I considered it at one point. If I thought that anyone would actually listen to my advice, I might have done it. Unfortunately my experience is that people with financial issues rarely want to take the actual steps needed in order for them to get their lives in order, so I don't think I would find that line of work very rewarding. I can see myself giving advice and watching in bewilderment as the advice I give is repeatedly ignored, even by those who came to me seeking advice and over time becoming less and less satisfied with that as a career.

It seems that with tough financial times, more people are open to listening to sound financial advice now.

If I could give people one piece of advice and nothing else, I would tell them to save a little bit of money. No matter how in debt you are, the key to wealth is keeping the money you make. If you are in debt, this seems counter intuitive to save. However, the truth is that you will never escape the debt cycle until you start to save. Make any adjustments to your lifestyle you need to accommodate this. Save something, anything! For most people the minimum I would say is $25 a week. It seems like the best advice would be to pay off debt first and then save, but I believe this to not be the case and in studies done it seems saving is more important than paying off debt. You get the spiraling debt effect if you don't save. What this means is that you find say $200 a month in savings by cutting out some partying or something, you put that towards your credit card and neglect to save any money. Then your car breaks down, so what do you do? You put the repairs on your credit card and now you are right back to where you were, or worse off! Only once you have a significant enough savings to cover any likely emergency would I then recommend paying the debt down, and even once you are in this position I would still recommend you continue to save a little so if you save $200 a month for 5 months and get a cushion of $1000 and decided this is enough to cover most emergencies you are likely to encounter, I would say continue to add $20 a month into your savings and use the other $180 to pay the debts down). Once you are ready to start paying down your debt, I would pay for the lowest amount owed bill first, so let's say you have a Sears card on it and you owe $1000 on it, pay that off first, then use the money you save from both the minimum you were paying on the Sears card, and the extra you were applying to the principle on the debt to pay off the next lowest debt you have, keep doing the same thing until you have all of your debt paid off and don't get any new debt (that is what the emergency fund is for, to pay for any new unexpected thing that may come up).

If you follow this advice, and stop accumulating new debt, you will be out of debt within a few years and can get your life on track. Taxes are slavery, but debt is voluntary indentured servitude to the banksters, and neither are good if your goal is personal freedom.