© 2003 NuLife2 Credit Counseling Services, Inc. All rights reserved.

10 STEPS TO FINANCIAL INDEPENDENCE

1. BREAK THE CYCLE—
You can do it!

2. UNDERSTANDING THE “LIBERTY” OF A BUDGET

3. WHAT TO DO IF YOU CAN’T MAKE IT ON YOUR INCOME.

4. STEPS TO PAYING OFF DEBT—
A Plan that Works!

5. AUTOMOBILES—
New Or Used?—Buy Or Lease?

6. HOUSING—
To Rent Or To Own?

7. THE THREE PILLARS OF SAVING—
The Triple Nickel

8. INVESTING—
In Yourself—Assets—Real Estate—Stocks/Bonds

9. THE SECRET OF GIVING—The Oldest Formula for Success!

10. REBUILDING YOUR CREDIT—Now, do it Right!

1.   BREAK THE CYCLE—
You can do it!

Prov 22:7  The rich ruleth over the poor, and the borrower is servant to the lender.

Do you know the number one reason most people are in debt up to their eyeballs?  Impulse buying!  When they see something that they want or hear about something on the radio or television, they pull out those plastic monsters and snatch up that cute, irresistible item that is on sale now, for a limited time.”  Most people spend beyond their ability to repay because they can.  The credit lending institutions want you to run your credit cards and personal loans up so they can make more money.  They don’t mind if you have fair to poor credit because they can charge you more interest.  When they find a “credit card junky” they sell that information to each other and they all send credit cards hoping to “cash in” on the weakness of the consumer. 

It sounds more like sharks or a pack of wild dogs feeding on a wounded victim than the financial intuitions of America.

STEP #1 STOP IMPULSE BUYING—NOW!

This simple step can change your entire life and is the first step to financial freedom.  Never buy anything without planning to buy it and knowing you can afford it!  Only go shopping when you have a specific need, not a want.  Don’t allow yourself to wander around the store.  Go directly to the area of the store that you need to be at, buy your merchandise and get out of the store.  There will come a time when you will be able to take a specific amount of money and go shopping for things you desire but not until you have broken the chains of debt slavery.

2.   UNDERSTANDING THE “LIBERTY” OF A BUDGET

Luke 14:28  For which of you, intending to build a tower, sits not down first, and counts the cost, whether he have sufficient to finish it? :29  Lest haply, after he has laid the foundation, and is not able to finish it, all that behold it begin to mock him,

People that don’t live on a budget usually think of a budget as something that constrains you or binds you, but in reality, the opposite is true.  A budget is structure that will allow you to take control of your debt and help walk you into financial freedom.  Without a budget that is almost impossible.  Living without a budget is like traveling through a foreign country without a map or compass, it’s just about impossible!  None of us know what the future holds so we plan with the information we have today.  When the information changes (our income or our expenses) we make a new budget.

STEP # 2 MAKE A BUDGET—TODAY!

There are forms in office supply stores, you can find some online or you can buy a simple software package to build a budget with.  It’s critical to do it now!  Don’t put it off again!   It’s as easy as filling in the blanks.  First get a folder to put all your bills in.  Then, follow the steps to fill out your budget form.  You may need to do a little research to do a really good job at estimating your expenses.  It’s really as easy as, Step one—Income.  Step two—Household expenses. Step three—Transportation, etc.  Do this to refine your budget, keep all your receipts for one month and include everything you buy, down to your snacks and drinks.  Go back through and put all your expenses into the proper categories and I think you’ll be surprised what you’re actually spending.  You must include an average for maintenance and repairs to your house and transportation.  If you derive income from equipment you own you need to include an average for maintenance and repairs for that, as well.  The better you build your budget the better the control on your cash flow.

3.    WHAT TO DO IF YOU CAN’T MAKE IT ON YOUR INCOME.

Prov 6:4  Give not sleep to your eyes, nor slumber to your eyelids. :5  Deliver yourself as a roe from the hand of the hunter, and as a bird from the hand of the fowler.

There are several ways to deal with this situation; however you must either increase your income or decrease your debt.  When you realize that by working harder and making a few sacrifices right now, you will benefit your entire future and quite possibly even your children’s future.  Think what your life would be like if you became debt free and the opportunities that you could grasp if you weren’t in debt slavery.

STEP #3—ADJUST YOUR “INCOME TO EXPENSE” RATIO!

A.       REDUCE DEBT

Before you make any decisions examine your budget carefully and see what you can do without. 

First, what are you making payments on that you can do without? 

Second, what do we have that we can sell to pay off or reduce an existing debt like cars, furniture, jewelry, and hobby items? 

Third, are you paying for services that you could do yourself like mowing the yard, cleaning the house, doing your nails or hair, or any other service that pampers you?  By focusing on debt reduction now you may be able to pamper yourself for the rest of your life without going into debt. 

Fourth, Does your entertainment cost you money, most of the time it does.  Dining out, movies, theater and sports are all items to examine to see where you can cut expenses.  Find free or inexpensive ways to entertain yourself.  Go to matinees instead of the more expensive evening shows.  Eat before you go so you don’t pay for outrageous concession stand prices.  If you want popcorn and a coke, pop it at home and eat it before you go.

Fifth, do you have savings or investments that could reduce your debt now?  Most saving, are paying so low interest and creditors are charging such high interest that it is much better to payoff your debts than to have a savings account.  Example: If your savings or investments are paying you 7% (I wish) and your debt is at 18-20%, it is costing you 11 to 13% to have your money in your savings instead of paying off your debt.  Does that make sense?

B. INCREASE YOUR INCOME

How can we increase our income?  Many people work a part time job or even a second full time job to increase income.  But, if you are doing this just to allow yourself more debt payments, you are doing it for the wrong reasons.  You must adjust your income to expense ratio!  There are employers that when asked will allow you to work overtime or additional jobs to increase your income.  You will be the one to know if that is a good idea or not.  If that is not a good idea then you should look for extra employment or find a way to create income.

BEWARE!  Many “work at home” and “MLM” companies prey on people wanting extra income.  They all make it sound so good, “In no time you’ll be making thousands of dollars!”  They have examples of “poverty to riches” in weeks or months.  You can examine their system and if you make more money by signing people up than by moving products, you are in a scam.  There are a few legitimate MLM or Networking companies but 90% of the people who sign up and pay their fees never even make back their original investment.  One of the lines they use is “Don’t you believe in yourself?” or “You have to invest in yourself to make it!”  A legitimate investment in yourself is a better education or tools necessary to make money with, not an inventory of products that you have to buy and fill up your garage. 

You need to know how much extra you need to make, for how long.  You may need a part time job for just a few months or you may need a second full time job for a year or so.  Your budget analysis will help you determine that.

Ask yourself what you really like doing?  If you are going to have to work extra hard, what would you enjoy doing?  This might be an opportunity to develop your own business or a life long dream.  What ever you find do it with all your might and remember that you have a definable goal that you are working toward.

4.   STEPS TO PAYING OFF DEBT—
A Plan that Works!

Isaiah 28:10  For precept must be upon precept, precept upon precept; line upon line, line upon line; here a little, and there a little:

Do I want a consolidation loan?  Many people adjust their income to expense ratio by consolidating all their debt into a single debt and they usually use their home equity for this kind of loan.  Is this a good idea?  Sometimes, not always!  The way this works is that you transfer all of your non-secured, high interest, loans to a secured, lower interest loan, usually with lower overall payments.  So how could this be the wrong move?  If there was a way to pay off all your unsecured loans within 3 years, you might not want sell the equity in your house to reduce your monthly payments.  While it will be reduced interest and reduced payment, it is for a much longer period of time.  You will pay on that loan for ten, fifteen, twenty, or even thirty years.  That’s a long time to pay interest on something that might be paid off in two to three years with a little extra effort and sacrifice. 

STEP #4—CREATE A GET OUT OF DEBT PLAN—NOW!

The fastest way of getting out of debt is focusing on your smallest debts and work your way up the ladder.  Start with your smallest debt and do everything you can to eliminate it.  When you have completely paid that debt, add the payment that you were paying on the first debt to the second one.  When you have completed the second debt, add both the payments from the first and the second to the third debt, and so on.  Most people pay off a debt only to run it right back up again.  Don’t do that!  Focus for a short period can give you a liberty for a long period of time.  Once you have paid off all the unsecured debt go after the secured debts.

5.   AUTOMOBILES—
New Or Used?—Buy Or Lease?

This is one area where many people get trapped in.  Most people don’t buy cars to meet their needs they buy car to fit their egos or fears.  Many people throw away thousands of dollars each year to be able to drive something that either makes their inferiority complex feel better or because they are afraid to break down on the highway.

Step #5—Buy the Car That Fits Your Budget and Your Needs.

While there are still a few automakers who manufacture lemons, or “instant Junkers” the mainstream automakers are building much better and much more durable automobiles these days.  With the advent of fuel injection and the overdrive transmission, the average lifespan of today’s vehicle is up by over 30%.  In the 1970’s and 80’s the average car was considered “wore out at about 100,000 miles.  Today’s cars are easily going 130,000 to 150,000 before they are considered “wore out.”  Toyotas and Hondas are beginning to have better maintenance records than the Mercedes-Benz.   You can acquire this kind of information from automobile clubs, automobile magazines and many places on-line. 

What is all this about?  Many people loose thousands of dollars buying brand new automobiles and selling them when they have only 20 to 40,000 miles on them.  You can buy a 2 to 3 year old car or truck with 20 to 30,000 miles for usually 20-30% less than new.  You can purchase an extend warrantee that will cover everything a new car warrantee covers for usually under a $1,000.  Let someone else take the “new car loss” and you can reduce your cash expenditures.

When it comes to leasing, the only time it really makes sense, is if you need the additional tax write off, when your income is higher than your expenses.

6.   HOUSING—
To Rent Or To Own?

Matthew 7:24b ;I will liken him unto a wise man, which built his house upon a rock:

The American dream!  This is a universal question.  Should you rent and pay for someone else’s property?  While this seems like a “no brainer,” everyone has his or her own set of circumstances to consider.  There may be a time when a person or family may need to rent until they can find a really good deal. 

Step #6 Own your own Home.

There are many advantages to owning your own home such as tax advantages and building an asset, but there are a few disadvantages including property tax, insurance and maintenance. 

There is a common mistake in planning to own your home.  You may not be in a position to buy “the dream home,” you want to end up in.  You may have to buy a smaller home or even a fixer-upper to get started.  Once you have your debt problem in check start exploring the possibilities to find a home that you can not only afford but one on which you might be able to do a little work on and end up with a profit.  This is one of the smartest ways to really get ahead.  If you do this every 2 to 3 years you could end up in your dream home with little or no mortgage at all.  It has been done over and over again.  Most people want to impress others immediately rather than to impress them for the long term. 

My son-in-law realized when he graduated high school that he wasn’t going to be able to afford college so he went and found a run down house that the owners were willing to finance, and at 18 he bought a house for $18,000.  He didn’t even tell his parents what he was doing and when they did find out, they didn’t think it was a good idea.  He continued to work a regular job and did a lot of work on this old house, only to sell it a few years later for $34,000.  He continued this same process and was living in a house, which he paid under a $1,000 for, when my daughter met him.  He was remodeling and fixing the place up and when they were later married, he had it ready for them to move into.  He has a large saving account, stocks and bonds, mutual funds and wasn’t even thirty yet.  Remember, this wasn’t in a great neighbor hood and it wasn’t a fancy house that needed a few things to impress his friends.  It was a small abandoned frame house in a tiny rural community.  He drove a fair distance to work but now he drives all the way to the bank. 

It’s not the house; it’s the opportunity that counts.  Stop living in a “dream world” and move into the “opportunity world.”  You can find opportunities in the newspapers, the Internet and even from friends, but often the best ones will come from driving around and looking yourself.  Look for empty or run down houses.  You can ask neighbors or even go to courthouses to find out who owns property.  Stop thinking inside the box!

7.   THE THREE PILLARS OF SAVING—The Triple Nickel

Prov 13:22  A good man leaves an inheritance to his children's children:

There are many different formulas for savings and this is just another good way to address your own needs.  The Triple Nickel is a common sense approach to systemically planning for a rainy day and for the things you want.  Once you have broken the chains of debt, you need to start a savings program the will allow you to keep from getting into this situation again. 

Step #7—Start Your Savings System.

Pillar One—The emergency fund.  If you take 5% of your income and put it in an emergency fund, never to be used for anything but an emergency, you will create a cushion of safety and confidence that few American’s ever have.  In 5 years you will have 20% of your annual income in a savings account drawing interest.  In 10 years you will have 50% and in 20 years you would have an entire years salary in your emergency fund.

Pillar Two—The long-term fund is a 2 to 10 year fund.  If you take another 5% and place it in your long term account to accomplish long term goals such as college for your children or additions to your existing home, a substantial down payment on a new home, or a car or boat fund, you will be able to make good financial decisions.  This is a power few people ever experience but when you do it will be worth it all.

Pillar Three—The short-term fund is a one to 3 year fund.  Now you take another 5% of your income to put in a savings account to accomplish your short-term goals.  New furniture, a personal pleasure item, a vacation or even a second car, it can all be accomplished with short-term savings plan.  This is one of the best training tools for the undisciplined and for children.  You should involve your children, if you have children, in this short-term savings program, teaching them the power of planning and discipline.           

This simple “Triple Nickel,” system will set you apart from the crowd and change your entire financial world. 

8.   INVESTING—
In Yourself—Assets—Real Estate—Stocks/Bonds

1 Corinthians 9:24  Know ye not that they which run in a race run all, but one receiveth the prize? So run, that ye may obtain. :25 And every man that striveth for the mastery is temperate in all things.

The greatest investment you can make is in yourself.  Whether it’s a better education, training, or new and better equipment, you are the best investment you can make!

Step #8—Invest in Your Future

What ever you left undone in your childhood, finish it.  If you dropped out of high school, get your GED.  If you dropped out of college, go back and finish your degree, whether it’s an Associate’s, a Bachelor’s, a Master’s or a PHD.  There is such a special power in finishing and to be able to accomplish what was thought unreachable.  If you accomplish this, your window to the world will be opened.

Take the next step, turn off the TV and do what you’ve always wanted to do.  Pick up that guitar or that paintbrush, set down to the piano, typewriter or computer, restore that car or add that room on.  Start doing and stop sitting!

Assets, are anything that increase in valve.  Anything!  Jewelry, silverware, pottery, furniture, automobiles, real estate, coins and sometimes even stocks and bonds.

The trick is figuring out what is actually going to continue to increase in value when you finally acquire it.  There are “safer” or “less risky” investments but they usually yield the least reward.  There are risky ones with promised great returns but these are often the ones that you end up loosing it all on.

So what’s the answer?  Invest in what you are interested in and informed in.  If you are interested in something that you’re not educated in, get the education before you invest.  There are classes, workshops, videos, mentors, on the job training and so many ways to get an education on any subject.  Do not let other people invest your money for you if they have nothing to loose.

Stock brokers work for firms, not you, and they make their money whether you make money or loose money.  Real estate brokers do the same.  No one will watch out for your money better that you will.  There is no “risk free” investment so make it your passion, so if you do loose the money, it will be an investment in your education.

9.   THE SECRET OF GIVING—
The Oldest Formula for Success!

Prov 19:17  He that has pity upon the poor lends unto the LORD; and that which he hath given, will he pay him again.

There is a secret whether you believe in God or not.  It’s almost like a law of physics.  “It is better to give than to receive.”  This principle is secret that many don’t usually think about unless they see someone on a street corner.  What’s the right thing to do?

Step #9—Set Aside a Specific Amount to Give.

Most religions teach you to give to the religion, to the needy, or both.  Why?  It’s a biblical principal that has it’s own rewards seemingly, built in.  Whether it’s a psychological phenomenon or a spiritual one, it seems to really work. 

When you set aside 10% of your income to help others it’s like planting a garden.  You plant and then you harvest. 

First, you’re allowed up to 10% of your income to be donated and be completely tax deductible if you donate it to any 501C3 corporation.  Most religious organizations, churches, and charities are 501C3 corporations.  You can ask any group that you are considering donating to, for a “in Good Standing” certificate. 

Second, you can be involved in changing lives with your contribution.  Whither to help the poor and needy, a religious cause, or even specific projects that you want help.  You can ask that your contribution be used for a specific purpose or project and by law, they are required to use your funds for that purpose or contact you if they want to use it for something else. 

Third, it makes you a much better person and if you have children it sets an example that is increasable.  To purpose to give, to deliberately take funds that you could have spent on yourself, and then to disciple yourself to deliver it to its designated place, will change your life, your philosophy and your wealth.  Prove me and see!

10.         REBUILDING YOUR CREDIT—
Now, do it Right!

Prov 22:1  A good name is rather to be chosen than great riches,

It’s important to this right.  You are receiving a NuLife2, it’s very important what you do with it.  You have an opportunity to re-start your credit history substantially better than it was.

Step #10—Rebuild Your Credit Now!

Some of the basic things may not come to your mind immediately like establishing a checking account with no overdrafts on your record.  It is a good way to show that you are financially responsible.  If you have a bad history at a bank, open a new account at another bank. 

Open a savings account no matter how small it is and put something in it every month. 

The best way to establish credit is with low cost purchases.  This will ensure that you have the ability to pay off the bill. 

BANKS ETC.

The very best way to rebuild your credit is with a bank.  This may sound strange but independent banks have the flexibility to do what they want.  If you walk in to a bank that you have a checking and savings account with, find a loan officer and have a deal for him or her, you can probably work out a loan.  You need to borrow $1,200 to $1,500 for something that you can pay 20-40% down on and can repay the loan in 12 monthly payments.  Most banks don’t like making loans under $1,000.  A large down payment increases your odds of getting a loan.

Your own family may be able to help you establish credit by using family money as a down payment. 

Be smart, buy something that you need.

CREDIT CARDS:

If you have no credit history or have a bad credit history, anyone that gives you credit may charge you 21%.  Department store cards often charge 19-22% interest.  Gas cards are just as bad, but as long as you only use them to buy gas and pay them in full, every month, when the bill comes, you won't pay any interest.  This will help you establish credit from the ground up, while at the same time getting you in the habit of paying all your credit cards in full when they arrive.  Always verify the interest rate of any card you sign up to first.  Once you have established a 6-9 month payment history, call the company that issued the card and try to negotiate a lower interest rate.  They might not respond the first time but once you have a good history with them, eventually they will.  Do this every 6 to 9 months.

Sites That Help You Establish Credit:

iCreditSearch is a credit search that finds a credit card for people with bad credit. Instead of applying to different credit cards, getting turned down, and having your credit ruined even more, try iCreditSearch.  Just answer a few simple common questions, and they list all the credit card banks who are guaranteed to issue unsecured credit cards to people with bad credit.  It's a great way to get a credit card for people with bad credit.  It's like pre-qualifying, for a credit card WITHOUT the credit check.

To establish credit use an unsecured credit card like The Future Card Visa.  It's also a credit card for people with bad credit. If you have not defaulted in the last 6 months, and have been living and working at the same place for 6 months, they'll give you a non-secured Visa Card or Master Card. Get Pre-Qualified for a no security deposit Credit card that is EASY to get. It's a Great Way to Establish or Reestablish Your Credit. Their approval rate is among the highest in the industry.  They have $250-$1000 credit limits. The application is free.

SCAM ALERT: 

Many dealerships have first time buyer programs or graduating college senior programs subsidized by the car manufacturer.  Some dealers may claim they have a first time buyer program, when there really is not one and they are just charging you 18% APR.  They often feed off of your lack of knowledge and fear of rejection.  Just keep shopping for a dealer who is willing to work with you.  Read more about buying cars at the useful consumer advocate site CarBuyingTips.com