To Win The Game You Have To Know The Rules!
There’s a game that we all play with money. It happens every day whether you’re conscious of it or not. And, every day while you’re playing, you are either winning the game or losing the game. The only difference between those that are winning and those that are losing is the fact that one group knows the rules by which the game is played and the other does not. Which group would you rather be a part of?
I thought so.
So, let’s start with the simplest concept: you lose the game when you’re spending more than you’re making. It’s not rocket science, but it does involve math. If you’re a chronic over-spender the easiest way to keep track of what’s going out is to keep a spending journal every day for a month. It doesn’t matter if it’s a 79 cent pack of gum or a 79 dollar pair of jeans. If you spend money, write it down. At the end of the month, add up your spending and prepare to be astonished.
The Rockefeller family, one of the wealthiest families in the United States has a tradition passed down from father to son. The kids all receive a weekly allowance, but in order to receive their allowance the following week, they have to provide a ledger documenting every cent they spent, saved, invested, and donated. If literally one penny is missing from the total, the child does not receive their allowance the following week. This is the equivalent of balancing your checkbook to the penny every single time you want to get paid. Do you do that?
Ok, so spend less than you make. Simple enough. Now, what you do with that money is the second step to winning the game. It’s far too easy to spend the money that sits in your checking account. So, setup your accounts so that a percentage of your paycheck is direct deposited into a savings or money market account. This is what will become your save/save account. It’s called a save/save account because the purpose is to save/save not save/spend. Here’s the goal: have enough in your save/save account so that if you have an emergency, there’s enough there to cover it. (And I’m not talking an emergency pizza, emergency keg, or emergency trip to Cancun !) The bottom line is, if you don’t have the money in your save/save account when your brakes go out (and they will!) you’ll whip out the credit card and begin the debt spiral.
While we’re on the topic of debt, let’s cover the biggies – credit cards and student loans. While I understand they are a necessary evil to get through college, I’m also not naive to the fact that people treat them both as free money. Let’s get this perfectly clear – they’re not. In fact, one of the biggest expenses you’ll have in your life is the interest expense on the debt you accumulate.
There are two things you can do right away to make sure the credit card debt-load you carry is not out of control. First, remember this: if you can eat it, drink it, or wear it – it doesn’t go on your credit card. Second, you can call the 800 number on the back of your card and ask someone in the retention department to give you a lower interest rate, or you’ll do a balance transfer. 70% of the time, your rate will drop by 4 or 5 percentage points just by asking. While you’re at it, save yourself $45-75 per year and have them cancel your mileage or bonus points program.
Student Loans are changing on a day-to-day basis. If you haven’t consolidated your federal or private student loans, you’ll want to after July 1. With recent changes in the student loan industry, more companies that once offered consolidation loans are ending those programs. The Federal Direct Loan Program is stepping up to the plate and offering what is predicted to be the lowest consolidation rates in history. Again, wait until after July 1, 2008 to consolidate and save massive amounts of interest!
The last piece of advice to winning the game we all play with money is the toughest of all to get, but the most worthwhile in the long run. At some point in your life, you have to live like a poor college kid. You’ll either do it when you’re in college, or you’ll do it when you’re a professional. Take it from someone who lived to regret it – I ate enough Totino’s pizzas and Top Ramen right after college to feed several small villages. And during that time I realized, if you do for two years what no one else WILL do, then you’ll be able to do for the rest of your life what most people CAN’T do.
Play the game to win!
