Clearing Debt

I'm pretty proud of myself to say that today I cleared my credit card debt. I've always been 'trying' to pay it off but about 6 months ago I decided I was going to be rid of my debts - for good. Before I had this attitude that my debt was only small, and that there were people out there who had many times what I did even on one credit card alone. Justifying it like that was just a recipe for disaster and I should have known that it would have never got me debt and financially free. My change of mindset happened, mainly I believe, to a series of books that I read which really made me question where I was going in my financial future. I will list these books at the end of the post.

My aim now is to finish clearing my outstanding debts and then start putting money into investing in new opportunities. One book I read by Harv Eker, suggests a system of how to budget your finances monthly. It's called the JARS system and goes something like this..

(all words from www.secretsofschievers.com) apart from my comments in bold italic.

Financial Freedom Account (FFA) = 10%

Long Term Savings For Spending (LTSS) = 10%

Education (EDUC) = 10%

Necessities (NEC) =55%

Play = 10%

Give = 5%

Financial Freedom Account (10%) - Put 10% into your FFA whenever you receive money, such as your salary. You must NEVER, NEVER spend the money that you put inside your FFA account. Any money inside the FFA account can only be used to purchase or acquire passive income streams to grow your money. You may spend the interest acquired from the FFA if you choose to, although it is recommended that you do not. Keep the interest inside the FFA to grow your capital and interest faster. Think of your FFA as the golden mother goose that lays you golden eggs, if you spend the money inside the FFA, it is akin to killing your mother goose that will bring you golden eggs (your riches). Instead, keep the baby geese (FFA’s interest) that the mother goose is giving you, and you can grow more baby geese (your wealth) even faster. As you may already get it, the idea is to create a golden goose! You may prefer to think of the FFA as a legacy that you can leave behind for your future generations. If you are one who believes in the law of attraction, this FFA is actually your money magnet. Keep putting more money into your FFA and attract more £££ into your life! Put £££ into your FFA account everyday if you can, even if it is just a penny.

In summary, the time to spend your FFA capital is NEVER! When you stop working, you get to spend the eggs but never the goose!

I am using money that I should be putting here to pay off my debts. Once the debt is cleared I will start putting money into my financial freedom account)

Long Term Savings For Spending (10%) - Put 10% into your LTSS whenever you receive money, such as your salary. The money inside LTSS can be used for major expenditure such as savings for your children’s education, buying a house for yourself, keeping aside contingency funds.

Education (10%) - Put 10% into your EDUC whenever you receive money, such as your salary. You can use the EDUC funds for your self-education, for examples, books, seminars and events etc. Everyone needs to learn, especially in this changing world. Grow your comfort zone through learning and doing. If you are not growing, you are dying!

Necessities (55%) - Put 55% into your NEC whenever you receive money, such as your salary. You should use the funds inside your Necessities account to settle all your essential bills such as phone bills, electricity, clothings, eating, driving, travelling, hair etc. If you cannot survive on 55%, simplify your lifestyle. Instead of driving a car, perhaps you can take public transport, or drive a Honda instead of a BMW. Buy Converse jeans instead of Armani. There are people who cannot live on 55% NEC when they started the JARS system but over time, these same group of people are able to simplify their lives and live on 50% or lesser!

When your usual needs for instant gratification kicks in, think this:

“Wealthy people think Long term. Poor people think Short term.”

When I worked out my necessities, I realised mine were way above 55%! I have now started to simplify my necessity spending by reducing my debts and bills.

Play (10%) - Put 10% into your Play account whenever you receive money, such as your salary. You are supposed to spend this money every month to pamper yourself. The key is to BLOW this Play money away every month so that you will feel good about having money and spending it! You should feel guilt-free when you spend this money every single month. Maybe you go for massages once every month, now you can use this money to really pamper yourself by going twice, thrice or as much as you want. Or you can try ordering champagne during dinner at a restaurant if you do not usually do. Or buy yourself a new gadget. Anything outrageous that you can do to pamper yourself and makes you feel really good. You are recommended to BLOW this money every month. However, if you need to save up for things such as short trips getaways that require a little more money, you can accumulate them up to a few months, say a quarter, before you use them.

Give (5%) - Put 5% into your Give account whenever you receive money, such as your salary. You can use the money for donations to charities, use it to help someone in need. Giving is important. If you choose to give 10%, take the extra 5% from your NEC and change the % allocated for NEC from 55% to 50%.

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This method of managing money IS EFFECTIVE! It will work straight away. I admit it's not easy to start with and you may have to adjust here and there, plus you will need a lot of willpower but I promise you it works. Within a few months of me deciding to clear my credit card I have done it. I moved back to my mums house, cut down all my spending and worked more hours, and it has WORKED. Loads of people has questioned why my husband and I moved back to my parents or looked down on us for it, but I really couldn't care less. I know where I'm gonna be in a few years, and sometimes what may look like a step back is really a step in the right direction.

So, here are the books I credit to me being on the path to becoming financially free! Go and snap them up!

Harv Eker - Secrets Of The Millionaire Mind

Robert Kiyosaki - Rich Dad Poor Dad

Felix Dennis - How To Get Rich

I hope I've inspired someone to become debt free, it's a nice feeling, and I'm just at the start :)

Comments

[Livon]

Nice one :) I'm def going to try this one soon as am back! The hard part for me is getting out of the mentality of 'ok that debt is clear now, I'm good'. Should lock up the cards as soon as I clear them, or enforce self penalties...

[Home Security]

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