Hi, Everyone
This is the second thread in a series of four to share the article I recently found about the Four Golden Rules of Personal Finance, by Francis Kier. See Mr. Kier's bio in the first thread.
Find the first rule
here.
Update: Rule #3 is now available here: http://community.adlandpro.com/forumShowPost.aspx?PostID=313436
Here's the second:
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Rule #2: Always keep your finances under control. The first step in losing financial control and spiraling into debt and money problems is simply not dealing with personal finances.
-Prepare for catastrophic financial accidents with health, life, disability, and auto insurance.
-Plan and save before you buy something. Create a balance sheet for yourself at least once a year to see how you are progressing.
-Pay every bill on time, or contact the creditor to tell them what is going on and make a partial payment.
If you are temporarily unable to handle any of this, ask for some help immediately and find someone trustworthy who will do this for you.
The most common source of financial trouble is a trauma in your life. This can be a health problem (large expenses or unable to work), an emotional problem (divorce or loss of loved one), or a financial problem (losing a job, cut in pay, relocation, unexpected expenses).
Whichever the source may be, it leads to three emotional problems: the first is denial, the second is being overwhelmed, and the third is hopelessness. Denial causes people to not open their mail and continue spending as usual, and being overwhelmed paralyzes people from getting assistance and dealing with the situation.
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For example, if you just lost a loved one, balancing your checkbook and paying bills is not high in your priorities. Unfortunately, tiny amounts of debt grow with interest and penalties into seemingly insurmountable mountains of debt; leaving you with loathsome options such as bankruptcy, poor credit, declining lifestyle spending, and added stress that you bring to relationships and work.
(To be continued...)
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* I see this in my real estate business all the time with regard to foreclosure. In my state, after three months of not receiving the mortgage payment, a creditor can issue a "Notice of Default". At that point, the homeowner still has three months to cure the default before the home is scheduled for auction. Then there's another three weeks while the auction notice is posted. During all that time, if the homeowner would only shake themselves out of denial, chances are they could sell the home and avoid foreclosure. Nevertheless, about 10 a week go to auction. What a pity! A foreclosure on the credit record is sometimes even worse than a bankruptcy.
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To prepare for the financial traumas: refer to Rule #1, have a checkup with your insurance providers and I'd recommend one with a financial planner and attorney as well. It's beyond the scope of this forum to list everything you should have in place, but those three professionals can fix you right up.
If you feel you can't afford to consult professionals, I would recommend Suze Orman's books. The one I own is called "The Road to Wealth - Everything You Need to Know in Good Times and Bad." I highly recommend it. It's in encyclopedia and Q&A format, so you can find what you specifically need to know quickly without reading it through. You should be able to find it in your public library. (Here's a savings tip: Don't spend money on a book that you don't know you want to keep. Get a library card and use it! You can always purchase the book later if it proves to be something you want in your personal library.)
The next rule may surprise you, so be on the lookout for it!
Cheri