For many, money is tighter now than it used to be.  Some have lost jobs or experienced reductions in income due to fewer sales. 

Whatever the specific circumstances, it seems that a lot of people are interested in budgeting and getting out of debt.

I’ve written quite a bit over the last year about living on a budget and paying off debt, but it might not be easy for a new reader to locate the information they need.  Therefore, I’ve created this guide. 

I hope it proves to be a useful resource.

How and why to get started with budgeting

These articles will help you understand the benefits of budgeting and provide resources to start your own budget.

• Now Is A Good Time To Be Living On A Budget – why you should consider starting a budget in the first place.
• 79+ Brilliant Budgeting Resources You’ll Love -  the ultimate guide to personal finance budgeting ever assembled! 
• We Use YNAB For Our Envelope Budgeting System – the things I love about using YNAB as my personal finance software.  Hint: it makes everything so easy!
• 20 Ways To Trim Your Budget And Survive Hard Times Ahead – ideas on how to reduce monthly spending.
• Personal Finance Budgeting Priorities In An Income Crisis – how to set the right priorities when allocating your money when your income has reduced or dried up.

How to successfully live on a budget

Living on a budget is about 10% knowledge and 90% behavior.  Get your thinking right and your budget will naturally fall into place!

• Things I Learned Living on a Budget – Part 1, Part 2, & Part 3 – lessons about money that I learned when I first started budgeting.
• Budget Living- 3 Good Habits That Outlived Their Usefulness? – three essential habits that make living on a budget work.
• Budget Living: How To Stick With Your Personal Spending Plan – three suggestions that will help you stick to your budget no matter what!
• A Rigid Budget Will Die A Quick Death – how to create some flexibility in your budget to make it last.
• How To Avoid Buying Things You Do Not Need! – tactics that will help you keep from spending beyond your budget.

How to become and stay debt-free

There are many advantages to living a debt-free lifestyle.  This is not about doing without!  In fact, it is really about how to have so much more.

• Debt-Free Is The Path To Financial Success – why debt-free living is desirable and some myths about debt are exposed.
• Establish A Personal Finance Emergency Fund – why you need an emergency fund and how to set one up.
• Getting Debt-Free Using The Debt Snowball Technique – how to pay off all your debt using the debt snowball technique as recommended by Dave Ramsey!
• Snowflaking Will Melt Your Debt And More! – introduction to snowflaking as a compliment to the debt snowball technique for paying off debt.
• I’m Saving Up To Pay Cash To Buy A Car – a practical example of how I am living to avoid debt.

What to do once you are on a budget and debt-free

Are you already on a budget and debt-free?  Great!  These articles will help you to take the next step to financial freedom!

• Your Income Is Your Best Tool To Achieve Financial Freedom – how to use your current earnings (no matter what they are) to become financially independent.
• 8 Tips For Investing Money To Build Wealth – how to start investing your money and make it work for you.
• How Much Money You Have Defines Your Life – why money is so important to living life to the fullest!

Most of what I’ve learned about personal finance came from spending time with the fantastic books in my reading list.  I offer them up for your enjoyment.  I hope this information proves as useful to you as it has to me!

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All too often, people rely on unrealistic means to free themselves financially.  Their hope lies more along the lines of wishful thinking than true strategy.

A solid plan for the proper use of your existing income is the best way to reach financial freedom.

Where many go wrong in their pursuit of financial freedom

I believe most people would say they desire financial independence.  However, if you asked them how they plan to get there, very few would have a worthy strategy.

Many hope for a big break.  They wish for one or more of the following:

• To win the sweepstakes or lottery
• To inherit money from a rich relative
• To hit it big in a multi-level marketing business
• To get lucky at a casino or race track
• To make a quick fortune trading individual stocks
• To stumble onto the next great get-rich-quick opportunity

Any of these would be great, but riches rarely fall into people’s laps this way.  The fact is that most wealthy individuals get there the old-fashion way.  They earn it!

It is amazing to me how so many can go their entire lives essentially hanging their hat on one or more of these fantasies.

Well, I’m sending out a wake-up call.  These wishful dreams rarely, if ever, work!

I know it is rare, but don’t some people get-rich-quick?

Yes and, despite the odds, some people would rather hang onto this fantasy than face reality.  They believe that someone has to win so, “Why not me?”

Well, even for that ever so small minority that do see a gigantic windfall come their way, it rarely lasts.

For those that come into a large sum of money by having it handed to them, they generally wind up broke.  In fact, they typically blow the money frivolously and end up worse off than before!

People that fail to learn the discipline of good money management, don’t know how to handle wealth when they get it.  This has been proven over and over again.

More tried and true methods for accumulating wealth

Okay, so if the old fantasies for achieving wealth don’t work, then how can I become financially independent?

Well, becoming financially healthy is a lot like becoming physically healthy.  It takes time, discipline and consistency.

For proper physical health, study after study shows that you have to eat right and exercise.  It isn’t glamorous or exciting, but it works.  The fact that it works more often than not, makes it a viable strategy to choose.  It is no longer just wishful thinking, it is a plan.

In the same way, the true methods for accumulating wealth are not usually popular or exciting, but they work. 

To become wealthy, you need to apply these steps consistently over a long period of time.  You need to make them the habits you live by.

If you do, then chances are very good that you will become wealthy.  This is the plan to follow.  It is a tried and true strategy.

Using your income to achieve financial freedom

So, what are the steps?  Here they come in all their splendid glory:

1.  Generate a decent income by working

You don’t have to make six figures to get rich.  People of all income levels have done it.  You just need a decent income to use as your tool for building wealth.  You can generate this income by working for someone else or by working for yourself.  It doesn’t really matter.

2.  Budget your money to live below your earnings

A budget is simply a method for planning and tracking your income.  It converts the money you make into a tool for building wealth.  It does this by giving every dollar a purpose.  You have to be very intentional to become wealthy.  That’s the role of a budget!

3.  Keep your lifestyle very modest

It is much easier to spend less than you earn if you keep your lifestyle modest.  Stop trying to keep up with the Joneses who are living well above their means!  Sell what you don’t enjoy, be thrifty and pay cash.  Simpler is better!

4.  Live without debt

Most wealthy people who remain rich pay cash for everything they buy.  They do not use credit.  Debt is risky and it is a more expensive way to buy things.  Millionaires are much too smart to fall for this trap.  Live debt-free!

5.  Save what you don’t spend

Rat-hole away every dollar that you can!  The more you save, the faster your net worth will rise and the sooner you will become financially independent.  Accumulating money is what being wealthy is all about.  Save, save, save!

6.  Make your money work for you

The rich understand the magic of compound interest and wise investing.  They diversify their investments and they watch their money grow.  They only invest in things they understand and they never leave their investment decisions to someone else!

Financial independence will not take as long as you think

I guess most people balk at this simple, but effective plan because they think it will take too long.  They want to be rich today!

Well, it does take some time, but it doesn’t take forever.  In fact, once you start and especially after you pay off all your debt, your wealth will accumulate much faster than you think.

The key is to get started.  The sooner you do, the quicker you will realize your dream for financial independence!

What are you doing to build wealth?  How well has it worked for you?

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Do you always feel that’s it impossible to catch up financially? For many, the rat race seems like a never ending cycle. You get to work, clock in, get your paycheck and you’re left scratching your head about what you can do to get yourself ahead financially.

If you feel alone, don’t. There are many others just like you and fortunately there are things you can do to get your financial situation on track. But, first you have to stop doing the things that are making you poor.

Here are four things that you can change today.

1. Throwing extra cash in your checking account.

It’s definitely very wise to save and have a good chunk in savings. You should keep at least 8 months worth of emergency funds (12 months if your income is unpredictable) in a high-yield savings account.

But over and above that, you’re missing out on the potential to earn more. Consider doing a CD Ladder or relatively conservative mutual funds. Just stop losing money by not taking advantage of the opportunity to earn more.

2. Giving in to 401k Temptation.

Does that new TV sound tempting? Or maybe you realized that you need to buy new tires and are not sure where you are going to get the funds (because you haven’t done #1).

Then it dawns on you – your 401k! Stop right there before the thought goes any further. Your 401k is not your savings account. Its your nest egg for down the road, so keep your hands off!

If you decide to take it and you’re under 59 1/2, figure on paying a minimum 20% in tax plus a 10% penalty. Giving away 30% to Uncle Sam is a sure way make yourself poor really quick.

3. Leaning too heavily on a 401k.

If you’re single and earn less than $116,000 a year, or are married, filing jointly and earning less than $169,000 a year, then congratulations! You are now allowed to participate in one of the greatest retirement tools of all time.

I’m talking about the Roth IRA. Investing in a Roth IRA means you set aside money now, watch it grow for decades and then cash out without paying a dime in taxes.

A recent study found that only 15% of American households have a Roth IRA. Are you part of the 85%? Don’t be. Here’s what you need to know about the Roth IRA rules for 2009.

4. 2010 tax bill- Save up Now.

In 2010, everyone will be able to take all their traditional IRA’s and old retirement plans and convert them to a Roth IRA.

The amount you convert will be taxed, but you can spread the bill over three years. You might want to start saving for the tax bill now, because this will be an opportunity you will want to capitalize on. It may end up being the best money move you’ve ever made!

This is a guest post from Jeff Rose, an Illinois Certified Financial Planner(TM) and co-founder of Alliance Investment Planning Group. He is also the author of Good Financial Cents, a financial planning and investment blog. You can also learn more about Jeff at his website Jeff Rose Financial.

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Popular strategies for achieving financial freedom

It seems that people have different ideas in mind for funding their retirement.  Let’s take a look at a few that appear popular.

1.  Live it up now and hope to get lucky later

In America, this one seems very prevalent.  I have heard it expressed as, “Why should I scrimp and save while I’m young?  I’d rather live it up while I can still enjoy it.”  Spending even well beyond one’s means is very typical.

Of course, life expectancy continues to grow higher and higher.  The average life expectancy reached a record high of 78.1 years in 2006.  Who is going to take care of these folks in their old age if they don’t prepare?

I guess this group hopes to hit a financial gold mine one day.  They must hope to get lucky by winning the lottery, collecting a large inheritance, or receiving some other large windfall.  What other hope do they have?

2.  Get rich quick with a brilliant business or investment

Many entrepreneurs and investors jump from one thing to the next in a heated pursuit of the next popular idea.  They keep hoping to strike it rich in one brilliant move.  If the money doesn’t come shortly, then they ditch it and move on.

The problem with this strategy is that so much money goes to waste.  There is always a start-up cost or initial investment involved.  However, because this group rarely sticks it out, they generally lose their money.

When I was growing up, my stepdad was one such person.  He was constantly starting a new business hoping to ramp it up and sell it for a fortune.  Obviously, there are people that have made money this way, but I think the failures far outweigh the success stories.

3.  It is impossible so I’m not going to try

It seems some people have given up before they’ve even tried.  They believe it is impossible to create margin enough in their lives to save a dime.  They feel trapped and want to blame everyone else for their failings.

I know it is very difficult to make ends meet for some families today.  However, I also believe those that are stubborn and persistent can get ahead.  It definitely takes time and a lot of work, but for me, I’d rather face the difficulty now so I can retire with some financial security.

I’m not the type to just give up so I have a hard time understanding this mentality.  I’ve seen it and I’ve got people pretty close to me that have adopted this way of thinking, but I still don’t get it.

4.  Slow and steady savings over the long-term

This last group embraces a modest lifestyle, gradually builds their income, lives below their means, invests a regular amount each month, and stays the course for many years.  The ebb and flow of the markets, economy, political environment, and popular opinion rarely effect them greatly.  They are not quick to change their plans.

Some feel like these people make too many sacrifices all their lives.  They think this group is boring and never enjoys anything really nice.  It is said, they are always living for tomorrow instead of today.

In my experience, these are the only people that ever really win financially.  They are the only ones that accumulate any wealth and hang on to to it.  They are the ones you see traveling abroad or driving across the country in a big RV once they are retired.  This is the strategy I’ve chosen and that I continue to promote.

Which strategy are you pursuing right now?

Achieving financial freedom at any age takes discipline and planning.  It takes a commitment.  Which of the strategies above most closely matches what you are doing today with your money?  Do you have a plan?  Are you following it? 

Retirement will be here before you know it.  It is amazing how fast time flies.  It takes years to accumulate enough money to retire comfortably.  It is time to start working earnestly so you can cross the finish line to financial freedom!

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This is not as difficult as it seems.  With all the negative press going on concerning the stock market right now, you might feel it is better to keep your money under a mattress rather than investing it.  However, this is simply not true.

The stock market has provided a 10-15% rate of return over the last 80 years.  Of course, this is no guarantee that it will do the same during your investment horizon.  Past performance is not necessarily an indicator of the future.  However, what else do we have to go on?

In order to make money with our investments, we should follow some simple tips. 

I should tell you right now that I am not an investment professional of any kind.  I do not profess any expertise whatsoever with investing.  I am just passing along what I think is some sound advice.  Invest at your own risk!

Practical tips for investing from a layman

I believe in keeping my investment strategy simple.  I’ll admit that seeing my net worth grow is very exciting to me, but the nuts and bolts of investing is not.  If you are an investment geek, then you probably won’t find much to get excited about below.  However, if you are like me, you need simple, practical information to help you grow wealth for retirement.  Here’s what I’ve learned:

1.  Pay off your debts before investing

I’ve already told you why I believe being debt-free is the path to financial success.  You should pour all your financial might into becoming debt-free as soon as possible.  Freedom from debt is the most important step toward building net worth.  Remember, your net worth equals your assets minus your liabilities.  Therefore, it makes sense to eliminate your debt before you start investing your money anywhere else.

2.  Set an investment goal before you begin

It is best to know where you are going before you head out.  By knowing your destination, you can keep the ship on course.  An investment goal will serve as a guide for your investment decisions.  As you invest, questions are going to arise about where you should put your money, how much you need to save each month, and when to make certain changes.  Without an investment goal, you really have no way to answer these questions.

3.  Find someone that will teach you about investing

I highly recommend finding an investment geek that you can trust and that will teach you what you need to know.  An investment geek gets all excited about the ins and outs of the stock market, mutual funds, charts, graphs and reading a prospectus.  Me?  I’d rather be whipped with a rubber hose.  However, I know that it takes expertise to invest smartly.  Find a broker, advisor, counselor, mentor, family member, friend, or neighbor that has a long track record of success in the market to teach you in layman’s terms what you need to know.

4.  Understand your investments before you invest

If you don’t fully understand the investment and how it works, then do not put your money into it, no exceptions.  It doesn’t matter how convinced anyone else is that this is the next big thing.  You want to understand it and be 100% comfortable that you know what you’re getting into before you give your money to anyone.  This is why your financial advisor needs to be a teacher and not a salesman.  There is no reason to hurry.  Take another day and make sure you understand.

5.  Diversify your investments

In the stock market especially, you want to spread your money out across numerous different companies.  The easiest way to do this is by investing in mutual funds.  By investing in a mutual fund, you are, by definition, diversifying your investments.  The fund manager takes your money and everyone else’s and invests it in a collection of stocks according to the fund’s stated objective.  I recommend spreading your money across multiple mutual funds.  This is called asset allocation.

6.  Learn to allocate your assets intelligently

You will generally distribute your money into more than one mutual fund to diversify your portfolio.  This distribution is called asset allocation.  Dave Ramsey recommends investing 25% of your investment dollars into the following types of mutual funds:

• Growth
• Growth & Income
• Aggressive Growth
• International

Over time, you will probably need to look at rebalancing your portfolio to maintain this type of allocation.  This is necessary because you will earn more in certain of these areas for a given period of time.

7.  Take advantage of matching funds in 401k

Many employers offer a 401k plan so you can invest pre-tax money for retirement.  Usually, the employer agrees to match whatever funds you invest up to a certain amount.  For instance, your employer may match your investments in your 401k up to 4% of your annual salary.  This is free money.  You should seriously consider participating in the 401k plan to take advantage of these matching funds.  Also, do not forget to rollover your 401k when you change employers!

8.  Keep a long-term mindset when investing

Investments in mutual funds and the stock market in general should be thought of as long-term investments.  This means that you should only invest money that you won’t need in the form of cash for five years or more.  Also, you shouldn’t worry about fluctuations in the market.  You only realize an actual loss when you sell at a low point in the market.  If you leave your money in, then your investment balance will go back up when the market recovers.  Trying to time the market is a losing proposition.

Basic investment tips that work when followed

These are basic tips for investing to build wealth.  However as with most things, if you get the fundamentals right, then you are 90% there.  Most people that have any wealth will agree with the majority of these tips.  I encourage you to research this further on your own.  You are the only one responsible for your financial well-being.  Take charge and make your goals happen!

What’s the best piece of investing advice that you ever received?

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