This subject may not seem appropriate for the asylum. But bad personal finances have the capability to do everything from simply causing stress to destroying marriages. So hopefully these thoughts will help a few people in here. The reason why i'm posting this here is to hopefully help some people who are stressing out, or are depressed because of their money situation. As a disclaimer, not all of these words are my own, most of it is common sense, some of it is mine, and some of it I learned from Dave Ramsey (www.daveramsey.com) There are a lot of misconceptions about money in this country. All of my life I was exposed to debt. Credit card offers. Cheap car loans. 30 year and 0% down mortgages. The lending business is huge. And we Americans consume debt like we consume food, just look at the average credit card debt the average person carries, and look at the bankruptcy rate. It’s just insane. Personal finances are actually very easy. Dave can be quoted as saying its 80% behavior and 20% math, or something to that affect, and he’s right. People get too tied up in the way they behave with money, and make bad decisions with it. I certainly have. The same with 99% of the population. If somebody tells you they have never made a mistake with money then they either don’t have any, or are lying. Here is a simple guideline when dealing with your money. Budget, Don’t live beyond your mean Save and invest Credit Cards People have all sorts of excuses for using credit cards. Almost all of it is crap. I don’t think you’re stupid if you use them, but it doesn’t fit with me. If you can manage your money properly and still use them. More power to you, but for the average American, they are just too much of a temptation. Security: I use credit cards because they are more secure Well all I can say is http://news.com.com/Lost+credit+data+improperly+kept,+company+admits/2100-1029_3-5753557.html Same as cash: I take advantage of 0% financing, then it’s the same as cash. No it’s not the same as cash. Cash is cash, credit is credit. They are counting on you making mistakes, just like every other human. Then bam they hit you with fee’s and interest. Pay it off: I pay it off at the end of the month. Then why not use cash? Building Credit: I want to build up my credit rating? Then I would ask why? So you can get more debt? Buy a house? I don’t want any more debt. And if I want to buy a house, I’ll shop for a mortgage broker that does manual underwriting. Housing. A lot of people buy a house when they are unprepared to do so. I’m guilty of it and can attest to the stress and depression of doing so. Now I’m a firm believer that owning is always better then renting, however owning something you can’t afford is a curse. Here are some ideas to successfully owning your own home. Get out of debt: I can’t stress this one enough. When you have debt, money that can be used for repairs or building equity is tied up someplace else, you need it free. Not having cash reserves: not having any money saved up can be very problematic. What happens when you move in realize you need a new fridge? Or a tree falls and damages your roof? Soon you in debt up to your ears and your stress level is rising. May seem far fetched, but it happens more often then you’d think. 0% down: Don’t do it. Always put down a down payment, as big of one as you can. The house will end up costing you less, and if you put enough down you won’t have to pay for PMI (depending on the lender) Living in to much house: Keep your mortgage payment reasonable. A house you can’t afford is not a home, it’s a curse. Pay extra: Every extra dollar you put on the principal reduces the amount of interest you pay, and gets you the house quicker. Cars I learned a long time ago that I hate car payments. So I don’t drive expensive cars, I pay cash for them. I would be ok with financing a car provided that I could budget and pay it off in a year or less. The advantage to this is I can save more money and own outright a nicer car as the years go buy. Cars drive better when you hold the title instead of the bank. I see a lot of people around me talking about their car payments, 200, 300, 400 even 500 bucks a month. Why do you need a car that’s expensive like that? To impress people? A buddy of mine who bought a new caddy said it’s for reliability. His payments were 400 bucks a month, or 4800 bucks a year. My truck cost me that much outright, and in the 5 years I’ve had it I haven’t put half of that in it in repairs and maintenance. It’s not worth it, find a good compound interest calculator and see how much that money could be worth if it was properly invested. I’m not saying you shouldn’t have a good car, but so many people have cars they can’t afford and are throwing away money. Even if I wanted, and could pay cash for a 05 caddie, I wouldn’t do it, I’d pay cash on the 03 and save a few thousand bucks. Don’t even get me started on leasing (as quoted by Dave, fleasing) The right track. Winning financially isn’t rocket science. As I’ve stated before its more about behavior then it is about math. Dave Ramsey has established what he calls Baby Steps to financial peace (http://www.daveramsey.com/etc/cms/index.cfm?intContentID=2867). And it does work. May seem illogical to some, but it does work in the long run. The first thing you need to do is sit down with your spouse if your married, or by yourself if your not. Turn off the TV and grab your bills, and get a good picture of what your current situation is. If you’re behind on one of the following get them current NOW. Your home, your utilities, your car. And keep them current always. After that’s done, you need to list your debts smallest to largest. Except your mortgage (I’ll explain latter) And you need to come up with a tight written budget. Every buck you make should have a name on it. Even if that name is savings. Your balance at the end of the budget should be 0.00 not 0.01 or -0.01. This budget should be prioritized properly. Food should be first, then utilities then your house. Not master card first, not visa. And once you have this budget, follow it. It may take a few months to get it right, but you have to know ahead of time where your money is going. Make sure you budget to get 1000 bucks in savings as quickly as you possibly can. This will be the start of your emergency fund. After you get your 1000 bucks in savings its time to get out of debt. Take your list of debts and work on the smallest to largest. Get really insane about getting out of debt. Reduce luxuries and put the savings on the debt. Pick up part time jobs, and put every cent on the debts smallest to largest. If you can sell something do it. Find anything you can to get the debts gone. Some people disagree with this approach, and the reason it works for me is mental. I see the debts getting paid off and it pumps me up to get even more aggressive. You’d be surprised how quickly you can get your debts paid off. And once they are gone, don’t let them come back. This will be hard, you will be tired, you will want to quite, but one your debt free, it feels so good to see your money do what you want it to and not just go to creditors. After you are debt free except your home its time to go back to that 1000 bucks. Look at your budget and see what your expenses are and add them up. Build that 1000 up to 3-6 times your expenses. That way if you lose your job, you can live. This money should be kept in something like a money market account with check writing privileges. This money is not for buying groceries, or going to the movies. This money is to be used ONLY for unbudgeted Emergency’s. Once that’s build up, start investing for retirement, work on paying your home off early. And start building wealth and have some fun with your money.