There is a lot of quality reading on the subject of personal finance. Below is a collection of what I believe to be the top personal finance books. If you have other suggested reading please add it to the comments below.
I know some people who swear by Dave Ramsey and have even joined groups that get together to review Dave Ramsey’s program. I have read some of his material and watched a few of his videos. I was already doing most of what he taught so I didn’t feel the need to continue, even though I did learn a few good tips. I know people who have drastically improved their financial situation by following Dave Ramsey’s program so I decided to include it here.
I am constantly reading books on this subject and I will be adding to it when I find quality works.
If you’re reading this then chances are that you are in some serious debt. When it comes to debt this is a no judgment zone because almost everyone has been in debt at some point. Like most people, I made some bad financial decisions as a young adult that put me into debt and forced to take a hard look at what my priorities needed to be. Once my wife and I finally decided to make some changes, we were able to become debt free in less than 18 months! I can tell you with total certainty that the feeling you get that first month where you don’t have to make any more loan payments will be worth all the sacrifices that you have made.
For most of you the only real help you need is motivation and a plan. Others of you may need help from a debt consolidation agency.
8 Steps to Get Out of Debt
1. Acknowledge what happened and fix it. Before we can have any hope of getting out of debt we need to recognize how we got into this situation in the first place. So how did this happen? The answer is simple… we got here by spending more money than we bring in. Now need to commit to changing our circumstances, which means that we will not take on any more debt… no matter what. So get all your credit cards together and cut them up. This includes anything that will allow you to get into more debt. If you want to keep one credit card for emergencies then pick one with a small credit limit (preferably under $500) and keep it at the house not in your wallet.
2. Know where your money is going and associate a dollar amount with Step #1. For one month record all your spending. This goes for everything from mortgage to that candy bar you get every day during your morning break. From Step #1 we acknowledged that we are spending more than we are making. Now we need to see exactly what we are spending our money on. Compare your monthly expenses to your income to see exactly how much you are living beyond your means.
3. Categorize your spending. Divide your list from Step #2 into two categories: fixed and variable expenses.
Fixed: Set amount each month that cannot easily be changed.
Basic Phone Service
Variable: Spending amount that can easily be changed from month to month.
Membership Fees (gym etc.)
Phone Service Features
When you categorize your expenses don’t be too quick to put something like cable, phone bills, or gym memberships into the fixed category. Even if your phone service is a “must have,” that doesn’t mean that you need unlimited data or texts. Break down your bills to the lowest level that you can survive on, then you can put it into the fixed expense category. You can live without cable and a gym membership so keep those in the variable category.
4. Create a Budget. You now have your income calculated and you expenses categorized so you can create a budget to bring your spending to equal your earnings. Don’t go too specific here, it is just an outline to get you ready to make specific cuts. In this budget you need to set aside money for additional loan payments beyond the minimum.
5. Start Cutting. I recommend that you look closely at your variable expenses, not the fixed, when you decide what to cut. Don’t waste a lot of emotional energy trying to eliminate things that you have little control over. Step #4 gave us our general numbers, now its time to get into specifics. Some things will be difficult because they have been the norm for so long but you cannot get out of debt if you are not willing to own up to the fact that you have been living beyond your means. It will be best to look at getting out of debt like running a marathon, not a sprint. Don’t go overboard on cutting expenses to levels that you cannot maintain. You run the risk of doing to your budget what you do to your fad diet; doing great in the short-term but quickly resorting to your old ways.
6. Eliminate the debts. There are two primary ways to go about deciding which debts to eliminate first. We will use the following scenario to illustrate the difference between the two. Let’s say that you have the following debts:
Method #1: Pay off the smallest debt first: You will make the minimum payments on all debts except the Visa card. Use the additional loan payment amount of $400 to quickly pay the Visa card. Once you pay this off, you will apply an additional $504 ($104 for the Visa + $400 additional loan payment) toward the next smallest loan amount which is the car payment. Once the car is paid off you move to the MasterCard, then to the student loan.
Method #2: Pay off the highest rate first: The order that you make payments in the scenario will be to apply the additional loan amount to the Visa. Once that is paid off then you apply the additional amount to the MasterCard, then to the car, then the student loan.
There are other approaches to paying off debt but these are the two most common. Each of these approaches has its own benefits. I prefer Method #1 because of the psychological impact it had for me as I watched all these different creditors disappear within months. Eliminating debt streams will give your family a morale boost when you see quick results.
Method #2 will actually save you more money in the long run so some people prefer this one. The best approach is the one that works for you.
7. Don’t give up. You will be faced with situations where you want to take out another loan, use that credit card, or give up completely. You may feel that the changes that you made to get out of debt have cost you for freedom to buy what you want, when you want to. I promise you that when you have your debts paid off you will really understand the feeling of financial freedom and it is so much better than the freedom to go into debt to get what you want, but cannot afford.
8. Share your successes. For some reason in our society people like to keep financial difficulties to themselves. Part of my family’s ability to maintain a debt free life is sharing with others how great it is. You will be surprised with how people open up to you with their circumstances. Some people, who you thought were financially secure, are actually in bad shape when it comes to debt. Now it’s your turn to share your story and help these people out.
Thank you for reading this post on how to get out of debt. Please leave any comments below.
The goal of passive income is to generate residual income after the initial investment of time and money. I spent a lot of time researching different methods of generating smart passive income and decided to make a list of opportunities to make it easier for you.
Passive Income Ideas
1. Affiliate Marketing: This is a marketing program where a company sells its products or services through an affiliate (individual or another company) for a commission. You see this all the time without even knowing it. Many of the websites dedicated to promoting or reviewing products are actually affiliate websites. In the content of the website they will have links to a vendor. When someone clicks through their website and makes a purchase, the affiliate gets a commission. I am an affiliate marketer and have had some good experiences with it. Prior to this source of income, I needlessly wasted time and money on a few subpar programs trying to discover how to make money online. I eventually came across Wealthy Affiliates, which got me on the right track with affiliate marketing. I will eventually dedicate an entire post to discussing Wealthy Affiliates so those interested will know if it is for them or not.
2. Blogging: Many have turned their hobbies and writing skills into passive income. The two most common ways to make money off a blog are affiliate marketing and direct advertising (if someone clicks on an ad on your blog you get a small commission). If this is something you want to try I suggest you pick a niche that you are passionate and knowledgeable about. Making money from a blog takes time so if you are not writing about something you really enjoy, it will be tough to stick with it. Though blogging is a continuous process, I consider it passive because once you post the blog post there is little upkeep required.
3. Peer-to-Peer Lending: This is when people lend money to other individuals instead of going through a bank or other financial institution. The most common P2P websites are Prosper and Lending Tree. I have been with Prosper for many years and have seen decent returns. Back in the Financial Crisis of 2007 most of my investments lost a lot of money. However, Prosper was one of my investments that continued to be profitable during that crisis.
4. Rental Income: Many have either supplemented or based their entire income off making money from rental properties. Being a landlord is definitely not for everyone. A lot of success or failure in regards to making money off rental income is in ensuring you get quality tenants. The wrong tenants can make your life a headache if you decide to use this type of passive income.
5. eBooks: These will be a lot of work upfront but once created they can be a source of passive income. You can either create your own website and sell the eBook yourself or sell it through another website like Amazon, Payhip, or Lulu.
6. Dividend Paying Investments: Possible options are dividend yielding investments like stocks, exchange traded funds (EFT), and Real Estate Investment Trusts (REIT). Be sure to do your proper research before picking which investment to go with to maximize your earning potential.
7. Treasury Inflation-Protected securities (TIPS): These are issued by the US Treasury and sometimes referred to as inflation-indexed bonds. When the Consumer Price Index (CPI) increases the principal of a TIPS also increases. For example, if you invest $1,000 and there is a 4% inflation the first year, your new principal amount is $1,040. You earn on the adjustment to the principal as well as the fixed coupon interest rate. The risk with TIPS is if the CPI decreases, your principal also decreases. Chances of the CPI decreasing, however, are extremely low seeing deflation in the US dollar rarely occurs.
8. Annuities: These are typically used to ensure a steady cash flow for a specified period of time or for the rest of your life. The two basic types of annuities are deferred and immediate. In a deferred annuity, the principal is held by the financial institution (usually an insurance company) for a period of time. The investor then begins to receive payments. In an immediate annuity, the investor begins receiving payments soon after making the investment.
Passive Vs Nonpassive Income
Passive Income Definition: Once the initial investment is made, little or no maintenance is required to sustain the income. An example is writing a book, once you write the book and have it published it will continue to generate revenue for years.
Non-Passive Income Definition: Continuous upkeep is required to sustain the income stream. The best example is wages from a traditional job. If you stop working, the income stream ceases.
Multiple Income Streams: Income coming in from multiple (both passive and non-passive) sources.
Many blog sites dedicated to identifying passive income list selling real estate or starting an eBay store as passive income when it is in fact non-passive. Those types of income sources should be listed as possible multiple income streams but definitely require continuous work.
Each of these passive income opportunities has its own risk and reward associated with it. Before undertaking any investment I encourage you to conduct your due diligence to see if that venture is right for you, even if that means asking for professional advice.
Those of you are looking to make money online or through affiliate marketing will come across a lot of scams, rip-offs, and get-rich-quick schemes. It is very easy to get sucked into these products because many of them have entire websites dedicated to giving the program a positive review. Many of these reviews are from affiliate marketers who will praise the product or service, even if they know it is a scam, because if they can get you to purchase it then they will still get a commission. I got sucked into a few of these myself so the technique that I use is to ignore the positive reviews and seek out the bad ones. Each program (even the good ones) will have bad reviews but look at what the people are saying about it.
Some people give legitimate programs bad reviews but they will admit that they didn’t take the time or effort to make it work. You can eventually find the truth about every program before spending any money if you look hard enough. I also look for programs that are willing to sell themselves without having to rely on the promise of a refund; meaning they will give you a taste before they expect you to pay.
Other programs will charge you then promise a refund if you are not satisfied. If you read reviews from actual paying customers you will see that some of these programs make getting a refund a hassle or don’t give it at all. I chose Wealthy Affiliates because they offer a free (but limited membership). If after one week you like the service you can upgrade to the paid membership ($19 for the first month and $47 for each month after that) or you can keep the free membership but you can’t get the reduced price for the first month.
Thank you for reading this article. Please post a comment if you have any questions or you can also elaborate on any of the examples that I have provided.