8 Ways to Prevent Financial Insanity.

The definition of insanity is doing the same thing over and over again and expecting different results.  Are you financially insane???? With the economy in a free-fall, are you continuing to do the same thing day after day and expecting things to get better???  In this post, I discuss 8 ways to prevent financial insanity in your life.

 

1. Read, Read, Read.  I am a HUGE advocate for continuing education!  Maybe not the kind of continuing education that you might originally think of, though.  I’m talking about going to the library or purchasing books on topics that will improve your lot in life.  Many believe that formal schooling is an end to education, while I believe it’s only the BEGINNING!!!  Want to learn a new skill or trade?  Read and learn all you can about it.  Some books I’m currently reading on a variety of topics include:  

• The Backyard Vegetable Factory by Duane Newcomb (backyard gardening)
• Basic Economics by Thomas Sowell (hoping to learn more about our economy and the basic economic principles that make it work)
• The 5000 Year Leap by W. Cleon Skousen (history and founding principles of the United States)
• Lone Star Rising: The Revolutionary Birth of the Texas Republic by William C. Davis (Texas History)
• The 4-Hour Workweek by Timothy Ferriss (time management and lifestyle design)

I have a specific purpose in mind for all of the above books and know how each will help      

eliminate insanity in our household.

2. Analyze your budget line-by-line and eliminate the waste.  Over the years we all tend to add and add and add expenses to our budget.  The importance of these expenses to us change over time, but we often-times don’t eliminate the items that have lost importance of meaning to us.  Cut out some of the fat and put yourself in a better financial situation moving forward.  We’ve made several changes to our household budget over the past few months:

• Cut cable TV (see Cutting off the Cable TV This Week).
• Signed up for an unlimited long-distance plan with our telephone company as this will actually decrease our bills by looking back on our calling patterns.
• Cancel monthly Tivo subscription.
• Eliminate collision insurance coverage as our vehicles aren’t worth enough to warrant this coverage any more.
• Stop eating out as much during the day while on the road.
• Cancel monthly radio talk show “extreme club” subscription.
• Shop smarter.  Plan your shopping trips.  My wife spends time scouring the grocery circulars to ensure we get as many things as possible on sale during our large grocery trips.  She also uses coupons where they make sense.

While the above personal examples may not apply to your household, most of us have places we can cut back.

3.  Get a second job and increase your income.  Go out, swallow your pride, and get a part-time job that will fit into your schedule.  This will not only provide some valuable additional income, but will also provide added security in the event that you lose you full-time job (See  Why Pizza for A Dream for why I became pizza boy).  My 12 hour a week (3 nights) pizza delivery job offers $1000 extra a month which makes a HUGE difference in our household! 

4.  Begin Saving, YESTERDAY!!!  Less than 5% of Americans have a savings account.    Become part of the 5%!!  Have this money automatically withdrawn from your paycheck so that you don’t ever miss it.  Start with a simple $1000 emergency fund and grow it from there.  Once you have an emergency fund built up, you should never have to use credit of emergencies again!!  Eventually you won't have to use credit for ANYTHING ever again!!

5.  Begin giving or increase your giving.  Though this is counterintuitive, the more you give the more you will receive.  Take your eyes off of yourself and make a difference in your church or community.  The Bible covers this principle in much more detail than I ever could, so use it as your guide.

6. Buy used cars and pay cash.  The minute your drive your new car off the lot, it loses thousands of dollars in value.  To eliminate being stuck with this depreciation cost, buy cars that are at least 4 years old and let someone else pay the depreciation.  Also, pay cash for them and drive them and drive them, and drive them some more!  Your car will last ALOT longer than you think.  Our 2 cars (’98 Honda Accord and ’97 Ford Taurus) both have 255,000 and 210,000 miles on them respectively.  We typically spend about $1000 a year on repairs (from our emergency fund) which is tons less annually than monthly car payments!

7. Start a business.  Put yourself in the driver’s seat by creating something that you own!  I worry less and less about my full-time job security as my business continues to grow!  Become the one that signs the fronts of checks instead of the backs!!  Aside from the income, there are tons of tax advantages (See Taxes: Why You Should Own a Business) that you’re missing out on if not running a business as well!

8. Get out of debt.  The borrower is the slave to the lender.  Strive to eliminate all debt in the next couple of years and completely change your family’s financial future!  If you’re looking for a program to follow in this process, I highly recommend Dave Ramsey’s Financial Peace University (www.daveramsey.com) for a simple and systematic approach to financial peace and independence. 

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Comments

[Sebrina Smith]

Wow! This was a great article. You have touched on several subjects that are close to my heart. My husband and I are currently trying to wrangle "the beast." (Our finances!) I think your suggestions are great. In fact, we have already started doing most of them. Thanks --and "Keep on Truckin'!"

[Andrea]

Hi Pizza,

I have been really bad about visiting my RSS feeds lately but am catching up today. Great post! I wanted to let you know that I posted something today regarding groceries - maybe your wife would find it useful. It's the 12/18 post about charity (I'm trying not to use your blog to blatantly plug mine, so don't want to put in a link!!).