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The Extremely Simple Financial Health Plan

(c) 2003 by Cheryl Williams Levey,

In both our business and personal lives, a number of financial matters must be addressed and taken care of regularly. Although it's easy to get mired in the financial lingo and details, and that's a great excuse to avoid dealing with it, our financial well-being is very important and should be a priority. As with most things in life, we don't have to make it so complicated!

Don't get me wrong, thorough analysis of spending patterns, rates paid, etc., can help, but more often the confusion it creates just hinders the chances of making positive financial changes.

Most of us are just "hoping" for a way out someday, and giving us budgets that require keeping track of interest rate fluctuations or writing down every single expense to the penny is not going to help us! All it does is reinforce our already bad and unhealthy attitudes towards money by making financial health seem elusive and difficult to attain.

Forget all of the complicated theories and budgets. Even if a budget is simplified, it's not as simple as what I do regularly. This is the extremely basic financial health plan.

You can stop hoping and start taking positive action now.

Getting Started on the Road to Financial Well-Being

Before we start, there are some people who do need the help of a professional financial advisor. If you are one of those people, please find a professional you can trust and follow their advice.

Most of us just need a nudge in the right direction. Don't go hide under a rock--ignoring the problem is how we got so deep. So many of us have fallen into this trap that it's ridiculous to even feel ashamed. Just take three baby steps towards making changes. Bigger and more complex stuff can come later. For now, just worry about getting started and used to the idea of financial awareness and wellness.

First, concentrate on reducing debt

Credit cards -- make a list of all the cards you have with the smallest balances first. Concentrate on paying the smallest one off. Even if you can only pay $10 extra, do it. When you pay one completely off, close the account. Do this until you only have one (or two -- one personal, one business) credit cards left. Then, pay off the one or two you plan to keep. Note that this may take years to accomplish, but it can be done! Then, make it a rule to pay the balance every month. Which means, don't buy anything unless you already have the cash for it. You can use your credit card to avoid carrying around cash, but even better, use a Debit/Check card and have your purchase automatically deducted from your account. No credit, no fees, no interest, no finance charges....

Tip: If possible, getting a second job and dedicating that paycheck to your debt elimination is one way to make the debt go away faster.

Loans -- check with your loan originators to see if you can refinance any of your loans at more favorable conditions, including your mortgage. This may not be possible, but it doesn't hurt to check! Loans tend to have lower interest rates than credit cards, so concentrate on actually paying off the cards and simply make payments on loans until the card balances are gone.

Then (Oh, I know it's painful!), try to live just a tiny bit more frugally…

Utilities -- see if there is any way to reduce your utility bills. Can you sign up for an average payment or a package deal (like telephone and cable)? Can you keep the thermostat just two degrees cooler (in winter) or warmer (in summer) than you are used to? Can you and your family be more diligent about saving water and electricity? Do you have services now that you can do without? Particularly memberships and subscriptions that are automatically charged to your credit cards.

Daily expenses -- Do you buy a coffee every day? Or spend money in any other way regularly? Can you cut expenses, or at least reduce them? Do you eat out more than once a week? Do you go to the movies at lot? Consider making your favorite restaurant meals from home. Rent videos and make popcorn. Make time at home special. If you eat out too much because you are too busy to cook, plan easy meals like spaghetti or meals in the crock pot.

Instead of writing out a detailed budget (which is useful, but tedious), just list your monthly bills and the approximate amounts of each. Add up the total and compare that amount to your monthly income. Is there much of a difference? Your goal is to make that difference larger by paying off debts so that more money is free to do fun stuff. One way to do this is to pay off one debt and then add the amount you were paying on that to the payment you were making on another debt.

Periodically relist your debt balances (which will be shrinking) and compare the total to your monthly income. If you are trying to reduce your debt, you will see progress.

Lastly, consider ways to increase your income and save

The first time I truly realized that I had a $12,000 balance on a credit card (yikes, how DOES that happen!), I immediately got a second job. I worked really, really hard long hours for a year, and sent at least $1000 every single month to that credit card. And I did pay it off. I still have the stub from the very last payment that states my balance is zero. I can't tell you how great that feeling is.

I was blissfully debt-free for a few months. But, I wasn't smart -- I didn't close the account.

I can't exactly remember why it didn't last, or what large purchase I made to jump that credit card back up, but I found myself with another huge bill before long, facing the same dilemma. Now, it's true that debt in many cases is a result of poor financial decisions (it is for me, anyway). We've just got to have something NOW. Sometimes, though, it's because of unexpected expenses like car repairs or medical costs that aren't covered by insurance. Expenses that we should have savings for, but most of us don't.

You can get another job, start a business (as long as that business doesn't take much to start - internet businesses are ideal for this), start selling on ebay, take in a roommate, etc. There are all kinds of ways to earn some extra money.

I started an online business and learned lots of different ways to make money online. Sure, at the time I kept my day job, but that salary just wasn't enough to eliminate that debt. I now earn money from several different sources, most of which are included in some form on this website.

The point is that you need to consider ways to increase your income, either permanently or just long enough to pay off a debt, like I first did. This time, I ended up starting my own online businesses, and I'm still working on that debt, but I'm getting there!

With persistence, becoming debt-free can be done.

So, the basic plan for financial wellness is:

  1. Concentrate on reducing debt
  2. Live just a little bit more frugally, reduce expenses
  3. Find ways to increase your income

The idea here is not to drastically change your life all at once or to cut you off from living the way you are used to living, but simply to make very small changes that will dramatically and positively change your finances. As you get used to some of the small changes, you may want to introduce bigger ones, but for the moment, just deal with the little stuff.

So, how does all of this apply to day-to-day life?

Two pieces of advice to follow always:
1. Balance the checkbook after every withdrawal or deposit and
2. Avoid using credit cards as much as possible.

Make a sign and hang it on your wall if you have to.

If you always balance your checkbook, you will always know exactly how much money you have. This provides you with the knowledge to know whether you can purchase certain things or not, and gives you a sense of power - because knowledge truly is power.

If you avoid using your credit cards, and try your best to pay a little extra on them, before long you'll see the balances going down. It does take effort and commitment, and it does mean talking yourself OUT of buying some things, but in the end, trust me on this one, you usually don't really need whatever it is anyway.

If you have your own business or plan to start one to increase your income, here is a down-and-dirty deceptively simple way to keep track of the financial health of your business. Of course, we need to pay attention to our business expenditures and income. We need to keep decent records for tax purposes and for our own goal setting and evaluating.

I use a 12-month accordion folder. For each month, I put every receipt for every expense and every "profit." I include my business credit card statement (properly notated to show what each item is) along with bank and income statements. These income statements are basically my "pay stubs" so to speak. At the end of the month, or whenever I think to do it :), I get out a sheet of paper and draw a line down the middle. I write the month at the top and on one side I list and total all my expenses; on the other I list and total all my income.

That's it.

Not very high-tech, but it's a system. A simple one. Which means it's easy for me to stick to it. And I can see at a glance the totals of my profits and expenses to be sure the profits are larger than the expenses.

Why make things harder than they have to be?

Again, financial wellness does not have to be hard or complex or…dreadful!

Before you know it, you'll be able to really see your debts shrinking, your income increasing, and your financial "big picture" will be looking brighter and brighter. And when you see positive changes taking place, financial management might actually become…fun!


Cheryl Williams Levey owns, a site
dedicated to showing you how to save time and money
while growing your home business. Do you have what
it takes to build a home business?
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