We have all done it, bought more car than we could really afford. For what ever reason we try to use in our mind to justify the purchase. I need a SUV to haul the kids around. My car was to small for the three car seats so I bought a new mini van. I just wanted a new car I was sick of the old one.

We get car fever and the dealers love it. Now I firmly believe you can get a great car with no car payments, you just have to be patient and look around a bit.

The average car payment in America today is $487 a month, think about it, that is $5,844 a year. For many people that would pay of a credit card or two. To make matters worse, most of those payments are financed out for 60 months, that is just for a $29,000 car. Once the car is paid for is usually only worth just shy of half that amount if you are lucky. As soon as you drive a new car off the lot, and I do mean the second you enter the road with your new car, it dropped in value by $2,500 or $3,000 and went from new to used all within a matter of minutes.

So what is a person to do. Well, first you have to look at a car for what it is, transportation, that is it. When you start looking at it as a “status symbol” or you go in for the “bling” factor you are going to get taken by some nice sweet talking sales person, you will throw money away instead of using that money to work for you. Take emotion out of the equation. Purchasing a vehicle is a business transaction. You need a ride to get you from point A to point B safely and successfully. And that can be done with a used vehicle, really it can, I do it everyday.

Oh I know what you are thinking, but I want it to be reliable and only new cars are reliable, they have a warranty if something goes wrong. If I buy a used car I will be fixing it all the time, throwing money into it to keep it going.

NOT!

Think about this, could you ever put $487 a month worth of repairs into a vehicle for 60 months? Of course not. Sure a three to five year old vehicle will have things go wrong, but repairs on a car you paid cash for will still be far less than a consent car payment for 60 months.

Now that you have the right mind set, focus on paying cash for the car. Do you know how many reliable cars there are that are $5000 to $7000, loads of them, they are all over the place, someone else has paid the depreciation, they are coming off of lease, they are really all over the place. And yes, they are reliable too.

Also, here is a little known trick, did you know when you walk into the dealer with cash in hand, you can get that $5000 to $7000 car for even less. These sales people work on commission, and when sales are down and they are looking at cash in hand they will make you a deal. Know your numbers as they relate to the car you are shopping for, look it up online at Kelly Blue book or NADA. When you shop with knowledge and cash, you shop with power.

Now that you bought your new “used” car, you do have to be smart and put some money away every month for general maintenance and the occasional repair. But you still don’t have to put aside $487 (although it would be nice if you did), you could budget say $250 each month to put in savings earmarked “car” and that can be used for your maintenance, repairs, and even for your new “used” car fund when you want to upgrade to a newer used car.

Again, and I can’t say this enough, it is all about planning and focusing on the big picture. A vehicle is just a hunk of metal to get you from one place to the other and a $7000 car can do that just as good as a $29,000 car.

Let me close with this thought, do you know the average millionaire, and by average I mean first generation, self made millionaire purchases a car that is two years old or older and pays cash for it. Now you know why they are millionaires, they know where to put their money, and spending it on a high priced car is not the place.

Becoming debt free, building wealth and taking control of your finances does not happen overnight, nor does it “just happen”, it takes planning, commitment, and dedication. It is important to set goals as I discussed in Debt Free Goal.

Setting goals requires you lay out and acknowledge your financial priorities, but how do you do that, start here:

1. Be realistic.

You probably won’t be able to achieve every financial goal you have ever dreamed of. Don’t just identify your goals, decide what is most important to you and your family. By concentrating your efforts, you have a better chance of achieving what matters most.

2. First goals are the one’s that matter.

It isn’t about what you want most, but rather what is most important. You may have to postpone the “fun” stuff like a new boat or a special vacation in order to pay off credit cards. This doesn’t mean you can’t have the fun stuff, it just means you have to do them on a different time table.

3. Prepare yourself for multiple goals with the same level of importance.

There may be multiple important goals which conflict with one another. When faced with such a conflict, you should ask yourself questions like: Which conflicting goal will benefit more people? or Which goal will cause the greater harm if it is deferred?

4. Time is on your side.

Building wealth does not happen overnight. Time is on your side. Money in interest-earning savings accounts or invested in mutual funds, stocks and/or bonds grows and compounds. The more time you have, the more chance you have of success. Your age is a big factor.

5. Choose carefully.

In drawing up your list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Some of the items that end up on your list may include building an emergency fund, getting out of debt, investing, paying off your home and paying tuition for your children. Once you have your list together, you need to rank the items in order of importance to you and your spouse.

6. Include family members.

This is very important, if you have a spouse or significant other, make sure that person is part of the goal-setting and priority process, if married, you cannot do this alone, it just won’t work. If you have children who are a little older, and are able to understand some basic financial talk, include them as well, it will be a good learning process for them in many ways, such as how to set goals, how to improve communication in a family unit, and how to manage money.

7. Tomorrow never comes - Start now.

Don’t put off to tomorrow what you can do today. The longer you wait to identify and begin working toward your goals, the more difficulty you’ll have reaching them.

8. Focus on your behavior.

Once you have prioritized your list of goals, build your budget and stick to it. Whenever you make a large payment ask yourself, “Will this purchase bring me nearer to my primary goals — or will it lead me further away from them?” If a big expense doesn’t get you closer to your goals then it is not in your best interest.

9. It is not all about long term planning.

Much of what I have discussed is based on long term planning and goals, however most of life is lived in the here-and-now. Most of what you spend be for daily expenses - including many that are simply for fun. Fun is okay, and should be part of your plan and priorities. We work hard for our money, and even though we have our financial goals and priorities, that doesn’t mean we can not have fun. Plan for the fun in your budget.

10. You change so should your goals and priorities.

Your needs and desires will change as you meet goals and as you age, I recommend you re-examine your priorities at the end of every year and possible re-adjust at least every five years so you stay in step with your life as you grow.

You will make mistakes, don’t beat yourself up to much when you do, but learn from them, and then get back on track as quickly as possible.

What do you do when a friend or family member continues to ask to borrow money from you?

It’s a great question and one that causes much guilt and sometimes hurt feelings on both sides. One thing I have learned is that if someone is continually asking to borrow money from you they are most likely asking others as well. Personally, I don’t lend money to friends or family, it changes the relationship. “The borrow becomes slave to the lender” Proverbs 22:7, and that is so true, it gets uncomfortable sitting at the dinner table next to someone that owes you money.

With that said, I am all for helping others in a wise way. If you are financially free and have the ability to help a family member or friend out of a tight bind and know they are good with money and are not in the financial situation due to their own stupidly but rather because they just happened to be put into some bad situations, such as a home fire, car accident, serious health issues, etc. then yes, by all means help, but don’t loan the money, give it to them as a gift.

If you know that friend or relative just can’t seem to get it together financially due to their own bad decisions and habits then I agree with and recommend you answer that friend or family member similar to how Abraham Lincoln answered his brother when he asked to borrow money. I have included that letter today.

“Dear Johnston:

Your request for eighty dollars, I do not think it best to comply with now. At the various times when I have helped you a little, you have said to me, “We can get along very well now,” but in a very short time I find you in the same difficulty again. Now this can only happen by some defect in your conduct. What that defect is, I think I know. You are not lazy, and still you are an idler. I doubt whether since I saw you, you have done a good whole day’s work, in any one day. You do not very much dislike to work, and still you do not work much, merely because it does not seem to you that you could get much for it. This habit of uselessly wasting time, is the whole difficulty; and it is vastly important to you, and still more so to your children, that you should break this habit. It is more important to them, because they have longer to live, and can keep out of an idle habit before they are in it easier than they can get out after they are in. You are now in need of some ready money; and what I propose is, that you shall go to work, “tooth and nail,” for somebody who will give you money for it. Let father and your boys take charge of things at home, prepare for a crop, and make the crop; and you go to work for the best money wages, or in discharge of any debt you owe, that you can get. And to secure you a fair reward for your labor, I now promise you that for every dollar you will, between this and the first of next May, get for your own labor either in money or in your own indebtedness, I will then give you one other dollar. By this, if you hire yourself at ten dollars a month, from me you will get ten more, making twenty dollars a month for your work. In this, I do not mean you shall go off to St. Louis, or the lead mines, or the gold mines, in California, but I mean for you to go at it for the best wages you can get close to home, in Coles County. Now if you will do this, you will soon be out of debt, and what is better, you will have a habit that will keep you from getting in debt again. But if I should now clear you out, next year you will be just as deep in as ever. You say you would almost give your place in Heaven for $70 or $80. Then you value your place in Heaven very cheaply, for I am sure you can with the offer I make you get the seventy or eighty dollars for four or five months’ work. You say if I furnish you the money you will deed me the land, and if you don’t pay the money back, you will deliver possession– Nonsense! If you can’t now live _with_ the land, how will you then live without it? You have always been kind to me, and I do not now mean to be unkind to you. On the contrary, if you will but follow my advice, you will find it worth more than eight times eighty dollars to you.

Affectionately your brother,

A. LINCOLN.”

Frugal, not cheap, but frugal is an important trait in those who are working toward becoming debt free and living in financial freedom to build wealth. I promote frugality to my clients. It is important to price shop, use coupons, by generic, etc.

There is a time however, when being frugal turns into being cheap and it starts to cost you money. Like the old saying goes, “the bitterness of poor quality remains long after the sweetness of low price is forgotten.” With that said, it is important to know where that line in the sand is between frugal and cheap.

For example, I have a friend who will drive 25 miles out of her way to save three cents per gallon of gas, now when you think about it, that extra 50 mile round trip to save .51 cents on a 17 gallon tank of gas. The trip most likely used up and extra 3 to 3.5 gallons of gas assuming she gets 12 to 15 miles to the gallon. So that savings of .51 cents for the cheaper gas cost an extra $9.80 if gas is $2.80 per gallon. That is an example of frugal turning cheap and costing you money.

Another thing to take into consideration when being frugal is the value of your time. Many times referred to as soft dollars. Sadly, many people do not actually put a value on their time. But your time is valuable and must be used wisely just as money must be spent wisely.

How do you put a value on your time? One way is to take your gross (before taxes) annual income and divide that by 2080 (number of working hours in a year based on a 40 hour work week) this will give you your hourly rate of pay from your job, so that hourly rate is a good starting point for a value on an hour of your time. What if you are a stay at home mom? Well, it is near impossible to put a value on stay at home moms because your service to the home and family is really invaluable, but non-the-less, your time is of value and must be used wisely to not take away from the kids, and other duties around the home, so you must determine what it would cost if you had a sitter watch the kids for an hour as well as the hourly rate of someone cleaning the house, add those two amounts up and that is a good starting place of your personal hourly value (of course you are worth much more because you do so much more.)

Using this thought process will help you to insure you are actually being frugal and wise with both money and time, verses being cheap and just looking at the dollars involved in spending rather than the whole savings picture.

One thing that sometimes gets lost when talking about money issues is the real reason why money management is so important. Most people would say, it’s to get rich. And although I actually prefer the words “build wealth” over “get rich” I suppose it all means the same thing, to be financially comfortable.

But what is the real definition of “rich” or “wealthy?” Sure, anyone could look it up in the dictionary and get Websters take of the literal definition about having abundance and treasures, etc. But is that really what being rich means?

This week on the news there was a headline story of what I believe is the true definition of “rich” is. It was a story of a young 15 year old girl, who lives in a secluded neighborhood in Central Florida. She had had been surfing the internet as most kids do now days. The computer was in the family’s living room in plain site of mom and dad, and dad even knew what sites she was surfing, but admittedly he knows nothing about computers or how to get to any of the websites she was on. None-the-less, they felt all was okay since it was in view of the family.

The 15 year old told her parents she had a boy friend, and even told her friends at school she was in love with someone she met online, and that she was going to run away with this person. But nobody knew how serious it really was, or who this boy was until tragedy happened.

The young girl slipped out of her house early Monday morning to meet this “boy” and disappeared. Authorities were notified and AMBER alerts went out state wide. Thirty hours later and 400 miles away from her home, this young girl was found in a Wal-Mart. She had run away from her home to meet someone she thought she was in love with, to discover he was a gun carrying 46 year old convicted sex offender. It is believe he was scared off by the state wide publicity and that is why he let this young girl go.

She was quickly reunited with Mom and Dad. When her Dad was asked “how does it feel to have your daughter back?” he was quoted as saying “ Go ask that guy who won the Megaball lottery up North somewhere, all right? I feel ten times better than that.”

Do you think he feels RICH? Yes. Is he rich, you bet he is. He may live on modest means, or maybe not, but regardless of the amount of money or possessions he has, he is an extremely rich man. The whole family is rich because they are together, safe, as a family.

Being loved having your family and friends safe and healthy is really what it means to be rich and wealthy. I hope with all this blogging here and all over the internet regarding debt and wealth building that the real definition is not lost or forgotten.

Today a friend of mine talked to me about his debt situation and in the same breath stated he wanted to lease a new car. I won’t mention his name but he is a smart individual, well established family man who makes a good salary, close to six figures.As we continued our conversation, he stated that he wanted to become more aggressive in getting out of debt, that he needed to get a job where he made more money so he could pay more on his debt and eventually become debt free like me.

I made mentioned that he could become debt free now, after all he is making a very good salary, but that he just needed a little bit if spending discipline and sacrifice a little bit now, such as not leasing a new car but keeping the perfectly good car he currently has which will be paid off in three months.

“Why should I make sacrifices, I work hard and deserve nice things for me and my family” he said, then he went on to say “who am I kidding, debt is a normal part of life, you are the one that isn’t normal by not being in debt.” I replied and said, “yep, you’re right, I am not normal when it comes to money, normal is broke!”

My dear friend then said “So your are debt free, you made sacrifices what if you die tomorrow, you wouldn’t be alive to enjoy your efforts” I said ” But I am not died and I am enjoying it now and when I do die, debt free, I will be able to leave something positive behind for my family, instead of something negative like debt, I will die with dignity and be known as and individual of character and responsibility who took care of their business while alive and did not leave a mess behind for my family to handle”

From there the conversation went down hill, he was getting upset at my thought process and I was confused as to why since he was the one that brought up his debt in the first place.

One minute he is telling me he “wants to be debt free” but in the next breath he is all but stating he will never be debt free because it isn’t normal, and what is the point in attempting to be debt-free you may die and not enjoy the efforts. Maybe he needs to read a little bit about having a positive mental attitude because that thought process will keep him in debt for sure.

Sadly, it is this thought process that is causing millions of people to continue to live with debt. They believe that having car payments, credit card payment, second mortgages, etc, is a normal part of life.

Like Dave Ramsey says “Normal is broke.”

Many people are short sited and only thinking of themselves with regard to the debt the carry rather than their family after they die. I would much rather change my family tree for the better now while I am alive, still having the things that I want by paying cash, giving wisely and also leaving something behind that will benefit my family as well as charitable programs rather then being selfish and spending what I don’t have and racking up debt. What does that tell loved ones in a non-verbal way? “When I’m dead I don’t care what you have to deal with or that I didn’t leave you anything to live on.”

I think it is a shame that people view debt as a normal way of life, that stress and working all the time to pay someone else is the way it is suppose to be. Debt is not “normal” it is not even biblical, Romans 13:8 says “Keep out of debt and owe no man anything” and Proverbs 22:7 “The borrower is slave to the lender” It doesn’t get much clearer than that.

Debt is not a badge of honor or a sign of success, it is a symbol of failure and a lack of discipline. It is time to change your view about debt if you are ever going achieve financial freedom and peace for you and your family.

Goal - Dictionary.com defines it as: “the result or achievement toward which effort is directed; aim; end.”

Goal, intention, objective, destination, target, mission. No matter what word you use, it is a point in your future that you aim for success.

We have all set goals, we have successfully achieved many and we have all not met some of the goals we set for ourselves.

Goals are important both professionally and personally as they are a stake in the ground that we (or your employer) set to encourage growth and forward movement.

It has been said that most people believe in setting goals, however only about 3% of us actually set and write down goals for our personal life. There are many reasons for this; fear is very near the top of the list.

Most people who don’t set goals are afraid they will not meet the goals they set. They don’t want to fail. Yet, I think dong “nothing” is worse than trying to do something and missing the mark. It is always better to attempt to improve even if you fail, than stay stagnant as life passes you by.

We have all set goals like “I am going to lose weight” or “I am going to stop smoking” or “I am going to get out of debt.” What ever it is you feel you need to improve, you have probably set a goal about it. Or have you?  Have you really set the goal to the point where it is attainable? It is safe to say, “I am going to be debt free” you haven’t really set a goal; you have just made a statement.

Goal setting is about being specific to what you want to achieve. Draw a line in the sand.

Be honest with yourself, look at your debt and your income, determine your behavior change and commit. Set your goal, write down your goal as well as a plan to achieve it. For example your goal should read something like: “I will pay off $18,000 by June 1, 2008. I will do this by using the money that I saved by not eating out and putting those dollars on credit card debt” Be specific. How much will you pay off, by what date, and how.

Write your goal down on 3×5 cards and place them in multiple places around your environment. On the refrigerator, bathroom mirror, visor in the car, edge of your computer screen. When you see it, read it out loud as well as to yourself, positively reinforce your goal to yourself, remember PMA - Positive Mental Attitude.

Once you have your goal set, tell someone close to you. Now this is very important.  When I say someone close, I don’t mean your spouse, after all you two are already in it together. Tell someone that is close to you, friend, parent someone who is not directly related to the debt, who you trust. By telling someone else what that goal is, you are placing accountability on yourself. You are making that goal real. It turns a general statement into something you must take action on and be accountable to yourself as well as admitting to someone else the status of your goal.

Set a goal to pay of a specific amount of debt by a certain date. Living with the stress and fear of debt is far more risky than setting a goal to begin your journey down the path toward financial freedom.