Getting Ahead

We've all heard the phrase, but do we really know how to go about getting ahead? First of all, it isn't as hard as it might sound. All it takes is a little discipline and some proper planning. But before we get too far, what do they mean when they say getting ahead? Well, when I talk about getting ahead, I'm talking about getting ahead financially. Let's face it, most people don't really have a huge amount in their savings accounts. Oh sure they have retirements set up through 401Ks or any other number of tax deferred accounts that they have set aside for their golden years, but I'm telling you that this doesn't count. That money is set aside and should never be touched for ANYTHING except your retirement. Some people have savings accounts, but then they carry balances on their credit cards that equal or dwarf their savings. I'd like to help you get started on your way to getting ahead regardless of where you're starting from.

The first rule is to pay yourself first. This quite simply means that you should be putting money away before anyone gets their money grubbing hands on it, including the IRS. So if you don't have an IRA or some other type of tax deferred savings vehicle, set one up before the end of the month. This is the first step in getting ahead. I don't recommend moving on to the second step until you've taken care of number one. Pay Yourself First!

The second rule is to get out of debt. I realize that times are tough and there are a lot of folks out there who are living paycheck to paycheck, but you've got to start paying down those balances on those credit cards. If you're only making minimum payments, you'll never be out of debt, the payment schedules are specifically designed to keep you paying quite literally, FOREVER! If you have one or more credit cards and/or other loans (besides your mortgage), start paying the ones with the highest interest off first. Transfer as many balances to your lower interest accounts as you possibly can. By getting out from under your credit card debt, you can finally begin to see the light of day and start getting ahead financially. But if you still carry debt, you're not ahead, you're behind.

Third, once you're credit cards are all paid off, you can start putting extra money aside. I know that most savings account interest rates are a joke right now, but you know what? They're a heck of a lot better than not saving at all. I recommend getting yourself set up with a financial plan that involves a wide variety of savings vehicles. You never want to put all of your eggs in one basket. So please, DIVERSIFY. In addition to setting money aside (in addition to your retirement), you can start thinking about paying down your mortgage faster that you're currently doing.

This step only applies to homeowners who are carrying mortgages. More specifically, 30 year mortgages. If you're already in a 15 year mortgage, you're probably doing the right things, but you too could start making extra payments to get your mortgage paid off even sooner. If you're in a 30 year mortgage, there are a couple of different strategies you might take advantage of. You can either get yourself into a fixed-rate 15 year program, or if that's a stretch, just start paying half of your monthly mortgage payment every other week instead of sending the full amount once a month. Over the course of the year, you'll have made an extra month's payment on your principal. The difference you'll feel in your wallet is miniscule, but the chore to getting that mortgage down will start feeling easier and easier.

So to wrap, I'd just like to let you set some "get ahead" savings goals. The first goal is the easiest, and many of you are probably already here. Get $1,000 in the bank. After that your next goal should be having 3 months worth of mortgage/rent payments in the bank. After that, take it to six months housing costs in the bank. After you have six months worth of rent/mortgage in the bank, expand your savings goals to have 6 months of all of your living expenses (including all other expenses in addition to housing) safely tucked away (not counting your nest egg). And finally, once you've reached the point where you have a full year's worth of your total expenditures socked away, now you can go out and splurge a little bit. Go on a nice vacation, buy that boat, or whatever it is that makes you feel good. You've earned it. After you get to that point, you can support your family on savings even if all income is cut to nothing for an entire year. Not good enough you say, savings stud? OK tuck away 3 years, 5 years, heck go for 10 years (do that and you can almost retire). Let's all do what we can to start getting ahead this year.