557. Information is Money

All information, even if old, is money but CURRENT information is always the best !

556. The Snowball System for Clearing Your Debts

The best system I have found for clearing debt is what I call the Snowball system. I call it this because the amount of money you can use to pay off your debts increases (like a snowball) with each stage.

The first thing to do is to find an accelerator, an extra income that you can use to "get the snowball rolling". This could be a part-time job or a sideline business that pays for example €100 per month.

Next list out your debts in 4 columns, the payee, the amount owed, the monthly payment and the date of the final payment.

Now re-write the list in the order of how soon the debt ends.

Apply the accelerator to the nearest debt horizon (the one to be soonest paid off) and speed up the payments on that so that if you were paying €250 per month to this debt, start paying €350 per month until it is cleared. In the meantime, continue paying the normal repayments on ALL other debts. You must not rob Peter to pay Paul here by stealing the accelerator from other debts. This is very important. The accelerator must be genuine extra income or genuine extra savings from reduced spending.

Once the first debt is cleared, take the new full payment (€350 in our example) and apply it to the next shortest horizon debt (say this is costing you €500). You are now paying €850 off this debt and you continue to do this until all your debts are cleared.

Once cleared, you can then start applying all the money you were spending on debt to building up your investments.

555. Why We Should Pay Our Debts

Pay off your just debts. When you do this you become wealthier (paradoxically) because it is always more expensive to owe money than to be debt free, even with the "tax-breaks" that sometimes attach to debt. It can be difficult to pay your debts but if you take the decision and focus on the process, it can be done. Use the Snowball technique and attack each debt in turn until you are clear. All the money you have been using to clear the debts can now be diverted into investments and you will begin to accumulate wealth. Being debt free makes it cheaper to stay alive.

554. Living Within Your Means

Always live within your means. Drive a pickup truck rather than a Ferrari. The biggest tax that most people pay is their own lifestyle. A life spent "keeping up with the Joneses" will leave you poor, old, tired and miserable while you could be better off being happy, comfortable, retired and independently wealthy.

553. Invest in Your Own Education

The best investment of time, money and effort that you can make is in your own education, but only if you apply what you have learned in practical terms. Apprendre pour apprendre is the French expression that carries the sense of learning for the sake of learning. This is a fine and noble idea but it is a luxury. Make sure you can afford it. Your learning should follow a plan. There should always be a practical, material benefit to your learning. It should enhance your career (i.e. give you a better paycheck) and it should bring benefits to those around you. (i.e. the practical application of your new skills for the benefit of the less fortunate). It is a never-ending process.

552. The Pain of Breaking Old Habits

When breaking yourself of habits that you have identified as being harmful to you, you should know that it will be a painful procedure. You WILL get cut. All you can do is to make sure that you are cut with the sharp butcher's knife, not the blunt butter knife. When breaking the habit do it once and for all time. Do not try to ease out of it because that way you just stay in the comfort zone and before you know it the habit has re-established itself. The butcher's knife is fast and clean, the butter knife slow and painful.

551. When Should I Sell ?

Sometimes, you hold a profitable investment and wonder whether or not to sell it. Do not be in any doubt. If you are asking the question at all then you should sell. Nobody ever went broke by taking a profit. As part of your financial plan, you should already know your selling price and if the investment has reached it then you should sell and move on. Remember that your profit is made on the day you buy not the day you sell.