Whether we’re talking about eliminating our debt or building up of our savings, there’s one thing that’s crucial to that success, and that is to have at least one long term goal in place, and hopefully more.

Of course you can have more than one long-term goal because you can have personal goals, financial goals, professional goals, family goals, etc.

The reason why you should and must have a long term goal in place is because when you’re looking at putting away savings and building up wealth, along with eliminating your debt, there is always short-term pain involved, which if you don’t deal with, will cause you to quit very easily and revert back to past practices which have led you to where you’re at now, with debt overload and no ability to put away money for the future.

In other words, there’s a lot of psychology involved with defeating your debt and having healthy finances, and a key to successfully navigating those waters is to have long term goals in place which you can use as inspiration and guidelines for the reason you’re deferring gratification till a later date.

Almost everyone that doesn’t do this is destined to fail in their financial efforts, as there is very little motivation to take care of things today if you have no hope for tomorrow.

What we must all do in reference to debt is immediately eliminate our bad spending habits in order to begin a program which will give us hope of victory and eventual release from the huge debt burden we carry.

That requires the setting of long term goals which will be what you continually remind yourself concerning as to why you’re experiencing short-term pain. As athletes have said in the past: no pain, no gain. And that’s true. But the other element involved is they definitely have a goal and purpose as to why they’re training and what they’re shooting for.

No athlete goes through the training because they just love to train or for the sake of training itself. Athletes go through the rigorous training they do because they have a personal or team goal of becoming excellent and a top competitor in the sport they’re involved in.

That’s just another way of saying they have a long term goal. You get the point.

There is no way you can endure deferred gratification if you don’t have specific goals set before you which motivate you to endure the pain of paying down debt and to quit spending on things you think you ‘must’ have, but in reality usually buy because you saw or heard someone else having it and decided right away that you do too.

Paying down debt or putting away money for savings means that the money set aside can’t be used for purposes you would prefer. That’s the pain aspect of it. The long term gain is you will eventually be able to buy or do whatever you want once you’re free from the burden of heavy debt, and when you buy things at that time it’ll be a positive experience as you won’t be thinking in terms of how you’re going to pay for it going forward.

If you want to successfully save money and build up your wealth, there are things you won’t be able to do that others who are increasing their debt will be able to, although at eventual and extreme burden to themselves as the bills eventually mount up to the point of no return, as many have recently.

The key is to neglect what appears to be affluence, but in reality is someone in debt over their heads who are building that appearance at the risk of losing everything.

Set yourself some long term goals which can help you discipline yourself and keep in mind why you’re going through some short-term pain. You’ll eventually be thankful you’ve taken these steps and will enjoy the lifestyle you want without the concern you’re one job loss away from losing everything.

There is no big secret to making a household budget, and no matter who you’re talking to, there are basic things everyone needs to do to make it a success. There can be some variations on the budget and words used to describe it, but when you come down to it, it’s pretty much what I’ve listed below.

It’s also what I’ve encouraged people to do that came to me in the past when I was a financial adviser and they wanted to learn the best way to control their spending and manage their finances.

1.

The first step to take is to find out what the monthly average you pay out for all your liabilities. This includes your regular payments you make like electricity, cable, etc. Again, the purpose is to get an actual monthly average and not try to guess what you must pay out monthly.

2.

Next, you want to get a hold on your monthly income. So simply write down all places you draw an income from and what it is. You want to find out if you even have enough to meet your obligations or you need to get another source of income.

3.

Now make a list of your fixed monthly expenses and your estimated expenses. For example, do you service your vehicles on a quarterly basis. Do you expect to have to pay out some money for household repairs sometime soon. Do you set aside a certain amount for potential problems that may arise.

Here you want to at least a some money set aside for these types of emergencies so you don’t get caught off guard and it messes up your budget.

4.

Be sure to list your fixed expenses and variable expenses into different categories so you understand them and know what to expect. Here is where many people get frustrated and can quit because it was easy enough to list fixed expenses, but forgetting to take into account variable expenses can crush you when they unexpectedly arise. Don’t be caught off guard with this.

5.

Add up the amount of income you take in each month along with the fixed and variable expenses. This gives you the actual conditions of your financial health and will tell you the story of what needs to be done to take care of it.

6.

So far this has all been easy. But now you must take the practical steps of using the numbers you’ve discovered to make adjustments to how you’re going to go forward. This isn’t the fun part of a budget, but it is the most necessary part. No pain no gain. Let’s face it, all of us who have too much debt have brought that upon ourselves. Now we must take it upon ourselves to deal with it.

Again, at first this can be a little discouraging, but once you implement it you will get the feeling of being empowered, and instead of feeling you’re always being acted upon, you’re now taking action to manage your finances and your life.

7.

Immediately start to put money away for the purpose of paying down your debt. The credit card with the highest interest rate should be your first target.

Having said that though, if you need a psychological boost, take the credit card with the lowest amount and start paying that off, as it gives you a sense of accomplishment and you can see very quickly your debt load starting to disappear.

8.

Once you begin this, then simply go over your budget on a monthly basis as things begin to change financially for you. As you do, make whatever adjustments you need to make and fix anything that may be leaking through.
 
Just keep repeating this process until you pay things down.

If you’re married or have joint debt with someone else, be sure to sit down with them and get on the same page. Obviously this won’t work with two people going in opposite directions.
 
Finally, use a software program so you can enter all your data and see the results easily. It helps you do get into the budgeting frame of mind and can give you encouragement as you check your progress from month to month.

Remember that the entire purpose of this is to free up money so you have more to set aside for building wealth. Forget that and the budget begins to make you think you’re being cheated, just like a diet can when you see that big piece of chocolate cake you want to get and take a big bite out of.

Just keep the idea or vision in your head of the day you’re free from debt and have a lot of money to invest, build wealth, and spend on the things you need without going into debt.

If you hear the word budget and your cringe, you probably just found out why you’re in debt so badly, as you more than likely spent far beyond your means and now have to face the consequence of that spending.

But this isn’t a beat you over the head article, anyone deep in debt should know they spend more than they took in, and eventually you have to pay that debt off.

Now as far as it relates to savings, remember, if you are paying everything off on debt, you have nothing left over to put away to build your wealth up. So it should be a priority, as it’s becoming with many people after they struggled so hard over the last two years because of excessive debt, to develop a budget to not only get a handle on where your finances really are, but also where the best places to attack paying down your debt to get the maximum benefit.

Budgeting is like going on a diet in the sense that very few people stick with it. But for those that do, and you can hang around long enough doing it so it becomes more of a habit than a burden, it’s not that difficult once you put it in place and stick with it. It’s always getting the ball rolling and doing it long enough to become part of your lifestyle. That’s the challenge anyone faces with creating and sticking to a budget, or anything in life for that matter.

The psychology behind this which you must adopt to be successful is to get rid of the short-term or present-oriented way of thinking, and start to think in terms of years rather than instant gratification, which will always lead you down the debt hole, as there will always be something you “must” have right now.

This, more than anything, is what leads people to the devastation of a debt load which basically results in them living from paycheck to paycheck with no financial future to speak. We must be willing to change that, and to change that way of thinking and living does require some discipline and short-term pain.

Let’s face it, when you get addicted to spending, yes, addicted to spending, it’s a lot of fun. But just like heartburn and discomfort after eating the wrong types of food or eating too much, it doesn’t take long before the pain from overspending comes to haunt you, and it does that with the first bill that arrives at your home which gives you the results of your temporary spending spree.

Either way, you’re going to experience the pain from too much debt or the pain from dealing with that debt. One type of pain leads to nowhere, as continuing to spend at a pace you’ll never pay back for decades will not be a pleasing experience for you. But when you spend and have all that fun spending, the pain of having to stop and be disciplined is also very real, but it also at least has an end in sight when you can finally leave the load of debt and be free from it all.

Next article we’ll get into the practicals of budgeting, but now realize that you have a problem and that problem is how you spend you money, or rather, someone else’s money which drives into a place of being in debt to the point of almost feeling hopeless to deal with it.

Surprisingly, once you start to be earnest about paying down your debt, you can take care of a lot of it fairly quickly by making a few changes. The key is to stop spending so when you pay down your debt you’re making progress and you can see yourself getting closer to the end of the tunnel.

Again, the whole point of this is to have more money available to build up your wealth so the day will come when you can buy just about anything you want and there will be no pain except the loss of the money you already had put away.

To do that you must decide to create and adhere to a household budget which will deal directly with the problem and have immediate and measurable results.

One of the major enemies of savings is in fact carrying a heavy debt load. It’s not worth the time looking at various savings programs, or for that matter, even ways to budget if you don’t deal with the underlying problems of why you’re continually under a heavy debt load.

Now I know there are certain types of debt that are good debt, although it is still debt that must be taken care of, but I’m talking about lifestyle practices which can be brought under discipline, and which needs to be identified and dealt with by you.

Before we get into that though, recognize that one of the best ways to grow your savings and ultimately to build wealth is to free up your capital in order to create a savings and investment plan. The way to do that is by eliminating or significantly reducing your debt.

It’s surprising once you’re out from under the burden of debt the ideas that come to you concerning how to better invest your money. As a matter of fact, many times simple ways of investing are clouded because debt can do that to us, as it seems to separate us from clarity concerning the matter.

The bottom line is, if you don’t have money to invest or put away, you’re never going to be free to do what you want when you want, as debt keeps you a servant until you’re released from it.

I’ve been out of complete debt for well over a decade, and the time and money I have to put away for whatever I want is always there, even if my income may be cut back at times, or I’d rather spend time doing something else, rather than spending all my time only making money or investing.

We’ll get a little more into freeing yourself from debt in the articles ahead, but for now, understand that it’s not perfecting some type of budget plan which will deliver you from debt, that’s the secondary practical step to take.

What needs to be done first is to admit to what it is that debt really is, and that is you spend more each month than you take in. Simple to understand but difficult to deal with if you’ve become addicted to debt in a way that you have problems stopping spending.

I know we’re getting a little into the psychological side of debt here, but this is really where it all starts, and there are many reasons why it could be happening in your life on an ongoing basis.

With that in mind, you should take an honest evaluation of yourself to see why it is you spend how you do, and from there look at the best way to develop that dreaded word and practice: budgeting.

Budgeting works, but not if you don’t face the reasons why you’re overspending. Once you identify the why and where, then developing a budget makes sense. If you don’t what will happen is you’ll do the same thing many people do when losing weight. They’ll start the usual idea of diet and exercise, but because they haven’t dealt with the underlying reasons of why they’re overeating, they fail time after time until they completely give up on attempting to lose weight, because they believe the diet is the key, rather than looking at the reasoning behind it all.

That’s the same with budgeting. You can develop a budget, but if the reasoning behind why you’re continually spending isn’t faced, you’ll do the same as a diet, and go through budget after budget with a few changes for each one, and eventually just go back to your spending practices again.

Having said that, a budget is the answer in the sense of practically taking care of the issue, but if you continue on in your ways, in many cases lying to yourself, you’ll find that even though you think you’re adhering to your budget, you’re in reality pretty much spending as you always have.

The reason for all of this isn’t to just get rid of debt though, as that’s only a first step. You’re doing this so you can get more money to put away and build up your wealth. Just like weight loss, it’s not enough to just cut back on something, as that will never carry you through. Thinking on things like the benefits of a longer life and feeling physically better on a daily basis is a part of the overall success of those that faithfully adhere to dieting.

Budgeting is the same thing, as it’s essentially dieting your money in order to protect yourself financially over the long term, and eventually to get everything you want without the weight of a debt load you’re not able to carry.

If you live in the United Kingdom, a great option to help you get out of debt might be an IVA. An IVA is an individual voluntary arrangement, a great alternative option to bankruptcy for those who want to pay off their debts.

In the end, why pay your money out for things you can temporarily do without, in order to be able to buy whatever you want in the future without adding the stress of too much debt to your life?

This is why so many Americans are starting to pay down their debt now, as the recession and difficult financial circumstances have woken them up to the reality they can’t afford to live this way.

Now once that debt is paid down, we can then start to put more money into our savings and ultimately building up our personal wealthy at a much faster and higher rate than we ever have before.

Society as a whole is more interested than ever in the concepts of budgeting and cutting back on expenses. In some cases, many will feel that there is simply nothing left to cut out of their lifestyles. But if the family budget is still not working for you, there may be a needed effort to look more closely at how you spend your money on basic necessities.

One areas of life that is filled with constant competition from the marketing departments of various multi-million dollar companies is the health and beauty sector. There is a wide range of products stocked on the store shelves that costs considerably different amounts. Purchasing the more expensive products also carry the myth that more cost means better results. However, that is certainly not always the case. Brand names may look snappier in the box but the results are often the same as a more inexpensive brand.

The same can be said of haircuts. Spending upwards of a hundred dollars or more on a haircut every 6-8 weeks can really add up to a fortune over time. While some stylists charge a fortune for a cut, others can do the exact same thing for considerably less money, especially when all you really need is a trim off the ends.

Vehicle repairs are another areas where you can save big. With the ease of locating automotive parts right on the internet, consumers can save a bundle on car repair if they learn to outsource the work to someone who does not charge insane labor fees for repairing your mode of transportation. Consumers are often left in the dark about what exactly they are paying for when they have their vehicle repaired and many don’t put much thought into the expense as long as the car is back in good running order in the least amount of time.

But it is projects like haircuts and car repairs that can make a big ding in your  budget year after year. The trick to saving money is to find the right person to help you out. One of economical choices you can make to cut down the cost of some of these expenses is to contact your local community trade school. Trade schools are filled with eager students who are learning the needed skills for a profession in the real world. Many of the students already have hands-on experience cutting hair, repairing cars, designing websites, doing basic carpentry, and landscaping gardens. Because they are looking to obtain real-world experience in the job market of their choice, they will likely be more than willing and able to work for you for a considerably less cost than more established businesses. In some cases, students may be willing to work for free just for the experience.

Contact the trade school directly and ask to speak to the person in charge of career development. Often the recommendation of students can come from their teachers directly, who will more than likely be professionals of the trade in their own right. They can recommend students who are already exceptional at what they do and possibly even help you negotiate a fair compensation price for the services rendered. While still somewhat green, these students are likely as dedicated, if not more so, than their professional counterparts and you will probably get more bang for your buck.

By hiring students to do work for you when they are just starting out on their own career path, you may also be able to start what is to be a long-term business relationship, where you may still be granted lower-than-normal fees for your loyalty. Over time, this relationship can add up to big financial savings.

If you expect to be able to save some of your current income for your future, a household budget is necessary. You need to know where the money is coming from and where it goes when it leaves your wallet or bank in order to manage it effectively.

To get started, you’ll need a pen, calculator and paper – and/or a spreadsheet program. Gather all of your pay stubs, income records, monthly bill statements, check register or online bank statements if you have them, and statements for retirement or other investment accounts.

Step One: Determine your income. If you are on salary this will be easy, as you earn the same amount each month. It can be more complicated if you are self-employed, work on commission or have variable income for other reasons. Do your best to get an accurate monthly average of income earned, and remember to include tips, bonuses, child support, alimony or any other type of income you receive regularly.

Step Two: Determine your monthly expenses. List everything you pay. If there are bills that fluctuate, like utilities or food expenses, for example, just find the average by totaling a year’s worth of that expense and dividing by 12 months.

Step Three: Take a deep breath and check your totals! Is your income less than your expenses? No wonder you haven’t been saving! Go through your monthly expenses list and mark items that can be eliminated from your expenses (coffee shops, gym memberships and/or unnecessary subscriptions, etc). While you’re at it, you can also mark expenses that could be reduced (food expenses can be reduced more than you think with use of coupons, buying items on sale, eating out less, etc). Once you’ve tipped the scales so your income total is greater than your expense total, you can determine how much money to save. Pick a weekly or monthly savings amount that also allows for a little cash buffer in case you have some unexpected need for more cash than you included in the budget.

Step Four: Post the budget on your refrigerator or another area that you will see it every day. Refer to it often to help stick to the budget and grow your savings. As items are paid off, you can increase the amount you are saving.