The Rule of 72 tells you how many years you need to double your savings. To take advantage and get the most out of your savings, you’ll want to get in the habit of keeping 10% of your income as savings. For many people, this is difficult because we’re already living outside our means. If you can’t reasonably save 10% of your income, take a good, hard look at where your money goes for a period of three months by writing down what you spend or pay to the penny. Eliminate unnecessary spending and bad financial habits so that you are able to save 10% of your income in a savings account.

The Rule of 72 then says to divide 72 by the interest rate your savings receives to find the number of years needed to double your money. A low-interest savings account of 2% will take about 35 years to double (assuming the interest is compounded annually). Savings earning an 8% return will double at about 9 years.

When looking at your debts, you can use the “20-10” rule. Limit your total debt (excluding your mortgage) to less than 20% of your net annual income, and you’ll be able to use 10% or less of your net monthly income toward paying back debts.

If you earn $54,000 a year, you want to keep your debt under $10,800. ($54,000 x 20% = $10,800).

Your total monthly debt repayments (again, not counting your mortgage) should not be more than 10% of your net monthly pay.

If you earn $54,000 a year, you earn $4,500 a month. Your monthly debt repayments should be $450 or less. ($54,000 / 12 = $4,500 and $4,500 x 10% = $450).

Learning how to save and borrow money wisely are the basic building blocks for having financial security. Here are some tips to help you get there:

Live Within Your Means

All financial experts will tell you not to spend more than you can afford. Even people who claim they can’t save any money each month because they’re already using every last dime to pay just the basic necessities probably could trim down their expenses somewhat. If you keep a financial journal for three months and religiously record every last purchase and all the income coming in – you will be able to see where there is money being spent that is not necessary.

Create a Budget

Once you have a better understanding of your income and expenses, you can create a budget. Figure out how much is used to pay expenses and debts, and how much will be saved each month, and how much you have for miscellaneous spending and try to follow it as closely as possible.

Plan Ahead for Additional Spending and Costs

There is no point saving money if you can never use it! Plan ahead for events like vacations and unexpected expenses. When you plan in advance, you can keep your costs low by shopping around for the best deals and not just spending money spontaneously.

If you don’t think their are consequences to your actions, look at the sovereign debt crisis of Greece to see that it can extend to an entire country, and possibly continent, when certain behaviors multiplied times millions of people bring about the same result as a single person or couple going into debt can do.

I say continent above because there is a possibility that a number of these countries could bring down the euro if the credit fiasco extends to them, which is a very strong possibility.

These things are brought up to catch your attention. In America there are already major cities bankrupt, and California is on the verge of falling, which is a larger economy than most countries in the world.

This is isn’t to make you fear but to sober you up a bit on the condition of your finances. Many of us, even after what has went on the last several years, just don’t think something like that could happen to us. But it’s not just happening to poor people, but to all economic strata’s in the U.S. and other countries.

What is the bottom line for all of this? No matter if it is a continent, nation, state, city or individual, excessive debt is nothing more than spending beyond your means, or to such an extent that any unexpected situation will bring you down financially to the place of bankruptcy or complete insolvency.

The major lesson to learn from the Greece sovereign debt crisis is you can’t continue to pretend that it’s something that will just go away. Those heavy in debt are only one economic downturn from being exposed that they have over-spent.

Thinking negative times are just short term and you’ll rebound when an economic recovery begins is no different than rolling the dice and hoping the right numbers come up. In other words it’s gambling, and we’re all in a period now where those that have gambled are losing.

This is one reason to put away a nice chunk of money for savings. A nest egg protects you from prolonged negative economic circumstances and events which weren’t expected. But if you’re so deep in debt any long-term economic downturn can hurt you, then even a large nest egg may not be enough to save you, as many are finding out now the hard way.

If a state, country or continent has the risk of going bankrupt or defaulting on their debt, so can you be at risk. Even if you’re in a solid financial position, it’s a good idea to keep on top of your debt and refrain from going any further into debut until you’re in a much strong financial position.

As many Americans are practicing now, is the time to build up your cash reserves and pay down your debt. Forget about the stupidity of the U.S. government – which is close to going bankrupt itself – telling you to spend your money as if it’s some type of patriotic duty.

Now is a time to hold on to your money and build your cash foundation up and, as mentioned above, pay down your debt. Nothing should be more important to you than that concerning your finances.

When taking into account the twin problems of putting away for savings and reducing debt, many times we’re faced with a choice of which one is or should be the priority.

Normally at this point of the conversation, people will immediately say they can’t do one or the other, because debt is taking every penny they have; making it impossible to build at least a fund up for safety in case of a financial emergency.

It’s the old catch-22 many people face, and yet, a lot of people have escaped this seeming trap they’ve fallen into, and so can you.

In this post we won’t deal with all the practicals, as we must deal with something else first, and that is making a decision on whether to pay down your debt or build up a savings.

Almost everyone can go through their finances and find places they can cut back on in order to release up some money to put away to build up at least a small nest egg.

The question becomes then, should that extra money be put into savings or paying down debt. I believe putting away for savings should be the first step; at least until you have enough for some minimal financial protection.

Paying down debt is a huge psychological boost, and a priority, but if you don’t have something put away, you’re one major, or even minor, event away from losing just about everything.

For the most part having a nest egg or savings account is for safety purposes for an unforeseen financial challenge. Things like unexpectedly losing your job, and other such experiences.

If you’re paying down your debt but lose your job, you may have less debt, but you will have an entire different circumstance to deal with if you’re desperate and have absolutely nothing to fall back on.

This is the reason I think we should all have savings as a priority, while continuing to pay down debt at minimal levels until we do. At least get something put away first, and then work from there on the debt.

Once a fund is financed some, you can then possibly split the amount and slow down on the savings fund in order to start relieving yourself of some of your debt.

Try this and I think you’ll feel a lot better and prepared for what comes in life for you. If you have significant debt, it’ll take time to pay it down no matter what you do, so focusing on savings first should be the priority, with paying down debt right behind it.

Obviously if you have enough extra money a month to do both, that would be the best situation. But most don’t, and if you have to choose, I would suggest the savings first and the debt second.

While we’ve been talking a lot about debt and the numerous ways it helps our lives to eliminate it, one of things we do need to understand is it’s a different purpose to eliminate debt and to look for great deals at low prices.

Some may think this is obvious, but I’m talking about doing things for the purpose of releasing money in order to build up wealth. Paying down debt, while important, and it can indeed help you set aside more money for wealth building once you lower it though a number of strategies, like transferring debt from a high interest credit card to a low interest card. That’s an immediate release of funds. The problem is, most people really addicted to debt need to focus on paying down that debt before they think in terms of trying to build up their wealth.

Having said that, I do think it’s good to take symbolic steps which can help you psychologically and at least put a little bit of money away, even if you have a heavy debt load. But overall, when you cut back on debt load and expenditures, it’s best to take that savings and tackle your debt before anything else.

Now the reason I lump this together with finding good deals, is many people are looking to cut back on monthly expenses for the purpose of putting away money for themselves.

This is a different purpose and a different practice, and you can see the results instantaneously as you take money saved and apply it toward building a financial moat and preparing for your retirement.

I mention this because I’ve communicated with people that sometimes confuse these two purposes of deal with our financial circumstances, when they are completely different issues, mentalities and financial challenges to work through.

When it comes down to it, lowering and paying off debt is to get you out of bondage to the lender, while looking for and getting good deals is for the purposes of lowering monthly expenses, building up financial protection and putting away for the future.

With one you’re releasing funds to deal with the past, and with the other you’re putting away funds to prepare for your future.

Debt is dealing with major financial surgery, and must be approached that way, while looking for deals is saving money through a thousand cuts. Each has its place, but we need to be sure not to confuse them, as they are completely different financial issues we’re dealing with, and it’s essential to understand one from the other when working through the financial morass we call life.

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.

We are caught up, as consumers, in finding any way possible to help fit into our budgets. That means that refinancing options are being explored as ways to make this happen. Saving money anywhere possible leaves money available to use in more important places in our budget as well.

So, is it possible to always save money when you refinance your house at a lower rate? It depends.

Lower payments. The goal of a refinance program for borrowers is a lower monthly payment. This is a short-sighted goal. You should not be of a mindset to just fit into a lower payment. You should have as a major goal to pay off your mortgage so that you can one day own the house free and clear. Or, at least pay off enough of the loan so that if you do have to sell, you will have some equity from which you can benefit and use as a down-payment on another house.

Starting over. When you refinance, you start the 30 year process all over again unless you take out a 15 year mortgage and that is not likely since you are trying to save money on a monthly payment. What this means is that if your original mortgage was for 30 years and you have made the payments for five years on that mortgage, you will now be extending that to a 35 year term. This, plus the fact that the amount of interest that you pay is loaded up at the front of the mortgage, means more goes to interest and less to principle.

Fees and costs. Refinancing has its own closing costs and fees, just as you paid when you first bought the home. Get ready to pay these again. Better it would be for you to take that extra money and pay off some smaller, short term debt to give your budget some needed room in which to operate. Do not ignore what can be done by lowering your overall debt load in other ways before considering a refinance.

Avoid the ARM. If you do choose to refinance, be sure to avoid any offers of an Adjustable Rate Mortgage. Attractive because of rates, they can get you in just a few years down the road with higher payments which will put you right back where you were before.

Take a good, hard look at refinancing before you do and make sure it makes financial sense for you. Be better off, not more in debt.