A well thought-out and disciplined approach to personal finances can do wonders in reducing
the negative impacts of worry and stress that can impact your heart and overall health. Follow
these simple rules to achieve financial health and reduce the risk of incurring excessive and
unmanageable debt:

1. Build a budget for personal expenditure and stick to it!!

Financial freedom can be achieved but it takes work and discipline to realize. Create a budget
that takes into consideration:

• All sources of personal income (salary; income from sales of personal items; alimony,
  rental income etc).
• All expenses (create a simple spreadsheet and list all expenses – rent, electricity, groceries, insurance, gas, monthly credit card payments; loan payments, water bills etc.)
• Subtract your total expenses from your total income.
• If the difference b/w your income and expenses is positive, great news. You have a profit to pay down debt principal. You can also set aside a portion of the positive
  differential into a savings plan.
• If the difference b/w your income and expenses is negative, you are spending more than
  you earn each month and you need to make drastic changes in your spending habits.
  Not making changes means that debt levels will never be reduced, and you will never
  achieve financial freedom.

2. Set monthly limits on spending (after covering monthly expenses/bills) to avoid overspending and mounting debt.

Looking at any monthly excess cash that you might have left over after payment of bills (refer to #1 above), apply discipline and set aside a portion into a savings account. As part of this
exercise, you can identify what amount you have for spending (buying the consumer goods that are nice to have but not absolutely necessary) and setting your monthly limit to ensure you are not overspending and creating debt.

Start by identifying the basic needs like food and clothing and ensure that you are not buying
expensive versions as opposed to more reasonably priced options. Become a smart shopper by
only buying those things that are absolutely necessary and ensuring that you buy what you can pay cash for as opposed to using a credit card – which attracts exorbitant interest charges on outstanding balances.

Remember, applying discipline for a defined period of time until such time as you can manage
your monthly bills and have built a small nest egg puts you on course to growing your wealth,
improving your credit rating and achieving financial success.

3. Build an emergency fund – for “rainy days”.

Current statistics estimate that greater than 85% of the US population cannot cover an
“unplanned for” expense, such as an emergency car repair, in the amount of $400. Don’t allow yourself to be counted in that portion of the population who doesn’t have emergency cash to cover unexpected expenses – that we all will face. Set aside a fixed percentage of your monthly salary – say 5% or whatever you can afford – to cover unexpected emergencies. You can open a separate savings account at the bank and simply build this balance up over time.

When you have sudden home repairs or a mechanics bill, your stress levels will be minimal when you can access this cash and not take on more debt to cover your (emergency) bills.

4. Do not fall into the credit card trap of paying only the monthly minimum balance

Not only do the majority of people have large credit card balances (living beyond their means), they also do not place sufficient importance on paying off the balance on time. Some
consumers skip some monthly payments (this is reckless and will ruin a credit score) which
results in penalty-interest being added to the existing principal and interest balance
outstanding. Late payments also attract penalty fees which are separate to penalty interest. It
is crucial, in trying to achieve financial health and well-being, that payment dates are met and
that you pay more than the minimum each month. Applying discipline by tracking the
outstanding amount, your spending habits, and the due dates and then ensuring “on time”
payments – IN EXCESS OF THE MINIMUM BALANCE – will reduce the debt at a faster rate than if you pay only the minimum and also reduce the amount of “free money” (interest) that you pay the credit card company over the life of the debt.

5. Be realistic in setting your goals. Remember, CONSISTENCY is the key to success.

Regardless of your financial situation, you can climb your way out of debt and achieve financial success (which has many meanings) if you are disciplined and live within your means. Ensure that you apportion your monthly salary to bills, debt repayment and saving. Any extra funds can be used for consumer goods and partying and holidays etc. Remember, applying discipline is not a “death sentence” but rather a stepping stone to success. How long you stay in debt is up to you but being disciplined and consistent in your approach will result in success over the long term.

Set short term goals (1 – 2 years) and long-term goals (5+ years). If you have unmanageable
debt now, make it your goal that in 1 or 2 years, your debt will be significantly reduced or
extinguished which means that your credit score will increase, and you will be on your way to
financial freedom. Continue with your disciplined monthly approach to financial management and in 5 years, your long-term goals such as saving for further education, home purchase etc can be yours.

Other housekeeping matters that you can take to improve your financial and overall health and well-being:

• After paying off credit cards, carefully assess the need to maintain multiple cards and
  close those accounts that are not really needed and which can cause future problems.
  Have one credit card for emergency purchases and manage accordingly.
• Look after your health to reduce medical and insurance costs;
• Try to take on property maintenance yourself (as applicable) to reduce home repair
  costs;
• Develop a “saving” mindset as opposed to a “spending” mindset.
• Consider debt consolidation as applicable to your personal circumstances.
• Take on a “side job” if possible, to earn extra income and assign those funds for one or
  two specific bills or credit cards.
• Check your credit report regularly to manage your score and drive towards financial
  freedom.