Time Tested Tips for Long-Term Wealth

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1 Time Tested Tips for Long-Term Wealth Everyday Wealth Guide.com 2013, all rights reserved

2 The Importance of Cash Flow The first step to achieving long-term wealth is cash flow management. One of the best ways to control debt and increase savings is good cash flow management. Cash flow, in terms of wealth management and individual finances, refers to how income flows into bank accounts and out to pay expenses. Understanding how money flows in and out of your accounts is critical to financial success by allowing you to make better use of the money available. There are several steps to achieving good cash flow management, and they include: Setting clear, realistic and achievable short, medium and long-term goals. Goals must be specific, such as save $50 each payday rather than build savings. By making goals specific, you are more likely to stick to a plan to achieve them. Operating personal finances as if they were business finances. Cash flow is critical to the success of every business and is a vital part of any planning process for that business. In order for a company to operate efficiently, it must have adequate cash flow. By developing a structured cash flow plan, treating income as revenue and using one of the many budgeting applications available in today s technology to track cash flow, personal finances can become as profitable as business finances. Learn whether you have a surplus, or money left over at the end of the month, or if you are operating in the negative at the end of the month. If you are in the negative, it is possible you are increasing debt and interest in order to meet expenses. A budget can help manage cash flow by identifying the patterns in your expenses, which could lead to adjustments that could increase your cash flow. To create a budget, you must identify where you are spending, evaluate areas where you can adjust spending and track all spending to be sure you are following the guidelines set when you created the budget. Know the difference between cash and cash flow. Cash is the money you have available to make purchases. Cash flow is how that cash enters and exits your bank accounts. It is possible to have cash, but not have an adequate cash flow, which is why identifying where money goes each month is the first step to building long-term wealth.

3 Benefits of Debt Consolidation Once you have identified your cash flow situation and have trimmed any excess expenses from your budget, you may still find that your cash flow is not where it should be. In those cases, it may benefit you to speak to a credit counselor about debt consolidation. In consolidation of debts, all debts are combined into one payment through a credit counselor who negotiates lower interest rates with creditors. The lower interest rates reduce monthly payments, and the consumer makes one monthly payment to the credit counselor, who then pays the monthly payments to the creditors. However, it is important to choose a credit counseling company who will work with you to develop new spending habits and a budget to help you avoid becoming overloaded with debt again. By implementing good cash flow management strategies, consumers should be able to begin building wealth as soon as the debt consolidation program ends. Although consolidation can initially lower your credit score, it is less damaging than defaulting on credit card debt. In addition, because consolidation lowers monthly payments, it can provide improved cash flow as well.

4 Pros and Cons of Borrowing Money Borrowing money can be a stepping stone on the way to become wealthy, but it s important to understand the risks involved as well. In order to avoid the need to consolidate debts, it s important to investigate the Pros and Cons of borrowing money to understand the role it can play in establishing wealth or overwhelming debt. The benefits of borrowing money include: Getting an idea for a business off the ground to eventually make money Allows consumers and businesses to make larger purchases Builds credit history However, there are also cons in borrowing money as well, especially when it comes to the types of borrowing a consumer is considering. Some negative aspects of borrowing money include: Predatory and irresponsible lenders as many consumers who have had issues with payday loans can attest High interest rates for those deemed credit card risks or who do not qualify for low interest credit cards Unexpected circumstances that may result in the consumer being unable to repay the debts Using credit allows consumers to distance themselves from the reality of what they can afford Stress on relationships when paying creditors back

5 Quite often, consumers view financing as an easy way to get items they could not otherwise afford and with many companies offering no interest for one year or zero down credit terms, many consumers feel that financing is the better option than paying cash. In order to create long-term wealth, however, it is critical to understand the terms of any financial agreement, and to determine if the risks of financing outweigh any financial benefits. Always read the fine print before agreeing to finance any purchase, especially offers for low interest credit cards. Some of those offers come with strings attached that could actually end up costing you more money than simply purchasing the item with cash. Although creating long-term wealth may be difficult at times, the benefits far outweigh the occasional sacrifices necessary to become financially independent. With hard work, dedication and a focus on the goals set to help you achieve long-term wealth, it is possible to attain any financial goals you set. Everyday Wealth Guide.com 2013, all rights reserved