As we can be our best assets, we need to improve ourselves. We need to increase our market values. But how can we do that? We can do that by increasing our knowledge and education – formal or informal depending on our necessity. If you are an employee, it is just advisable that you get higher education (master’s degree, certification, etc.,) to aid your promotion. If you are an entrepreneur, you can also get higher education like MBA or the like, attend trainings and seminars or just conduct your own research to develop your business.

The fruits of education are these: if you are an employee, you can get a higher salary and if you’re an entrepreneur, you can bring your business into progress. Moreover, if you don’t have the both (business and employment), you can gain the capability to have one of them or both if you become educated. Knowledge also brings skills. Skills can give us opportunities to earn money and solve financial problems.

Education helps us reinforce our finances. It can also boost our earning capacity, orient us the discipline to control our spending, and teach us how to save and invest our money. Sometimes our financial world is dark and uncertain. But because of knowledge, we have light and calculations that give us almost precision. Therefore, education cannot be ignored. It should be prioritized just like how we prioritize our selves. There are many books that can be read. There are many reliable articles on the Internet where you can get the wisdom to manage your finances. We should not stop from learning. We should not stop and claim that we are already wise. We should be like that if we don’t want to be called fools. Remember that foolishness can lead anyone to shame.

Wise people are humble. They also live in modesty. These attributes keep them away from excessive expenses and unwanted debts. Apparently, foolish people are boastful and live in extravagance. Consequently, they lose most of their money and they fall into the trap of debt. By having wisdom and knowledge, we can have the information and cautions we need to plan strategically. We can set effective procedures that will help us achieve our financial goals. Finally, we can learn the principles and behaviors that will fortify our personal finances.

Related posts:

1. Personal Finance Tips #5: Be Diligent
2. Personal Finance Tips #6: Forget the Money
3. Personal Finance Tips #3: Be Honest

Now, why I am saying that one practical personal finance tip is to forget about money? I’m telling this, because I want everyone to focus on becoming great instead of concentrating on money. The Bible even said, seek first the kingdom of God and all these things be will added to you. This means let’s seek first for greatness rather than things which do not last forever. Becoming great is a combination of being humble and one who serves God and His people. But how can greatness (humility and service) can help us stabilize our personal finances? Simply, if you become great, you will bear greatness.

By becoming great, we can avoid financial troubles – even long-term and permanent troubles. In earning money for example, when you work great in your business (serving your customers well, treating your employees the right way, and becoming responsible to the government), you will be assured that your financial condition and operation will have a bright future. Just imagine if you will just concentrate on money. For example, if you deceive your customers to have bigger profits, give unjust compensation to your employees just to cut your cost, and practice tax evasion just to save more money – what will happen? Do you think you will prosper? But of course you can be financially successful. But that will only be temporary. You customers will not return to you, your employees may leave you, and the IRS may impose tax penalties on you. The consequence will be a great financial tragedy for you and your business.

How about if you are not a businessman? Let us say you’re an employee. The virtue of greatness still applies. If you concentrate in doing great to your job, performing well and having the best results, there will be a huge chance that you will be promoted and will receive incentives and bonuses. Thus, helping your financial capability to be strengthened. Moreover, if you will not boast and will stay humble, you will be exalted and win bunch of good friends. These true friends that will be yours will help you in any aspects of your life, including the financial aspect of your life.

If you wish to get out of debt, greatness also applies effectively. Often, people, because they don’t want their money (even their last money) to leave them, they don’t pay their debts responsively. A responsible person does his promises, including his promises to pay his dues. That’s why if you want to really extinguish your liabilities, you should do great in doing your vows. You should not just focus on keeping that money in your hands, but you should concentrate in preserving your word of honor, as well as your credit score, which are beneficial to both of you and your creditor.

Therefore, concentrate on becoming great in everything you do. Sometimes or even most of the times, you must forget that money. Be great and be righteous, and money will not leave you – even if you will not focus on it. Don’t hold your money too tight, so that it may flow freely, and return to you voluntarily – giving you the freedom you have first given to it.

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1. Personal Finance Tips #7: Educate Yourself
2. Personal Finance Tips #3: Be Honest
3. Personal Finance tips #1: Stick to Your Financial Plan

”Lazy hands make a man poor, but diligent hands bring wealth.” – Proverbs 10:4 (NIV)

Diligence is important as an action is important to accomplish every task or plan. Intelligence is good. Yes it is good because we need to be wise in making our financial planning and in designing our steps and procedures in managing our personal finances. However, this wit is inadequate without putting them into actions. Using our brain is good, but without using our hands, it can never be better. Even if we have the confidence in our hearts to succeed in our financial life, it will only come short if we will not walk the talk. Remember that faith without deed is dead.

Our financial program is composed of a good plan, nice goal and a series of effective steps to achieve that financial goal. In this program, the steps are very important – and we can only walk all the steps if we are constantly diligent. We need to do what we think. We need to realize what we feel. We need to work for the things we want to achieve. The debts we want to extinguished must be paid by our earnings. These earnings should be the fruits of our consistent labor. If we only think of repaying the money we owed, but never work for the money we will be using to pay off those debts, we will just find ourselves still slaves by lenders.

In saving money, our actions play a very important role. It is our hands that hold, make and or spend our money. In order that we can save money, we should increase our income by working more. We also need to control our hands not to spend excessively.

In investing money, especially when we invest it to our business, diligence is our key to success and prosperity. If you will refer to your financial statements (balance sheets or statement of financial position and statements of income), you will find in your balance sheet that equity increases when your income increases. If your equity increases, your asset may also increase, and your liability may be decreased. Take note that the statement of income, which is also known as the statement of performance and results of operation, reflect a company or an individual’s performance and results. This just means that the success of a business or financial activity indeed lies on our performance and results – which are the manifestation of our works and our diligence.

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1. Personal Finance Tips #4: Value and Importance
2. Personal Finance Tips #7: Educate Yourself
3. Personal Finance Tips #6: Forget the Money

Many people, although they have a good financial plan and procedures to achieve their financial goals, still fail. One mail reason is… they don’t perform their very best. They take those plans and steps slightly, and sometimes they take them for granted. This happen because they don’t stand on the things they have laid.

All plans must have a goal. This goal must be an important goal for someone not to take it insignificantly. Hence, in every plan and goal we make, we must always ask ourselves – why are we doing this plan? Why do we want to achieve those goals? How important it is to achieve them? By assuring that a plan and its goal are very important to our lives, we can also assure that we will do our best to execute that plan and achieve its goal.

In setting up our emergency fund, we should also put some value on this fund. Because if we won’t, we might just lose it. This must also apply to all the funds and allowances we build. We must hold them tight, protect them, and nurture them – as if they are very important to us. We can also think of some important things to become the reasons why we are doing these financial activities. These things can be the most important people in our lives. They can be our love ones, our children particularly. The educational fund you are building up can be very important to you, because you love your children. The emergency fund you keep can also be very significant to you because you don’t want your family to face financial troubles in the future.

One major personal financial goal you can desire can be your release from debts. This goal must also become very important to you. This means, you need to become serious in eliminating those amounts you owed. You need to pay them on time. This also means you need to do your best effort to find and earn money to repay those debts.

By putting pure value on everything we do, we can set ourselves on fire and attain success on those things. Remember that what we don’t hold firmly – can fall from our hands. Thus, we must stand on every plan we create, in every steps we make, and in every goal we want to achieve. We must place a great importance on them. We can do that by linking them to important things in our lives, like our love for our family and other loved ones.

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1. Personal Finance Tips #5: Be Diligent
2. Personal Finance tips #1: Stick to Your Financial Plan
3. Personal Finance Tips #2: Buy the Big First

So how is your personal finance doing? Do you have many debts and don’t have financial stability? If yes, what do you think is the problem? Have you been an honest person all these years? Maybe you have obtained a loan you know you can never pay? Or you have not done your vows or promises to pay your debts, resulting this to double your debts because of interests and penalties?

A simple piece of dishonesty can bring a person lot of financial troubles. People who can hardly say “no” or refuse or resist a thing that should be resisted often slide into a whole financial mess. I remember one person who didn’t have enough money in his pocket or in his bank account. He was encouraged to have a grand birthday party by his friends. Because the man cannot be true to his self, he did not say no to them and he gave his vow to realize that party. Consequently, he resorted to creditors and owed money he could never afford to payback. Eventually, the party happened and the increase in his liabilities also occurred. With that story, we can tell that should he became honest to people and unto himself, he should have escaped lots of debts.

Dishonesty is also common in paying taxes. Many people, who wish to save their money, don’t pay the right taxes. They resort to tax evasion which is a great practice of lying. These people gain temporary financial relief because they don’t pay bigger current taxes. However, as the IRS conducts audits, these people are caught with more penalties. That means more expenses which result to additional financial burden.

To strengthen our personal finances, we should also strengthen our attitudes and behaviors. This includes strengthening our virtue of honesty. As we all know, the truth will set us free. The truth and the light can give us financial freedom and stop us from becoming slaves of our creditors. Honesty is difficult to practice, but if practiced constantly, will truly help us in gaining our financial stability. Therefore, let us embrace in our everyday conducts that honesty is still the best policy – even in our financial policies.

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1. Personal Finance Tips #6: Forget the Money
2. Personal Finance Tips #5: Be Diligent
3. Personal Finance Tips #4: Value and Importance

Prepare your pocket
First, because we are talking here financial matters, we need to prepare our pocket, our wallet, our bank accounts, or our financial capacity. In times of financial crisis, we should see to it that we have built an emergency fund which we can get funds to help us pay our emergency expenses. Setting up an emergency fund can be done gradually yet it should be consistent. We can also place that fund in a savings account to earn interests yet still unrestricted. We can also save other things aside from money that can help us in times of financial crisis. These include stored foods and supplies, which we can spend while you still don’t run out of bucks.

Prepare your mind
An alert mind is a great mind. A financial crisis is an occurrence that is irregular. In times like this, we need to have our mind prepared for this tough situation. That’s why we should fill our brains with all the advanced personal financial solutions we can use when financial troubles happen. This can be done by making strategic plans, budgeting and forecasting.

Prepare your emotions
If we need to set up our mind for the anticipate crisis, we also need to prepare our emotions. Our emotional behavior can play an important role in difficult financial situations. We cannot ignore our feelings, especially because this is our human essence. May people who are emotionally weak usually don’t survive a very hard financial condition. Our emotions, when properly manage and control, can give us the strength and courage to face any battle, including our financial battles. Moreover, they are also our tools that supply us inspirations and will-power to do what is right and what is excellent.

Prepare your people
We also need to prepare the people around us who have significant impacts in our lives. These persons may include our families, relatives, close friends and other people who can affect our financial lives. Your children for example, who need your financial support for their education, should be taught and be ready for the effects of the coming crisis. The importance of preparing the people around you for the coming financial storm is to make them people that can help you survive the disaster instead of letting them become additional burden that will add weight to the crisis.

Prepare your hands
Last but not the least, we need to prepare our hands. This means we need to prepare ourselves to do and execute all those planned actions we have prepared for the crisis. Since we may be losing money when crisis comes, we must assure that our hands can actively work and find money to cure the coming financial troubles.  Although we have prepared mind, heart or people around us, if our own hands are not prepared, expect that failure will still come to us. Hence, let us set our hands in fire during the cold and rainy days.

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1. Personal Finance Tips #4: Value and Importance
2. How to manage your personal finances (the manager’s way)
3. How to Build an Emergency Fund

Planning
To achieve our financial goals, we need first to plan strategically. A plan is a set of objectives and procedures which aims to achieve an objective by executing the necessary procedures to achieve it. In the personal finance world, planning may include creating a financial plan. This financial plan may include budgeting and setting an emergency fund. We need to exercise reasonable calculations and estimations to get ahead of time. We can manage our finances in advance through planning. Advance planning reduces the risks of cramming. An example of planning is calculating your next month’s revenues and expenses and then putting and plotting them in papers or spreadsheets. With this, we can have a comprehensible picture of our financial status for the succeeding month. If we foresee a problem, we can find solutions for that problem in an early period of time. Planning can also help us compare our planned financial figures against actual results. This way, we can analyze our strong points and rooms for improvements.

Organizing
Organizing is arranging our things in the proper order. This practice includes the classification of resources, obligations and expenditures for a more efficient financial flow. We can classify our finances according to time (short-term or long-term), size (amounts of money) or priority (according to importance). By proper organization of our finances, we can efficiently carry out our financial plans. An organized person has the better chance of achieving financial success than a disorganized person. This function of management prevents us from chaotic situation that brings failure in any endeavor. Hence, it is always best to organize our financial elements and put them all in harmony instead of in turmoil.

Assigning
One important technique in managing our finances is the proper allocation of our resources (which may come from our earnings and saving) to our usage or expenditures. A good example of this is the allocation of our emergency fund. Emergency fund should be exclusively used for emergency purposes and not for regular usage.  We can also assign allowances for particular purposes. Examples of these allowances are our household allowance which is allocated for our regular home expenses, educational allowance which is allocated for our educational expenses. The essence of financial assigning is to strengthen our financial condition and flexibility.

Directing
Directing, also called leading, is known as the heart of management. In managing our personal finances, directing involves motivating ourselves to achieve our financial goals. This requires the possession of effective human attributes and attitudes. Any strategic plan will become useless if a person is not motivated. Furthermore, organized and effectively assigned tasks and tools will not work if we don’t have the right interest to execute them. In attaining our financial goals (e.g., financial stability, getting out of debt, high investment returns, etc.,), our principles and attitudes play very important roles. We need to assess our current principles and attitudes which are the roots of what we are, as well as what our financial statuses are.

Controlling
Finally, we need to see to it that our plans are running well, and that any deviations from our original targets are handled well. Thus, monitoring must always be done regularly. We need to monitor and track down the flow of our execution – is it doing well or it is the other way around? Are we meeting our financial budgets or are we not? Do our actual expenditures exceed what we are expecting? These questions must be answered and they must be addressed. With the help of a strategic plan, which is well-organized and properly backed-up with effective tools, plus our will power to achieve our goals, we can assure that we can be able to find solutions whenever financial troubles come.

Again, we must keep in mind that in managing our personal finances, our personal attributes play a very important role. We need to become diligent, patient and wise to execute our procedures to achieve our goals. Planning, organizing, assigning, directing and controlling, these five functions must work together in full force and in powerful harmony.

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There are many important things to consider if we want our budget to go into success. These include making them specific, quantifiable, realistic and documented. We should specify our budget and make details so that we can have a clear picture of what we will follow. Measurability is also important in any financial plan, especially that we are dealing with money. Quantifying our budget is also vital in estimating future financial figures. We must also see to it that our budget is realistic and achievable. A conservative approach is more likely to succeed than a frustrating idealistic budget. Moreover, budgets must also be supported by documentations which are very useful in tracking and monitoring them. Tracking our earning, spending and saving behaviors will give us an idea on our weak points and strong points when it comes to our personal financial matters. With this, we can always find ways to strengthen our weakness and preserve our strengths. However, all of these things may not be enough for our budget to be taken efficiently. We should also realize one thing, and that is what I will discuss in the following paragraphs.

The important key to an effective budgeting lies on the value and importance we give to it. We may have a specific, measurable, attainable and trackable budget but it may not just be enough to help us reach our financial objectives. It is important to ask ourselves the following questions. Why are we making a budget? What is its great importance to our lives? These questions should be answered by our selves. We need to have a sense of direction. Budgets are tools that we can use to make our finances stable. But still we need to know its essence and values. Many people failed their financial plans because they don’t value them. Several financial gurus will teach you how to manage your personal finances. But without the sense of purpose you may only falter at the end. Our own budget should have a great impact in our lives.

In every plan we build, we need to assure that it is important to us. In every budget we create, we should see to it that it is relevant to our lives. As for me, I am budgeting because I want to save money for the establishment of my own corporation. I want to have a company that will employ people and give them jobs. I also want to offer quality products and services that will give my clients and customers satisfaction. This is why budgeting is so important to my life. Now, you can also try to meditate and know the roots why are you making a budget. Even a child can give great importance to his own budget to save a few bucks from his school allowance to buy a nice toy. Therefore, ask yourself once more, why I am budgeting? We all know that systems and tools facilitate our goals (financial goals), but our values are the ones who will give those goals the sense of direction and the sense of destination.

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3. How to reduce your monthly expenses?

Prevent the battle
Prevention is still the best cure even as against our debts. The supreme warrior is one that can win a war without going into a battle. This is possible through planning and making precise calculations. The person who wins is the person who has the best plans and most precise calculations. Therefore, before we spend, let’s first calculate and see to it that it is according to our strategic plan. This is to assure that we will not be fallen into the necessity to rumble debts.

Be a great leader
To gain victory over our every endeavor, we should become great leaders of our selves. We should manage and control our selves efficiently and effectively. Great leadership is a combination of gentleness and strictness. Hence, be gentle on your expenses and be strict on your self-imposed rules and policies.

Be a great spy
This is applicable to the things around you and to the things within you. To achieve triumph, we should always gather enough information that will help us decide the best financial decisions. Let us research every loan products like payday loans, debt consolidation, unsecured personal loans, and other loans if they are advantageous or disadvantageous to us. Let us be wise and be careful not to fall unto their traps. More importantly, we should also take the best efforts to know our selves – just like spying on ourselves. Monitoring and tracking our personal financial behavior (our weak points and strong points) will help us place our selves in the right financial position.

Energy and rapidity
Being in war means we need to set ourselves on fire. We need to defeat our opponent by attacking him like a lightning, which is full of force and speed. To annihilate our debts, we should act at the earliest possible time – NOW. There should be no time that will be wasted, as well as strength that will be wasted. We should preserve our momentum, which is also a very important ingredient in winning every battle. Therefore, if you are not doing anything to extinguish your debts, start doing something now. Do what should be done and stop what should be stopped.

Deploy your army
When battle has not been prevented and you have no choice but to face that battle, then you need to position your army. In your war against your financial woes, your army consists of your self as the general or commander and your men as your assets and resources. Your resources could be tangible or intangible and humans or not humans. Your tangible resources could include your properties (real estate or personal) and your intangible resources may consist of your attitudes, knowledge and skills. Your human resources may compose of your relatives, friends, allies and affiliates. Your not human resources could include your location, weather, economy which are advantageous to you. Now, all you have to do is to gather and organize all these resources of yours and deploy them effectively as your army to defeat your enemy – your debts.

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1. Why You Have Too Much Debt
2. What is Debt Consolidation?
3. The Best Ways to get out of Debt

Knowing is good, but understanding is better. That’s why, let’s not just memorize the following formula but let’s understand it. The following formula and explanations are derived from the financial accounting equation, Asset = Liability + Equity.

Liability = Asset – Equity

The above equation gives us the understanding of the following:

1. Increase in asset without increase in equity will increase your liability
This means that if you obtain cash or acquire properties and other assets without accumulated earnings, you will resort into debts. The debt trap is usually found behind our needs and wants. Once we desire for something we cannot afford to pay for cash, we call the lenders and the creditors for help. Therefore to prevent debt, we should not buy something beyond our earning.

Don’t increase your asset if your equity cannot afford that increase.

2. Decrease in asset may reduce your liability
One certain way to decrease or extinguish your debt is to pay-off them. If you have cash to settle your obligations, then settle your debts. If you have receivables, then exert your best effort to collect them so that you can use them to pay your own liabilities. If you have assets that don’t generate income, you may sell them and use the proceeds to repay your debts.

Cut your asset and use that to cut your debt.

3. Decrease in equity without increase in asset will increase your liability
Equity is equal to infused capital plus accumulated earnings (losses) minus capital drawings or dividends. This primarily means that if you incur losses or don’t earn enough profits, your chance of getting out of debt will fade.  Net income or profit is directly related to your revenue and inversely related to your costs and expenses. Moreover, revenue is directly related to your assets such as cash and receivables while your cost, purchases and expenses are directly related to your liabilities such as accounts payable and accrued expenses. Hence, to decrease or zero out your liability, you should increase your revenue to collect more cash and receivables and efficiently minimize your cost and expenses to avoid more trade payables and unpaid expenses.

Increase your equity to prevent increase of your liability.

4. Increase in equity may reduce your liability
As discussed in the preceding paragraph, increase in your cumulative earnings will increase equity. If your equity increases, you can be able to finance your needs not by means of debts but by means of the assets generated from your revenue, such as cash and receivables generated from your sales. Therefore, strive for earnings to increase equity and to get out of debt. Work well to increase your salary income. Do business well to increase your business income. Also, avoid unnecessary costs and expenses to avoid losses that will result to deficiencies in your equity.

Conclusion and the real secret formula:
The secret formula to get out of debt is simply you. You, being the one who is capable of knowing and understanding the basic formulas (e.g., accounting equation, financial ratios, etc.,) that the world has provided us. You, being the one who can control your effort in accumulating profits. You, being the one who can manage your behavior in spending your money.  And you, being the one who can only defeat the poor person within you.

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2. Why You Have Too Much Debt
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