Possibly my perspective is affected by my advancing years and the fact that the memory was placed in my brain using my elementary-school-size brain, but I swear that those 3 side-by-side teeter totters had to be 45-50 feet in length.  I mean, if the kid on the other side tried to yell a challenge or taunt at you, he was so far away that you’d see his lips move long before the sound ever reached you.  Yup, those were some big teeter totters.

Having one person on each side - gently teetering and tottering back and forth?  Nah!  (Well, sometimes the “girls” would do it that way.  But not us “BOYS!”)  It might start with one kid on each side, but the fun began when others started piling on. 

If a big kid had a little kid pinned to the sky, you’d see 2-3 other kids come to the rescue - rushing to add enough weight to the little kid’s side to send that big kid up to the sky himself.  And if they could do it fast enough, and they lifted their legs up so the end of the board smacked into the ground, they could sometimes make the big kid go flying off the end as the impact vibrated through the fulcrum and slammed full force into his unsuspecting bottom.  Oh the fun of that Oh No look in his eyes and the subsequent flat on his back splat! 

And then you’d move to the next stage where each side of the teeter totter was rushed by “teams” of boys.  Having 10-20 kids on each side (and again, maybe it’s possible the memory might have added a few kid’s bodies over the years) became a contest of wills and strategy.  Pretty soon, you’d have the manly boys standing towards the center of the teeter totter, trying to push each other off to reduce the weight of the opposing side in order to give their own side an advantage.

The winning strategy came down to two ideas:  1)  Increase the weight on your side while 2) Reducing the weight on the other side.  That’s how you won - make your side heavier AND make the other side lighter.  All at the same time.  Both strategies going at the same time.

And that’s how credit scoring works! 

Over the years, I’ve helped hundreds and hundred of folks improve their credit scores so they can qualify for a home loan or get a better interest rate.  There are many tips and tricks I share with them (Check out the many articles here for more ideas), but ALL the strategies are filtered through the Teeter Totter Test.

If the strategy helps reduce the weight on the “Bad Side” of the credit teeter totter, it is a good strategy.  If the strategy helps increase the weight on the “Good Side”, it is a good strategy.  But what is hardest to communicate to these clients is that they must absolutely work on BOTH sides of the teeter totter at the same time!  You cannot just reduce the weight on the bad side and hope the score will go up if you have no weight on the good side.  Teeter totters don’t work that way and neither does credit scoring.

You cannot just reduce the weight on the bad side and hope the score will go up

A potential client with lots of bad credit should start right away building good credit accounts.  Don’t wait until you have all the bad credit taken care of.  Open active good accounts gain momentum and points the longer they have been opened.  Waiting to open them until the bad stuff is gone will delay the credit score improvement.

And if you get enough good credit going - just like suddenly adding several kids to one side of a teeter totter - you can create enough momentum to “bump” some of the bad credit off the other side.  It may not actually go away, but it will be so outweighed by the good stuff that its impact will be diminished to the point it doesn’t really hurt all that bad anymore. 

The problem with the idea of “just as soon as…” is that it is a sure fire strategy for disaster.  It’s called “procrastination”.  It doesn’t work – never has, never will.   Nobody likes to save.  Savings involves “delayed gratification”, and who wants to wait and hope you can enjoy your money later when you are absolutely certain that if you spend it today on a designer pair of jeans or a leopard-print steering wheel cover that you’ll enjoy it? 

But look around – the economy is becoming scary.  Unemployment is increasing.  Once “Too Big to Fail” companies have failed.  Once proud financial institutions and huge corporations have stocks trading in the pennies and the government is printing money at an alarming rate, telling us the solution to the crisis is to spend more money.

But the real solution is “Saving”.  Reduce spending and SAVE!  Don’t Delay - Start Today!  Great minds in history have warned us against delaying the building of our savings accounts.  Minds like:

• Benjamin Franklin (“Have you somewhat to do tomorrow, do it today.”) or
• Mark Twain (“Never put off until tomorrow what you can do today.”) or maybe
• God Himself (“In the house of the wise are stores of choice food and oil… THAT MEANS SAVINGS… but a foolish man devours all he has… THAT MEANS NO SAVINGS – Proverbs 21:20)

If you think the government is going to “bail you out” if you run in to trouble in the future, think again.  Start taking care of your own future – don’t be that “foolish man” God warns about.

I Don’t Have Enough Money To Even Start Saving…

Absolute nonsense.  You got change in your pocket?  The ashtray of your car?  That coffee cup above the washing machine?  Then you have enough to start saving.  Go open a savings account – even if all you have is two plastic baggies filled with loose change.  That’s the first step – that “journey of a thousand miles begins with a single step” first step.

Then COMMIT to adding to that account on a regular basis.  And by “commit”, I mean “figuring out a way to trick yourself” into doing it.  Because if you leave it up to your own good intentions, you won’t do it.  Here are some ways to “trick yourself”:

·        Make it automatic:  Have your bank automatically transfer a fixed amount every payday from your checking account to your savings account.

·        Make it automatic II:  Request that your payroll department direct deposit a percentage of your paycheck each month into your savings account and the rest into checking.  Many companies have started offering this service to employees – go ask!

·        Make it automatic III:  Contribute to your 401K.  If you’re not already in your company’s plan – start!  Start with 3% of your income – you won’t even miss it!

·        Make it automatic IV:  Go in to your payroll department and reduce your exemptions by 1 on your W-4 withholdings form.  That means your company will start withholding slightly MORE money each month from you.  It’ll go to the IRS, which will increase your tax refund next year.  (I know, EVERY other financial advisor tells you “Don’t let the IRS have your money – they don’t pay you interest on it”.  But if you’re not saving anything now – can you think of a safer place to park your savings each month?  You CAN’T spend it, and you’ll get a lump sum back next year.  Just commit now to how you’ll use this lump sum to save for the future.)

·        Make it automatic V:  Save your change.  Many banks offer a “keep the change” program with your debit card purchases where they round up each purchase to the next dollar and put the rest into your savings account.  Cool!  And put a big jar next to where you empty your pockets when you come home, and put all your change into it – and once a month, add it to your savings.

And some other ideas:

• Make it inconvenient to access:  Just like you might have to put your alarm clock across the room so you actually have to get out of bed to turn it off, if it’s too easy to access your savings – you’ll just end up spending ‘em.  Maybe you need to set up your savings account at a different bank?  I LOVE these new on-line banks, like ING DIRECT.  They pay a great interest rate, they’re safe, and you have to go out of your way to access your money – which isn’t hard to do, it’s just slightly inconvenient so maybe you’ll think twice before you dip in to your account so you can buy those designer jeans.
• Give the account a “goal” name:  Use names like “Emergency Fund”, “Vacation Fund”, “Kid’s Education Fund”, “Christmas Fund”, “New Home Fund”, etc.  Taking money out of your “savings” account is easy.  Taking money out of your “Start My Own Business and Fire My Boss” account to pay for something frivolous might be enough deterrent to keep your spending in check.

Saving a few bucks every day may not seem like much when you first start out, but those few bucks grow as long as you can keep your fingers out of the cookie jar.  And when it begins to become a sizable amount – you’ll actually start sleeping better and feeling better about yourself.  And if you can resist the temptation to blow it on something you don’t need – you may be able to enjoy that thing you’ve heard of, called “Peace of Mind”.

AND, there is a provision in there that says if you stay in this home for 36 months, YOU DON’T HAVE TO REPAY THE CREDIT!  It is yours to keep, no payback, no penalty.  This is different from the previous $7,500 credit that DID have to be repaid.  If you bought your home in 2008 under the $7,500 rules – those rules still apply.  That credit still has to be repaid over the 15 year period.  Sorry.

Now, questions you have are something like this:

How soon do I get the credit?  If you buy in 2009, you can get the credit very quickly if you’d like (and why wouldn’t you want to get it right away?).  If you haven’t filed taxes yet this year, just include this credit with your filing (and it is my understanding that even if you don’t have to file a tax return – you should file anyway and claim the credit).  If you have already filed this year, you can simply file an amended return and claim the credit.  You do NOT have to wait until next year to claim this.

Are there income limits?  Yes.  If you are a single filer, you can make up to $75,000.  Married filing jointly can make up to $150,000.  If you make a little more than this, check with you tax attorney or the IRS guidelines for specifics on partial tax credits available.

What happens if I sell or move before the 36 months?  If you sell the home or move and rent it out in the next 36 months, you’ll have to repay the $8,000.  So, if you’re buying this year and claim the credit, try to buy something you want to stay in for at least 3 years.  Otherwise, say bye-bye to this big benefit.

If you are considering buying a home this year – or already have – make sure you get full details of this new law.  I am not a tax attorney and cannot give legal advice on such matters, but the basic provisions of “you have to buy in 2009 BEFORE Nov 30 to qualify”, “$8,000 is the agreed-to size of the credit”, “36 months is the amount of time you have to stay in the home”, and “this will only be for first time buyers” are pretty clear.  Rumors of different proposals for non-first time homebuyers or for larger credit amounts didn’t happen – this is what we got.

This is great news for new buyers – so let’s get out there and buy, buy, buy – and great news for sellers who have been waiting for new buyers to offer, offer, offer.  Interest rates continue to be awesome – we have plenty of money to lend – our closing times are still terrific – home prices are incredible – and I’m still willing to take on new clients (ain’t that nice of me?) – so what are you waiting for?

OKAY, BEFORE YOU CALL ME IN A PANIC – THIS IS NOT TRUE!!!

But are you one of the lucky credit card owners who have received such a notice recently from your credit card company? With so many banks in trouble because of their poor lending practices – many have decided that the best way to generate some extra revenue is to target their credit card borrowers – even their BEST credit card borrowers.

Forget the fact that you’ve been a good client for YEARS and never been late. Forget the fact that they promised you that low interest rate on that balance transfer “for life”. Forget that your credit score is 800 and you’ve never missed a payment in your life! They have decided that YOU are their solution to all the other stupid lending choices they’ve made.

So, you’ll get the letter that says “We’re changing your terms – tripling your interest rate (or more) and increasing your minimum payment calculation too!” If you don’t accept these changes, your account is immediately closed. Faced with this choice, many of you decided to pay the higher interest rate rather than closing your account – because closing your account would hurt your credit score. Ouch! Rock / Hard Place!

Is there hope in sight?

Maybe. If you follow the financial markets at all, you’ve no doubt noticed that many banking stocks have stabilized and are starting to recover. The news coming out lately suggests that the stimulus money pouring in to these financial institutions is having a positive affect on bank balance sheets. Money is starting to flow through credit markets again.

But if you did get hit with those increased credit card rates, please realize that your credit card company is NOT going to send you one of them letters saying, “Whew! Crisis is over! We’re lowering your rate again!” If you accepted the higher rate – they are happy to let you keep it.

Did you Opt-Out?

Over the past few years, fears of identity theft have prompted many of you to use www.OptOutPreScreen.com to eliminate those pre-approved credit card offers from filling your mailbox. IF you’ve done this, and IF you just got whammied by your credit card company, may I suggest that you remove your name from the Opt-Out list?

Credit card business is VERY profitable to banks – so it won’t be long, as the bank balance sheets improve, before they start mass-mailing low-interest balance transfer offers again. If your name is on the Opt-Out list, you won’t be getting these offers – essentially Opting Out of Better Options.

What do you do Now?

If you did put your name on the Opt Out list at some point, it is very easy to “opt out” of the opt out list again.  On the www.OptOutPreScreen.com website, it is simple to “Opt Out” or “Opt In”.  Enter your info, and couple mouse clicks, and you’re back on the marketing lists again.  Soon, your lonely mailbox will start filling with offers again. 

No one likes junk mail, but when good credit card offers start coming out again, you’ll be glad you took this simple step.

The stories I write, with maybe some historical pictures of either the home itself or the people or events I write about, end up on the backs of listing flyers, on blog sites, linked to MLS listings, displayed in the home during open houses, and are used to blanket the surrounding neighborhood, etc. The intention is to raise a little more awareness of the listing, create some intrigue and mystery or elevate the historical significance of the home, and most of all – to increase the emotional attachment a potential buyer might have for the home.

Who are these people?

It is amazing what you can find with a little internet research. I often start my search with County Records – available in most communities on-line. Go through the sales history of the home and make note of sellers and buyers names. Who are these people? Find out! Google the names, check the archives of local newspapers, check out the public library.

If the names of the people aren’t “significant”, then what was happening during the time the home was built or sold or what changes has that neighborhood seen over the years. There are stories that can be told about almost any home.

What a Wonderful Tribute!

A recent example of such a story is below. This took me a few hours to put together. I knew absolutely nothing about the home when I started, and the agent knew very little himself. I wrote a rough draft on what I could find out about the people and then asked the agent to “get approval” for the story from the seller (which was the daughter of the previous owners). Once she saw the story we were trying to tell, she was more than willing to share extra details and give us a few more tidbits. With her input and the research, I ended up with this story.

And after blasting it out to my contact lists and putting it on my blogs and blanketing the neighborhood along with open house invitations, the listing has become a hot topic around town. I have no doubt that this story will help find a buyer sooner than a listing with no story.

(And just think how this real estate agent can now use this listing to gather in more similar listings around town! If you don’t believe people want their stories told like this – you are wrong! What a wonderful tribute and gift you are giving when you include this strategy with your listings!)

Here’s the story

(I dressed it up on the flyers with pictures and graphics of course):

Rose Bowls, Blueberries, Daffodils, and Silent Snap-Counts

The last time this home came on the market was in 1947, so when I say that this “For Sale” offering is truly a rare and special event, I don’t think I’m over-exaggerating the unique opportunity that sits here before you. The home and surrounding land is known to local residents as “The Bond Blueberry Farm”, and this home has a wonderful place in the history of the Puyallup Valley and beyond.

Chuck Bond was a star for the University of Washington football team - one of many such UW stars to come from Puyallup High School over the years. Chuck was Captain of the Huskies team that faced the University of Pittsburgh in the 1937 Rose Bowl. Chuck was a defensive tackle but as good as he was, he and his teammates were unable to stop the Panther’s “Dream Backfield” of Bobby LaRue, Frank Patrick, Bill Daddio, and Marshall Goldberg who rolled up 254 yards and two rushing touchdowns enroute to a 21-0 victory.

One thing that was interesting about that Husky’s team was the way they won a key victory over powerhouse USC to secure that Rose Bowl birth. USC’s homefield advantage featured rowdy fans with megaphones and a HUGE marching band that would play as loud as possible while opponents had the ball, making communication and play-calling very difficult (Sound familiar Seattle Seahawks fans?).

So the Huskies came up with a unique system of silent hand signals to call plays - much like many of today’s NFL teams use. Years later, when asked about the “new” system of silent snap counts that teams were putting in to combat the noise levels at the Kingdome, Chuck responded, “We used them in 1936 to help us beat USC. You’d think that now, 50 years later, the pros might have perfected that particular tactic.” After graduation, he was drafted and played 22 games as an Offensive Tackle for the NFL Washington Redskins.

Chuck returned to Puyallup, married his sweetheart Francis, and in 1947 they purchased this home and started their blueberry farm. (Oh, and their son, Chuck Jr. later played for two UW Rose Bowl Teams in 1961 & 1964 - also playing Tackle. They were the first Father/Son Rose Bowl players in UW history.)

Chuck and Francis worked hard raising and selling their blueberries together, but they also loved to play hard too. They were avid tennis players and formed a formidable doubles team. The family joke was that Chuck would use his long arms to cover most of the court but he made Francis do all the running to get to the tough shots.

In 1971, the Bonds built the Puyallup Valley Tennis Club on a section of their property. They hosted tournaments and some of the local high schools would use the courts for matches and try-outs over the years. After Francis passed away, Chuck met Mary in 1979 who also loved to play tennis and she became Chuck’s new double’s partner and second wife. The Puyallup Valley Tennis Club later became the location for Puget Sound Gymnastics - which is still using the facility today.

Chuck and Francis (and Mary) were active supporters of Puyallup, including our famous Daffodil Festival. They were an important part of Puyallup history, and their beautiful brick farm home with the amazing interior woodwork, lots of square footage, lush acreage nestled into a wooded hill (the perfect combination of “secluded” and “close in”) is an important example of local historical architecture.

Don’t miss your chance to own this home! Make an offer today. Last offered For Sale in 1947 - If history holds true, the next time you’ll get an opportunity to own this home, if you miss out this time, should be around 2,071.

(Please contact me for your financing needs. I’d love to help you write the next chapter of this home’s history!)

1) An Automatic 401K, 403B, or IRA account.
2) Your Mortgage Payment.

First, the 401K or 403B account – if available to you – are the best way to get started with your Long-Term Bucket. Begin immediately putting 3% of your income into this account each payday. It’ll come out of your pay without you ever seeing it – or noticing it. See my article on “Easy as 3, 4, 5…” to learn how this is possible. You get to count this payroll deduction as your contribution to your Long-Term Bucket.

If you don’t have access to a 401K or 403B account through work, then setting up an IRA account on your own is the alternative – but it’s more painful because it has to be funded with after-payroll-tax dollars. You will get your paycheck and have to take some of the money and put it into this account, and those months where you’re wondering how to pay for groceries, you’ll be very tempted to skip this contribution, and the skip it the next month, and the next month…

On the flip side of things, I run in to many people – especially men – who max out their 401K contribution each month – 10% - 15% - and then they run up their credit card debt because they don’t leave themselves enough to live on. If you are NOT able to fund your Short-Term and Mid-Range Buckets each month with an equivalent amount to what you are putting into your 401K account, you need to cut back on this contribution and use the extra take home pay to pay bills and fill these other buckets.

Balance, Baby, Balance…

For number 2 above – Your Mortgage Payment. If you have bought a home – good for you. This is the number one wealth builder of all time. If you look at your mortgage statement, you’ll notice that most of your payment each month is going towards interest, and a small portion is actually going towards paying down the debt.

This “small portion” that is paying down the debt is actually a Long-Term Bucket contribution, and you get to count it as that. So there you have it. Two absolutely painless ways for you to begin filling up that Long-Term Bucket, even when you’re just starting out.

But stay in balance. Don’t go overboard on the 401K if you can’t pay your other bills. And don’t pay “extra” towards your mortgage if you’re not filling the Short-Term and Mid-Range Buckets yet.

Ahh… but once you start getting an equal amount going in to the Short and Mid, paying extra towards the mortgage or increasing the 401K amount is a quick and easy way to increase the Long-Term filling. And eventually, you’ll be using that brokerage idea and buying stocks – but more than likely, you’re a ways away from that. And that is fine.

Stay in balance. Stay even and steady. And use increases in “extra money” wisely. And you’ll be fine – regardless of where you are right now.

I know that’s what you’re thinking. And it makes so much sense to wait, right? Logically, you should start paying off your bills and start building up your checking and savings accounts. And then when you have a bunch of money saved up, you can start investing in the stock market. Right?

Wrong, Wrong, Wrong…

In order to reach your retirement years in good enough financial shape to actually retire, you’ve got to start building your Long-Term Debt Paying Funds right now! You cannot wait until you are too old to work to start building up this account, and you will simply never start building this account if you wait until you have surplus funds in your Short-Term Bucket.

Short-Term funds are too easy to spend, too easy to access, too easy to for you to just buy something you need vs. trying to figure out a less-costly alternative (the reason you got into so much credit card debt in the first place was because it was too easy to access spending funds by whipping out a piece of plastic, and your Short-Term Bucket will empty just as easily as you go along).

Get Rich Quick?

Your Long-Term Bucket will also benefit from the advantage of “Time”. Having these investment vehicles open for longer periods of time will make them more valuable. If you don’t allow them the time they need to develop for you, then you will run into the frustration of chasing “Get Rich Quick” schemes – which almost always fail. Allow enough time, and you can get rick slowly, steadily, and safely.

We’ll look at some Long-Term Bucket vehicles in the next article – and once you read that article, you’ll begin to believe that this is actually something you can do. I know what your assumption is at this moment when I’m talking about “Long-Term Investment Tools”.

You assume that I’m immediately talking about “Go out and buy 100 shares of Microsoft and hold it for the long term…” But you would be seriously wrong in that assumption.

I Get Where You’re At Right Now!

Again, the type of person who found this website are not the independently wealthy individuals among us looking to me for investment tips or the next hot commodity scheme. The people reading this website info are people struggling with day to day living, too much debt, not enough savings, and worries about the future. I know who you are.

And for me to tell you to go open a brokerage account and start learning about the Price/Value ratios of company stocks, or maybe teach you the tricks of “Puts and Calls” really has no place in your world. That is just NOT what I’m going to be talking about.

Read on. This will be accessible to you and can help you get to the point – someday – where those other “investor” things are important to you. For now, we just need to get you started on a path that will lead to a better tomorrow. That’s my goal – I hope you’ll come along with me and get started building that better tomorrow.

The goal for this assignment is to attempt to actually prepare for the future instead of constantly reacting to the present. Wouldn’t it be cool if when that car of yours needs replacing or your daughter needs braces that you actually have money set aside that you can pay cash for it rather than trying to figure out which of your wallet-full of credit cards has enough room on it?

By the way, having this plan in place and getting your Buckets fully filled is called “Financial Security” – and it’s very, very nice when you get there. And you CAN get there, regardless of where you are in your financial life right now.

Let’s Get the Short-Term Bucket Filled, Shall We?

Okay, your short-term Bucket, by definition, consists of any significant expenses coming up in the next year. Things like:

• Replacing a vehicle
• Dental procedures
• House repairs
• Down payment on a house?
• Vacation
• Season Tickets to your favorite sports team
• 6 months of salary (an absolute MUST!)

Put a dollar amount on these items – that’s your Short-Term Bucket list. I don’t care what you put on the list – it’s YOUR list – but we need a dollar amount to shoot for. Because that’s how we’ll know when the Bucket is full.

Maybe you currently have absolutely zero money in savings right now. That’s actually NOT unusual at all, so don’t beat yourself up. Well, okay, beat yourself up a little, but then get over it.

If you find you need some help getting started, check out some of these articles on this website: “Get $500 In The Bank Now!”, “How To Get $500 In The Bank – FAST!”, “Need Cash? Try an “Income Blitz””. These articles will link with other similar articles, and you can learn how to jumpstart your savings plan.

Getting Specific

Your savings vehicle for your Short-Term Bucket is going to consist of:

• Cash under the mattress (Hey, some people LIKE having cash around – and that’s okay. If you have it, it’s part of your Short-Term Bucket.)
• Savings & Checking Account
• Vacation Savings Account
• Money Market Account
• Short-Term Certificates of Deposit

These vehicles are readily available to you – easily accessible for those short-term needs – and NOT susceptible to market ups and downs. And this is where you get the money to pay for those Short-Term items on your list.

Time For Tough Love

You put a lot of “needs” on your short-term list, and the amount of money you have filling this Bucket isn’t going to cover all of them. Right? Like, maybe you “need” a new car, or you promised your kids a Wally World vacation this summer, and if you don’t renew your season tickets this year you’re going to lose your seats – forever!

Awww… Choices. Aren’t they fun? Are you going to keep spending money you don’t have? Or are you going to reach for “Financial Security”? That’s what you’re facing right now. If your Short-Term Bucket doesn’t supply your every Short-Term “Need”, you’ve got to cut down on what you think a “Need” is.

For example, you don’t NEED a NEW car – nobody does. What you NEED is transportation. You can find a cheap used car, you can ride mass transit, you can borrow Mom’s old Crown Victoria for awhile. The NEED is to be able to get back and forth – the DESIRE is to maintain some sort of “status” with the friends and co-workers. You simply may not be able to afford your DESIRES right now.

Fill the Short-Term Bucket, but do it without neglecting your other two Buckets. (See “How Do You Fill the 3 Buckets?”)

Again, I don’t care what you put on your lists – they are YOUR needs, not mine. You’ll just need to figure out a way to pay for them from your 3 Buckets as they occur. When you get to this point – where all your future needs are being funded as you go without incurring additional debt – you have reached “Financial Security” and life is good.

Divide Your “Extra Money” Into 3 Parts

Remember, half of your “extra money” is going towards debt reduction, and the other half is going towards savings and investment (or as we put it in a previous article – towards “future debt reduction”). I want you to divide the half that is going towards savings into 3 equal parts. This is going to seem crazy, but it works!

Take these 3 equal parts and put 1 part into your Short-Term Bucket, 1 part into your Mid-Range Bucket, and 1 part into your Long-Term Bucket. When you are first starting out, you may just have to put all of your “extra-money” into a savings account for a little while until you get this thing rolling a little bit. But just understand that the idea is to put a equal part each month into EACH bucket.

We have a separate article on our website here that talks in greater depth about each of our 3 Buckets. But I just wanted to take one article to give you an overall view of HOW you’re going to fill the buckets..

The 3 Buckets are Different Sizes

When you first start out, all 3 Buckets seen HUGE! How in the world are you going to get enough money into savings to pay for all your short-term needs this year? Let alone putting away enough money for college for the kids and retirement and world travel later on? Especially since you’re supposed to be dividing your “extra money” in to 3 parts and putting a little into each bucket equally?

Here’s a couple of keys to give you a glimmer of hope:

1. Because you have debt you’re trying to pay off, only HALF of your “extra money” is going towards these 3 Buckets. Once you get the debts paid off, you’ll have an “extra half” to add to your Buckets – doubling your savings! That’s huge! And because you’re not taking on more debt along the way, and you’re making better spending choices, and you’re earning more money – you’ll start having even more “extra money” to apply.
2. This system helps you prioritize your spending and sort out “needs” from “desires”. Maybe you have a short-term need to buy, but you don’t have enough in your Short-Term Bucket to pay for it. This system, if you can resist the temptation to take on more debt, will help you find alternatives to that “need”.

Maybe you have a child ready to start college this Fall, but you have no college savings. It would seem you would “need” to take out a student loan to pay for the college of her choice. Don’t want to let the kids suffer because of YOUR lack of foresight. But your kid doesn’t NEED to attend that college in the Fall. Instead of spending money you don’t have, opt for a Community College for a year or two (seriously, the classes are about the same and will transfer over at full credit) and this will allow you time to fill your Mid-Range Bucket to pay for the final years, AND it will teach your kid a valuable lesson about financial management.

You’ll put money into the 3 Buckets equally, but the 3 Buckets aren’t the same size. Your Short-Term Bucket is the smallest one – and you can make it even smaller by cutting back and making different choices as you go. Your Mid-Range Bucket is the next smallest one. And your Long-Term Bucket is the biggest one – so big it can never be filled completely.

Once you’ve filled the Short-Term Bucket, you’ll be able to start dividing your “extra money” into only 2 parts – half goes in the Mid-Range Bucket and half goes in the Long-Term Bucket. And then, once the Mid-Range Bucket is full, you get to put ALL your “extra money” into the Long-Term Bucket. This is a really good time in your financial life – all your short and mid goals are funded and you’re just building wealth for the future. Nice!

Set up your 3 Buckets TODAY! Don’t wait until you’re better off – do it NOW! Better off ain’t coming unless you take action on this right away. It’ll change your life because you’ll finally be in control!

Absolutely wrong! The problem with this way of thinking is that it causes you to get defeated by upcoming obligations and financial “surprises”. You’re spending every dime you can spare on paying down debt, and then, BAM! You get hit with an unexpected car repair, an appliance that needs replacing, a medical emergency, etc. And you have no way of paying for it except to take on more debt. And all your hard work goes to waste – so why even bother…

A better approach is to understand that short-term expenses – those things happening in the next year – are going to happen in the next year. Your mid-term expenses – those things happening in the next 2-5 years – are going to happen in the next 2-5 years. Etc…

That’s Pretty Obvious…

Yes, it’s obvious. But those caught up in debt very often fail to believe it. You pay your extra money towards your debt, and your short-term expenses cause you to take on more debt this year. Then the mid-term expenses start hitting you, and you’re still reeling from the short-term expenses that you couldn’t afford.

And if you continue this cycle, pretty soon your long-term expenses are upon you, and you have absolutely no way to pay for them because you still have short-term and mid-term expenses that still aren’t paid for.

A Better Way of Thinking:

In the article, “The Half-n-Half Way to Improve Your Finances”, I suggested that you should begin dividing your “extra money” into two parts: Half-n-Half. (“Extra Money” is defined as money you save by reducing your spending, earning more money at work, or earning more money on-the-side.)

Use half of your “extra money” to pay down debt. Use the other half to fill your 3 Buckets. I’ll get in to more specifics on this in future articles. You still may be resisting the idea and it’ll be extremely easy to pull this savings out before it’s intended use comes around. But maybe it’ll be helpful to think of it this way:

Future Expenses = Future Debt

Your 3 Buckets are future expenses, i.e. future “debt”. So by setting aside half of your “extra money” to fund these future expenses, you’re not actually “Saving” anything. All you’re doing is paying off your future debt NOW. That “Future is NOW” thing kinda makes sense all of the sudden.

Again, half your “extra money” is paying down past debt and the other half is there to pay for future debt. So really, ALL your “extra money” is going towards debt this way. But the beauty of it is that your future debt will cost you far less this way, because you’ll be able to pay for it in cash without incurring a nickel’s worth of interest. And really, interest is the reason debt is so crippling and debilitating.