The following is an excerpt from my upcoming book, “Money Skills for Young Adults“, which addresses attitudes and habits that prevent you from reaching your Wealthy Life goals and provides practical steps on how to address these issues…Enjoy!!!

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A prudent man foresees difficulties ahead and prepares for them, a simpleton goes blindly on and suffer the consequences (Proverbs 22: 3 – TL B)

Mary Story… Mary is a 28-year-old college graduate with a decent job. She is single, owns her own home, an expensive car, lingering student loan debt, and four credit cards all maxed out. Currently she has only $500 in her savings account…  She told me that she cannot make ends meet on her current salary. “Well, what have you done to improve your financial circumstances?” I asked.

She said she had been looking for a new job that would pay more money. “Tell me, do you have any kind of plan for budgeting or for spending on your current job? Do you have anything set aside for unexpected events and retirement? I continued. She said, “I don’t make enough money to think about a budget or much less any kind of retirement,” she answered.” My job simply does not pay enough money!”

Mary wants her financial circumstances to change but she is not effectively managing what she already has. Would her current financial condition change if she earned more money or will she continue to make the same mistakes that most young people make?

What practical steps can Mary take to improve her financial conditions?

Most Americans are living on the edge financially. 54% of people with good jobs are living from paycheck to paycheck (Meaning that they have little, or no money left over after paying their bills). 72% of those who make less than $50,000 are living paycheck to paycheck and nearly 40% of those with annual incomes over $100,000 per year are also living paycheck to paycheck.

But what’s more alarming is that 70% of millennials (age 33 to 43), just starting their lives are living paycheck to paycheck (According to The Lending Club Bank, June 15, 2021).

Why are so many people struggling financially? What money skills do you need to know to avoid the common financial mistakes most people make?

Why Are so Many People Struggling Financially?

If you or someone you care about is struggling financially, there is usually a reason that can be traced back to financial mistakes that were made somewhere along the way. By identifying the most common mistakes people make and using the following financial checklist you will be armed with the knowledge and tools you need to get started on your road to finding financial freedom.

Mary wants her financial circumstances to change but has not taken any specific action that would improve her financial condition. In addition, she Is not effectively managing the money she already has…. What practical steps can she take to change her financial circumstances?

To address this issue let’s examine Mary’s situation a little closer… She has a decent job and follows conventional financial advice regarding a job and credit, but she’s still struggling with her personal finances. When I asked her about budgeting her money and savings, she said she had considered that, but she didn’t have enough left over after paying her bills… So where did she go wrong?

Mary is struggling financially because she doesn’t understand the money rules. She is not effectively managing the money she has coming in. Because of her lack of understanding of basic money management principles, she is trapped in a lifestyle that is preventing her from following her passion and reaching her wealthy life goals. If Mary continues on her current path, she will never have the time or money to live the life she desires. 

The majority of people’s desire is to live a successful life, pay their bills and be in a position to be a blessing to others, but they simply don’t know how to get there.

What is personal entrepreneurship and why is it important?

Personal entrepreneurship is the art of effectively managing what you already have… learning how to properly manage the money you have coming in.

There is nothing inherently wrong with owning a new car or even a lovely home. The problem, however, is when most people get their first job they start with the car, clothes, furniture, purchasing all the latest gadgets, and it’s all on credit. Now they are hooked! They were never taught anything about managing money or personal finance at home or in school. Now, the bills are due, and they have no idea why they are having financial problems or what to do to get out of the mess they have created.

What You Should Know About Managing Money Before You Collect Your First Paycheck

Imagine how different Mary’s life would be if she had no automobile payment, no credit card bills, no student loan payments and only had to make her house payment!

What if she had set up a savings plan 5 years ago… when she first started her job… and had 10% of her income automatically deposited in an interest-bearing savings account? For example, if Mary earned $50,000 per year, instead of having $500 in savings she would have more than $25,000 not including the interest that she would have received… Add 6% interest she would have _____ in her short-term savings.

What about debt? … The average wage earner spends between 30% to 35% of their income on principal and interest payments. For example, if Mary earns $50,000 a year, she could be spending an additional $15,000 to $17,500 every year on principal and interest (and other fees) without even thinking about it.

Do these 5 things before you receive your next paycheck!

So, how do you get off the Financial Treadmill? If you find yourself in a similar financial situation as Mary, First, stop blaming someone else for your problems… Ignore the talking heads and financial experts on TV and the Internet (and your broke friends). Focus your attention on Implementing The 5 Steps listed below… 

You might have to change a few mindsets and Habits that you have been conditioned to believe over the years… But do these 5 things before you receive your next paycheck and never be broke again!

Step 1. Write out your Wealthy Life goals…  What does a Wealthy Life look like to you …

Identify the things that matter most in your life… Your hopes, your dreams, based on your passion, your gifts/talents, and the experiences that you want to share with others.

Although every person is different, everyone has income coming in and expenses going out. Your success in life will depend on how well you manage the money you have coming in based on your long-term Wealthy Life Goals… Writing down your Wealthy Life goals puts you in control of your money and your life… 

It helps you to organize a simple cash flow (budgeting) plan that focuses on your life goals, while allowing you to track every dollar and effectively manage your spending, so that you have financial peace of mind regardless of what’s happening in the economy. 

Success in life is not just about money. It’s about being in a position not only to take care of your needs but to have enough resources left over to extend a helping hand to others.

Your ultimate goal is to organize your personal finances in a way that you are not completely dependent on your job (or the ups and downs in the economy). You want to always have enough cash reserves so that if something unexpected happens, you can continue life without being under unnecessary financial stress.

Your focus at this point is not on increasing your income (We will deal with that later).

Your goal here is to have enough money to live for 5 or 6 months without a paycheck. In essence, you have sufficient reserves in your surplus accounts so that you can borrow from reserves instead of the bank or finance companies!

Step 2. Set up your “Pay Yourself First” savings plan…  Use the 70/20/10 rule, and each month have a percentage of your income automatically deposited into an interest-bearing savings account. Use the Destiny Institute 15 Minute Budget Guide…

The pay yourself first plan provides the foundation for which you will build your long-term Wealthy Life Program… 

“Don’t save what’s left after spending. Spend what’s left after saving” … Warren Buffett

Paying yourself first is the number one secret element in setting yourself free from the bondage of debt and poverty. This step delivers you from paycheck to paycheck, crisis to crisis lifestyle and positions you to take control of your financial future where you not only meet your needs, but it positions you to be a blessing to your family and others.

Your priority at this point is to accumulate 3 to 6 months living expenses in your short-term Emergency fund savings account…. Do whatever you need to do to get this account funded (We address this issue in more details in the next chapter)

Step 3. Set up your “Live within your means” spending plan …  Prioritize your spending In line with your long-term Wealthy Life goals….

Spend lavishly on your Wealthy Life priorities and cut costs and spend frugally on the minors…

The second secret element to taking control of your financial future is … No matter how much money you earn, you must make a commitment to live within (or below) your means (what you Have coming in). Establish your goals and set your spending priorities in line with your long-term Wealthy Life goals. 

For example, if one of your Wealthy Life goals is to own your own home free and clear, then if you can afford a $400,000 home, purchase a $200,000 home instead. Even though you can afford a shiny new $50,000 car, purchase a $20,000 previously owned automobile instead. Your objective is to live the life you love without being under financial pressure …. Your goal is to always live within or below your means so that you can focus your attention on your long-term Wealthy Life goals. Just consider how much better life would be if instead of making a $500 per month shiny new car payment, the money was going into an interest-bearing account for one of your Wealthy life goals instead of going to the finance company!

In Mary’s case, she said, if she had the money she would spend more time and resources helping the poor and needy in her community. If she wants to make this a reality, she must put a line item in her budget for this purpose, while cutting expenses in other areas. On the other hand, someone else’s Wealthy Life goals may be to own their home free and clear so that they can use the funds to pay for private schools to maximize their children’s education without being under financial pressure.

While yet another person’s wealthy life goals might be to increase savings to start their own business and become their own boss… some might want to travel the world and take a yearly family vacation.

Your goal is to not waste a lot of time trying to figure out a complicated budget system… Just followed this simple template outlined In the Destiny Institute 15 Minute Budget Guide.

Remember there is a limit to how much you can cut back on. But there’s no limit to how much you can earn! (We discuss this in more details in Chapter 3 of God’s Plans for Your Finances). Your goal is to implement a simplified money management program that works for you. 

To be successful in life, you must live within your means by breaking your outgoing expenditures into manageable components. (See figure 1 below).

Step 4. Set up your “Debt Freedom” plan. Eliminate all Credit card and consumer debt.. List all of your credit card bills department store accounts…  from the smallest to the largest. 

When you reach Your three-month emergency fund goals, Select the smallest bill… Then borrow that amount from your surplus and pay off your smallest bill first… Then repeat the process until all of your consumer debt is paid… Once you pay off a bill, always pay yourself back principal and interest … Depending on how aggressive you want to be with your wealth building program. (Note: You must treat this just like a loan just like from your bank that you must pay back in order to maintain your surplus account balance!). 

The best way to eliminate debt is to avoid accumulating it in the first place… See the Destiny Institute 15 Minute Quick Budget Guide.

Your long-term goal is to eliminate all personal debt Including automobiles, credit cards and revolving credit accounts. Your ultimate goal is to eliminate all long-term interest payments… Including mortgage notes (see The Destiny Institute 10 Year Mortgage Payment plan.)

Step 5. Finally, set up your “Giving” Account … (Your Make a Difference in the lives of others Account) … When you have eliminated your credit card, auto payment and other debt, your surplus account will grow rapidly… This giving account is your “make a difference” fund, for the purpose of giving back and impacting the lives of others. Now you can increase your giving to support the thing you care about… to support the things that you are passionate about… things you want to accomplish in life, based on your passion. For example, you can give more to your local church, your favorite charity or you can start your own nonprofit or your own business that provides a product of service that adds value to improve the lives of others.

Conclusion

The secret to accomplishing your Wealthy Life goals is to implement a money management program that allows you to fulfill your financial potential and live the life you love… You must change the way you look at money. 

First, forget about everything that you have been conditioned to believe about handling money when you were growing up… where you were conditioned (by the banking/credit card and advertising industries) to think get a good job, get good credit, make minimum payment, and Pay interest on debt for the rest of your life.

Second, learn how to manage the money you have coming in. Use the 70/20/10 rule, to reprioritize your spending so that you pay yourself first and live a lifestyle consistent with your long turn wealthy life goals!

And finally, you must build into your Wealthy Life Plan, a Giving component that allows you to have sufficient surplus resources where you are in a position to be a blessing to others…