There are traffic lights everywhere: red, green, amber. Green and red are obvious: go and stop. However, what does amber mean? Our behavior suggests: “accelerate, go through the red light!” Simply, the amber light indicates that we must prepare to stop.

Similarly, we have signals for our financial condition. We know when we have enough. We are safe when we have a little. However, do we know when we approach empty? Like traffic lights, there are several signs that appear early, telling us to slow down and be ready to stop spending. Unfortunately, when these yellow lights appear, people speed up, get deeper in debt, and then crash their financial institutions and families, while their health suffers.

Here are four amber lights that indicate your decisions are causing or will create problems with your personal finances. Reflect on each one and be prepared to respond appropriately when they appear:

1. Giving to church, charity, Christian ministry, or to other places or individuals, reduced or stopped.
2. Routinely unpaid credit card balances.
3. Capital fund or unconstituted focused reserve fund.
4. Unused budget or spending plan.

Donation reduced or suspended

Sometimes some people feel overwhelmed by their financial status and feel that they need to reduce their spending. They know they have been spending more than they should, and so they decide to cut back. The first area they cut off is your donation to the church, charity, Christian ministry, or anywhere else. Unfortunately, they respond instinctively because this is the most visible discretionary item and the easiest to cut. They stop or significantly reduce it, without a full review of all spending. And they continue to spend in other areas.

Under these circumstances, when you consider reducing your giving, understand that the pressure you feel is your yellow light telling you to stop and review all spending immediately – the red light is here!

Look at your total budget, review your goals and plans, and remember why you were donating. You know the lifestyle choices you’ve made, so it’s easy to figure out the source of the stress you’re feeling. Review your spending decision procedures and recent spending decisions.

This is the first and significant sign that your finances are under pressure. Pay attention to him. Before changing your way of giving, reflect, pray.

Routinely unpaid credit card balances

A credit card gives you a minimum “grace period” from the date the item was charged to the day you pay the full amount due. Canadian regulations implemented in 2010, Require a minimum 21-day interest-free effective grace period on all new credit card purchases when a customer pays the outstanding balance in full.

Accept this grace period as your total credit period. Pay the balance in full monthly; if you can’t, this is your amber light. watch it; stop using the card. Put it in a freezer bag and store it in the freezer. Don’t “speed up” to go through a red light; Stop!

Unincorporated capital fund or focused reserve fund

What causes the most stress on the family budget? emergencies The car breaks down. The washing machine dies. The microwave, stove, or other household item stops working. You can’t predict when one of these items will sell, but you can expect to spend on one on a regular basis.

That is why each of us needs a Capital Fund: A plan to avoid getting into debt by saving in an orderly way for specific expenses with unpredictable times. It is a planned and directed saving.

Typically, people borrow, using their credit cards or lines of credit, to buy for the first time, replace or repair major items, such as cars, refrigerators, stoves, furniture, appliances. This is a stressful, costly and erratic maintenance and item replacement approach that the Capital Fund is designed to remedy.

The Capital Fund is an addition to your operating budget. Simply, to replace a $1,000 item with a useful life of ten years, set aside $100 per year for ten years. In year ten, if you replace the item, repeat the procedure. If you don’t, continue to reserve funds. Forecast major repairs over the life of the item and apply the same procedure. Imagine the interest charges you wouldn’t incur if you used a home equity fund to pay cash for everything except a house!

Are you without Capital Fund or equivalent? That’s an amber light screaming at you to stop and take notice. Will you reflect on this today?

Unused budget or spending plan

Everywhere you look, someone, a corporation, a group, or a ministry is trying to make you spend. In the mall, in the supermarket, on the TV, on the radio, there is a commercial that invites you to buy that wonderful widget, get a useful book or an amazing service. It may be as low as $5.00, or as low as $2.00, or as low as $10.00; so you buy it. You forget that these “single” amounts add up to a large sum.

Essentially, we allow advertising to drive our spending. That’s why we need a money map to use as a road map. A money map, spending plan, or budget is a guide we prepare in advance of an event or period to plan how to spend available funds at that event or during the specific period.

When you leave home without a map of money or budget, it’s like leaving home on a trip to an unknown place without a road map. You’ll get lost.

Trading daily without a budget is another yellow light. Slow down and be prepared to stop, otherwise you will sink deeper into debt. Decide today to start using a budget to help allocate your limited resources. you will be glad you did.

conclusion

When any of these amber lights start flashing, take a look at your lifestyle. You may need to modify your behavior. Bankers, insurance agents, and other salespeople who call themselves financial advisors will look at the symptoms and come up with money-focused solutions: remortgaging, refinancing, combining debt, anything money-related, rather than addressing your attitude, behavior and elections (ABC). ).

Changing your ABC’s is the only long-term solution to your financial affairs. Other remedies simply delay certain and necessary attitude changes. Are you ready to make the tough lifestyle adjustments necessary to rebuild your finances for the long term? Always remember that money management means lifestyle management.

Copyright (c) 2011, Michel A. Bell