The 7 Steps to Debt Reduction & Savings Sustainability

SPECIAL REPORT The 7 Steps to Strategic Decisions and Synergetic Success For Debt Reduction and Savings Sustainability

In this report you will discover how your decision making strategies can affect your financial success and what you can do to ensure you make strategic decisions that will promote a healthy bank balance and reduce debt. You will also learn effective ways to empower your relationships so that you and your partner are on the same page when it comes to how your hard earned money is handled which in turn will help to give you peace of mind and a lot less stress.

Let’s face it the Global financial situation is in crisis. We are fortunate that Australia is managing to hold its own mainly due to our mining industry but there are still a lot of Australian’s who are doing it tough and the number is increasing daily. With the continued increase in costs of living there comes an increase in debt.

It is inevitable then that as an individual’s debt continues to increase the excess stress and tension leads to an increase in health and relationships problems. It is widely documented that financial stress is related to at least half of the marriage breakdowns and over two thirds is related to mild to serious health issues.

It doesn’t have to be this way. Don’t become another statistic. Aim to reduce your debt and increase your savings sustainability and enjoy better health and improved relationships. It can be done.

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If you find you are struggling to pay your bills on time or keeping up with your everyday expenses then you could be on the road to debt creation if you are not there already.

Let’s face it debt is destructive and it can impact not only on your pocket but on your health and your relationships as well. Health issues caused by excess stress and sleepless nights can be debilitating and will cause you to make decisions that are not strategic. If you are going without adequate amounts of sleep and you are deprived on a regular basis then your decision making will be severely compromised. Other health issues that can occur are consistent headaches, muscle aches and pains, loss of energy and vitality, loss of appetite, skin disorders and depression to name a few and if you are finding that you have lost your zest for life and have become short tempered and irritable then this can affect your relationship with those you love.

As always prevention is better than cure but if you are already in a situation where your quality of life is suffering then now is a good time to do something about it.

Firstly you need to determine how deep your level of debt is because this will assist you in creating a plan that suits your situation. There is no ‘one size fits all’ fix when it comes to finances and when you develop your debt reduction plan you will need to be aware of this. What you most likely will want to aim for is to develop a plan that allows you to have savings sustainability and by that I mean a regular and steady growth in savings so that you can live comfortably and free of stress.

By now you may be thinking that it is easier said than done but let me assure you before we go on that it is absolutely possible for you achieve great results that will offer you less stress, improved relationships, better health, less debt and more money for you. If that sounds too good to be true then let me share with you my story.

When I was single and had no children money was not an issue and as long as I had enough put aside for rent, food and household expenses I felt free to enjoy the rest of what I earned. I had no partner to answer to and no children to care for plus I had very little savings but that didn’t seem to worry me back then.

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Fast forward to August 13th 1999 the day and the year that my world came crashing down. Dramatic I know but that’s what it felt like at the time. There I was with my two babies aged 3 and 5 on my way by bus heading for Sydney airport and a plane home to Perth. My marriage had ended and I had packed up and left because my knight in shining armour had decided he wanted more than one princess and I wasn’t prepared to share. I had no idea what I was going to do once I got to Perth. The house we owned together was rented out so I couldn’t just move back in and I had no job and no prospects either. If you had told me years back that I would be once again living with mum and dad when I was 35 I would have laughed in your face but here I was sharing a room with my two children and taking trips into the city for legal advice.

It’s amazing the strength and courage that we can draw on when we have to and eventually after 6 months I was able to move back into the family home where I knew my children would feel most comfortable and secure. That is when reality really hit home though because I was faced with all the financial responsibilities that come with owning a home and bringing up children. I had been out of the workforce for a number of years and my skills where computers were concerned were very limited so I made a strategic decision about ‘getting smart’ or ‘getting debt.’

Long story short, after spending a very long night writing and writing until I could write no more I finally had something that would eventually be my ‘intimate plan’ for staying out of debt and creating a disposable income so I could enjoy life as well. Little did I know back then just how effective this plan would be but to give you a taster once I had tweaked and adjusted my intimate plan (which took a couple of years) I actually managed to pay $40,000 off my mortgage in just over 2 years whilst working part time. And this is why I know you can get real results also simply by learning the systems and strategies that I implemented. The only difference is, it won’t take you two years of more to achieve the results I did because you will have the full proof method that has already been tweaked and adjusted. All you will need to bring is some commitment and consistency.

So without further adieu let’s take a look at what you will need for making strategic decisions and getting your debt reduced.

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STRATEGIC DECISIONS FOR DEBT REDUCTION & SAVINGS SUSTAINABILITY So what exactly are ‘strategic decisions?’ They are decisions that are critical to your financial success. These are decisions that play an important and essential role in developing the strategies that you need for your situation.

Remember there is no one size fits all and these decisions need to suit your current lifestyle, to a certain degree, because you do not want to add any more stress or disruption to your life right now. I say ‘to a certain degree’ though because there may be some discomfort in the decisions you make and we will delve more into this later in the report.

What I want you to do now is to evaluate your level of debt and I have a chart below to help you with this. This chart is rated from level 1 to level 5 with 1 being minimal and manageable to 5 being totally out of control.

5 4.5 4 3.5 3

Income

2.5

Amount of debt

2

Savings

1.5 1 0.5 0 Level 1

Level 2

Level 3

Level 4

Level 5

Level 1 - At this level your income is more than double your debt ratio and you have some savings set aside to counter any financial difficulties.

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I would say this situation is very manageable providing it is kept in control.

Level 2 – At this level your debt is increasing and even though you still have your savings they are slowly decreasing the more debt you accumulate. Your aim here would be to keep your savings at a sustainable level of growth so they do not suffer because of rising costs.

Also your income is only slightly higher than your debt which means the household bills and expenses could force you to go into more debt and if allowed to continue this situation could become a lot worse. You need to make some very strategic decisions and implement a plan now to reduce your debt and save your savings.

Level 3 – Here you are beginning to get into a lot of strife because your debt has overtaken your income. This situation may have been caused by having to borrow more to keep up with household expenses and bills.

Your savings will definitely not sustain this level of living and will soon disappear if intervention does not come soon.

Level 4 – Wow I would say that by now your situation is well out of control and you could be feeling utterly helpless and unsure about what to do to break even again. This financial situation could be creating a lot of disharmony in the home and possibly a good deal of stress and health issues. You need to get a plan now before you are at risk of losing it all.

Level 5 – At this level your debt has reached an all time high, it far exceeds your income and you have no savings to back you up. This situation is totally out of control and this is the level at which homes are lost and items are repossessed if it hasn’t happened already at level 4.

Even though this is a very dire situation you may still be in a position to pull yourself up by implementing some tactile strategies and systems.

Depending on how much you owe and who you owe will depend on who you get to help pull you out. Professional advice may be required.

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Okay so now you have a fairly good idea of where you sit on the scale of 1-5. If you are at level one all you need do is keep an eye on your debt and aim to reduce it as much as possible. The less debt you have, the more of a disposable income you will be able to enjoy. Create a plan now while you are ahead and plan to stay ahead.

There is a saying that says ‘If you fail to plan, you plan to fail’ and this is very appropriate in this situation. When I found myself on my own with two small children, I could have chosen not to devise a plan but, I hate to think where I would be now if I hadn’t. Be proactive and do it now. No matter where you are at on the scale of 1-5 an ‘intimate plan’ will be essential to your financial security.

Let’s look at some strategic decisions you could make when setting a plan for debt reduction and savings sustainability. Let’s assume for this exercise that you are at a level 3 but these decisions will be useful for the other levels also. You could make a strategic decision to;  Increase your income by working longer hours or getting a second job (remember you need to consider your current lifestyle and how it will impact on you and your family life and your health)  Take a close look at the debts you have incurred and create a plan to consolidate them or pay more off than you have been by cutting back on your expenses and buying only what you need  Use some of what you have in savings to reduce your debt and make it more manageable if, and only if, that will put your income higher than your debt so you can easily pay more off your debt and rebuild your savings. This could be risky so it would depend on your situation  If the majority of your debt is credit card based then you could decide cut them up and stop using them altogether. I would

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actually think this was not only a strategic decision but a very wise one!  If your credit card debt is minimal work out a way to pay it off now and don’t just pay the minimum because this is a real ‘debt trap.’

If it is too much to pay off all at once then pay as much as you can as soon as you can and get rid of it.  Replace your credit card with a debit card. This is a much healthier option and it will ensure that you are only spending what you already have.  Aim to pay $50 more off your mortgage every month as this will help to reduce your interest charges.  If paying your mortgage repayments monthly, change it to the fortnightly option and pay off more than the minimum. This is a great way to reduce the principal off your mortgage more quickly and reduce the interest charges.  Work out how much you pay in household expenses such as electricity, gas, phone, rates, insurances, food etc over a year and divide the totals by 52, 26 or 12 depending on how often you get paid. Aim to put this money aside each week, fortnight or month.

These are only some of the strategic decisions you could make and I’m sure you can come up with some more when you get going. Once you have decided what it is you are going to do you can then begin to create your ‘intimate plan.’

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The 7 steps to Strategic Decisions for Debt Reduction and Savings Sustainability 1. Brainstorming Put aside an hour or two and sit down with a pen and paper and a calculator. Pull out a year’s worth of recurring bills such as electricity, gas, phone, rates etc and as many of your grocery dockets that you can get your hands on. Pull out your bank statements and any loans or debts you may have. Now is the time to get really clear on what state your affairs are in. Add up all your bills and divide them by your pay schedule e.g. if you get paid weekly then divide the year’s worth by 52, or monthly by 12. Add up your grocery dockets and find the average amount you spend. Add up how much you are spending on mortgage repayments or loan repayments and how much you owe on your credit card/s. Divide these to get a weekly, fortnightly or monthly amount and write it all down on the left hand side of your piece of paper. On the right hand side write down what you earn and this will show you in plain black and white whether you are spending more than you earn.

2. Decide on a plan of attack After completing step 1 you will have a good idea of where you sit income versus expenses wise and hopefully the equation reads; income – expenses = savings but if it doesn’t then you will need to decide whether to earn more money or cut back on unnecessary spending. Spending more than you earn is what I class as a ‘debt trap’ and if you do not escape the trap then you will continue to attract debt. Now is the time to think about your incidental spending such as buying lunch every day or purchasing a cup of coffee on the way to work. The extra expense you incur soon adds up and takes a chunk out of the weekly income. You will find you can save a lot by cutting back on what you don’t need.

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3. Decide on ‘getting smart’ instead of ‘getting debt’ Once you have decided what plan of attack you are going for, whether it is earning more income or cutting back, you can now create a system for reducing your debt and increasing your savings sustainability. Remember that whatever decision you made in step 2 it must fit in with your current lifestyle because if it doesn’t it may cause unnecessary relationship or health issues and it will not be sustainable. Just as a healthy living plan needs to be able to be maintained over a lifetime so does your healthy savings plan. Of course, what you plan now will need to be tweaked and adjusted in the future because your situation will change but you need to have a system in place that can withstand this and one that you can operate easily and efficiently. Once you have your plan you can begin to start reducing your debt and alleviating many external and internal issues that come with debt.

4. Decide on how best to handle your debt How you handle your debt will depend on what debt you have. You may wish to consolidate your debts so that you are only paying one repayment and one lot of interest. You may wish to add your credit card debt or your personal loans to your mortgage if you have equity because this will mean a lower interest rate. With your mortgage, as I mentioned earlier, start paying it fortnightly if you don’t already and pay extra, as much as you can afford because this way you will see your principal and your interest reducing a lot faster. If you aren’t good with credit cards and are unable to use them wisely then please get rid of them. Credit card debt is insidious and all too often I see people paying only the minimum balance monthly and getting into a lot of trouble. My philosophy with credit cards is that if you don’t have the money in the bank to pay them off straight away then don’t use them. It is the banks money you are using not your own so don’t be disillusioned into thinking it is yours because this will mean you keep your bank manager happy but your life could get difficult. I believe credit cards have a place in society especially when shopping online or saving on eftpos fees but don’t buy if you can’t afford it.

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5. Decide who is responsible for what If you are in a partnership then you may need to set some guidelines as to who pays the bills and who looks after the money management otherwise it could get messy. Get organised and have a special place for bills so that they don’t get forgotten and they are paid on time.

Decide who is going to manage the plan you have created and how you are going to divide your income. The system my partner and I use is relatively easy. I worked out a long time ago how much our monthly expenses would be and divided them by two. We each contribute the same amount monthly and what is left over from our earnings is ours to do as we please which means no arguments as we both have our income independence. Whatever you decide make sure it is fair and reasonable for both parties and aim to lessen the stress and tension. Of course, if it is not possible for one to pay as much as the other then work out a plan that is based on income average or income percentage. As long as your costs are being covered and both parties are happy you will be able to maintain a balanced financial relationship.

6. Decide on what you will do with any extra bonus income When you get a pay rise, tax refund or a Christmas bonus it can be very tempting to go all out and spend, spend, spend but this is the time to use these bonuses to your advantage. If you have no debt and are well in front with your expenses then by all means blow it if you want but if you have debt then use it to reduce your debt and benefit from being debt free a lot sooner. Your main focus is to pay off your debt as soon as you can and once you have then you can play a little. You can of course, have a little for yourself each week and with my ‘intimate plan’ you can have that easily without guilt or fear.

7. Decide on what you are going to do when you are debt free It is important to have something to look forward to and having goals will keep you going as you keep your eye on the prize. Sit down and set some goals towards something you can enjoy when you are free of debt. It could be a holiday, a nice dinner out, a new outfit or a 10 | P a g e

complete makeover, whatever floats your boat. Write your goal/s down on a piece of paper and put them somewhere where you can see them and read them daily because this will help to keep you focused and motivated especially when it all seems a bit too hard.

Mindset is everything in life and have a positive money mindset will set you up for a life of financial freedom.

SYNERGETIC SUCCESS FOR DEBT REDUCTION & SAVINGS SUSTAINABILITY Okay, I know you’re wondering what on earth I mean by ‘synergetic success and if I were you I would be wondering too!’

Synergetic success put simply, means working together and cooperating for your financial success. I know too well how challenging it can be when you and your partner are not on the same page when it comes to managing the money. My brother had many difficulties when he first married because his wife loved spending and the monthly credit card bills were something he soon learned to dread.

It is so important to work together on this very crucial part of a partnership because if you don’t it can create a lot of disharmony, health issues, stress and often relationship breakdowns which is tragic considering that with a little communication, cooperation and planning it could end very differently. Some statistics say that 85% of illnesses are caused by worries over finances and more than 50% of marriage breakdowns have their roots in disagreements over finances.

Lack of communication, lack of commitment and money are 3 of the top reasons that marriages end in divorce. I wish someone had told me that 12 years ago! This top 3 may be easier said than done though especially 11 | P a g e

if one partner is more willing than the other however, if you can start with the communication then the rest will follow because regular, honest, respectful communication is the key. If you and your partner are able to respect each other’s opinions and ideas and you can discuss your spending habits and expenses versus earnings without confrontation then you will be able to get ahead and avoid excess stress and tension which is always a bonus.

My partner loves spending and he is fortunate to have a partner that loves numbers! I have to admit it was quite frustrating for me in the beginning reconciling the bank statements and seeing what I classed as unnecessary spending. Our initial financial plan that we discussed before buying a house together soon fell in a heap because it was too one sided so we sat down one night and he listened to my proposal.

With a bit of discussion and fine tuning we had another plan in place that has worked very well. My partner still loves spending however with our new plan in place it is kept in check and neither of us needs to worry about our finances getting out of hand plus there has not been one argument over money since.

One thing we have found is that a weekly get together, over a glass or two of wine on a Friday evening, to further discuss where we are situated financially and, what we want to be aiming for has really helped. This is so important because I am the one who manages the money and pays all the bills and it means that my partner is kept up to date with where we are situated. This allows us to both play an equal part in the management of our money.

So creating synergetic success by working together and cooperating will mean a stronger bond and a stronger bottom line.

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The 7 steps to Synergistic Success for Debt Reduction and Savings Sustainability

1. Stop playing the ‘Blame Game’ One of the biggest causes of tension in a relationship is due to one blaming another for the circumstances or events that have occurred. Blaming is often due to a build up of frustration, anger or guilt and it is often easier to point the finger then to take a good look at oneself which is what makes it such a palatable option. The trouble with this is that the one being blamed takes offence and nothing is resolved. The only thing that comes out of blaming another is a further lack of communication because generally one person shuts down, usually the one being blamed.

If you find you want to place the blame on your partner then maybe take a moment to check in with yourself and ask yourself what is really going on.

Chances are it could be because you are feeling guilty over something or maybe frustrated or angry over what has happened and are unable to see or accept the other person’s reasons. Acceptance is crucial in this situation and, once acceptance is achieved, then the lines of communication will be well and truly open for good honest discussion which will result in a resolution.

2. Feel the fear and face it head on Problems with finances can be scary and it can be very tempting to act like the ostrich and bury your head in the sand but this won’t make it go away in fact your situation will only worsen. The best path you can take is to face your fear and start now to get a plan in place to rectify your predicament. Fear will eat away at you, and your confidence, whereas when you face your fears and conquer them you will tap into a power that you may have thought you never had. Talk about it with your partner if possible and work it out together.

There is safety in numbers (excuse the pun!) Back each other and support each other through the rough patch and know that it will not last forever.

3. Practise Constant Communication As I have mentioned earlier this no doubt the most important thing to do.

When you are able to communicate your thoughts and feelings in a respectful and honest way then you will avoid arguments due to a build up of pent up 13 | P a g e

emotions. Of course, there may be a valid reason for you not being able to communicate in a valid way and this is the case for my partner because he is challenged when it comes to getting his feelings across and they often don’t come out as he intends so if this is the case for you then I would suggest you communicate this to your partner and if that doesn’t work then follow step 4.

4. Bring in a third party Often it is beneficial to involve a third party. Choose someone that you trust and someone that is able to help you mediate effectively and justly. You may wish to utilise the services of a coach in this instance if you don’t wish to involve a family member or a friend. Someone who is unbiased is best and there are plenty of coaches around to assist you with this. If you are taking this direction then be sure to choose a coach that fits you because if you are not feeling 100% comfortable with them then your results will be compromised.

5. Take a hike!

If you find it difficult to temper your emotions and feel like lashing out because you are angry or frustrated then get away and go for a walk. Remember you are normal and you will have these emotions surface at one time or another because you are normal. Often excess stress, sleep deprivation and health issues can make it difficult to remain calm so rather than jeopardise your relationship you are far better to take a breather and chill. When you are feeling more relaxed and in a better state of mind you can discuss your situation in a calm environment.

6. Practice acceptance There is a saying that says ‘what you resist, persists’ and this is true of any situation. When you are in a position of financial disarray it is easy to feel stressed and wish, hope and pray that things were different but this way of thinking and acting will prevent you from moving forward. It may sound strange but as soon as you can accept what is a new world of possibilities and options will open up. When one door closes another one opens. When you are able to accept the situation you will be able to take your power back and attack your new situation more constructively. Join forces with your partner, be open and honest, pull out your best coping skills, stay centered, be innovative, kick your fears to the curb, encourage them, and be a great friend and champion in what is most often a temporary struggle.

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7. Keep going no matter what There is another saying ‘When the going gets tough, the tough get going’ and this means pulling out all the stops. Once you have accepted your situation you can then start to brainstorm, with your partner, ways to get free once again. Keep at it and if you do something and it doesn’t work, then do something else and, if that doesn’t work do something else because eventually you will find what does work and your persistence will pay off in the end. Stay tough, stay strong and keep going. Delete the word ‘quit’ from your vocabulary and seek help if need be.

I trust you have enjoyed reading my report and that it has given you both insight and ideas into how to reduce your debt and increase your savings sustainability.

I know firsthand what it is like to be in a place of creating debt and I also know the freedom that comes from good money management. The intimate plan that I created for myself many years ago allowed me to really enjoy my children and my single motherhood. I was able to be a stay at home mum until my boy was eight years old as it was a goal of mine when having children to enjoy their younger years and for them to have their mum around as I did when I was small. Even when I went to work it was only part time and school hours so I feel very privileged that I was able to do that however, it may have been different if I hadn’t decided one night early on to get smart and get planning.

It is never too late and no matter what state your finances are in you can begin now to stop digging a deeper hole and start instead to climb out. Even if you are financially free having a plan will help you to remain that way and enjoy life even more.

I wish you every success.

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