Credit Repair Tips for Aspiring Homeowners

Stay in Sequence

Everyday life is filled with events that move in sequential or logical order. A child develops first by crawling, then progresses to walking, then running. Students first go to preschool, then elementary school, middle school, high school, and college. Couples advance from dating to engagement to marriage.

The sequence concept is one of the most important lessons I’ve ever learned when it comes to financial success. First identified by Zig Ziglar, the sequence of economic prosperity follows a natural progression, Survival, Stability, Success, and Significance.

This progression is like the metamorphosis of a caterpillar into a butterfly. For a caterpillar to transform, it must follow precise steps in a defined order. A caterpillar doesn’t grow its wings over-night. Nature remains true to its design, and there’s no hurrying the process. The struggle the caterpillar must make in the darkness of its cocoon is vital to its transformation. Before it can achieve the ultimate freedom of flight, it must fight release itself from its chrysalis’ confinement.

Each stage of your financial sequence has a purpose and importance too. None of it should be hurried or done out of order. And while it won’t be easy to change poor spending habits that have become ingrained, with discipline and incremental steps, you can sever the monetary bonds that have stopped you from reaching your financial potential. If you want to progress through the sequence of success, you’ll have to focus on each step. To get to the next level, keep your focus small.

Survival

When you are in survival mode, you can feel as if you’ve reached rock bottom. Your expenses and debt are crushing you because your income is drastically inadequate to meet your financial obligations. Bills go unpaid, credit cards are maxed out, and savings are nonexistent. In this situation, people can often feel helpless because they see no way out. The good news is there`s nowhere to go but up- as long as you start taking steps in the right direction.

Incrementally Increase Your Income

The biggest mistake you can make when your finances are in crisis is to chase some radical idea that promises to return a considerable amount of money in a short amount of time. This scenario is possible, but the fact remains that the most significant success follows an incremental path of growth that takes time.

Imagine a minor league baseball player trying to make a significant league The difference between the two is the difference between making thousands or millions. Some rookies attempt to increase their score by going up to bat and hitting a home run every time. But what they need to do is focus on getting one hit. A player who hits .250 risks losing his job, but a player who hits .300 is a superstar. The difference is just five extra hits every 100 times at-bat. By focusing on getting only one hit at a time, a rookie can make small, incremental adjustments and improvements that pay big dividends in the end-it are the same for your financial situation. It might be the one small decision to go for coffee three times a week instead of seven or take a brown bag lunch to work instead of eating out, but all these little decisions can take your minor league finances to the major league.

Keep Your Cash Liquid

There is a saying, “When you're on top of the mountain, throw a little dirt in the valley-it'll break your fall.” The dirt in the valley is an amount of cash you keep in reserve in case of emergency. Ideally, you should keep building your fund until you have a cash cushion that will cover your home expenses for six months, but that thought can be overwhelming. So, apply the incremental method by focusing on saving enough for one month, then three, then six, and keep going! There is tremendous peace and freedom that comes with having an emergency fund like this.

Institute a Spending Freeze at Home

People make a common mistake when trying to correct their financial shape to remove just one or two significant items from their budget. This can help, but often it’s the cumulative effect of smaller, unmonitored expenditures that break the budget. That five-dollar daily cup of coffee, those meals you eat out, those magazine subscriptions or TV services that aren’t vital all add up. There’s a big difference between essentials, such as food, and wants, such as premium cable! Review your monthly expenses and eliminate any that aren’t necessary.

Pay With Cash

Using cash heightens awareness of what you are spending. For example, Las Vegas casinos use poker chips instead of money so that people forget they’re betting with real money. If you pay with cash, when it’s gone, it’s gone. You can’t spend money that’s no longer in your wallet!

Typically, I allow myself a certain amount of cash every month for incidental spending. It’s become a sort of game to see if I can still get by on the amount of money I used years ago. Guess what? I can, and I do! I learned a lot about this by studying Dave Ramsey’s envelope system; Let’s say you’ve budgeted $500.00 a month for groceries. When you get paid, you put that amount into an envelope. No money comes out of that envelope except to buy groceries. If you go to the store and leave the envelope at home, you turn around and go back for it. In the store, if you spend more than you have in the envelope, you take some groceries out of your cart. If there’s no money left in the envelope, you raid your cupboards and the fridge for leftovers.

It’s a straightforward, effective system to keep in check items that can bust your budgets like groceries, entertainment, gas, or clothing. When the money runs out for each category, you don’t spend any more until the next month.

Get Your Family on the Same Page

A house divided against itself cannot stand. You must get your family members on the same page economically. This can cause some heated debate and argument, but the key to success is to focus your joint financial goals instead on contention areas. Discuss as a team what you all value and what you don’t. Work together to define your future goals and dreams and what it’ll take to reach them.

It only takes thirty days for a repeated activity to become a habit. Decide to go all-in for thirty days with your new spending and saving habits, and they will become routine. A lot of little changes over a short period add up-just think of the progress you’ll make over six months or a year! Soon, your new habits will be as simple and automatic as making coffee in the morning.

Stability

You are financially stable when your income stream is predictable, you’re paying bills on time, and you’re not acquiring additional debt-that is, you’re living within your means. To fortify your financial foundation, you should.

Establish a Home Budget

A home without a budget is like a car without brakes. What’s going to stop you from living beyond your means? How do you harness your emotional impulses to purchase? You must establish a budget- and stick to it. Record the amounts that you typically spend in all significant home categories and then select your baseline expenses. This is the most powerful tool for changing impulse purchases into informed decisions.

Develop a Monthly Savings Habit

You already have payments that are automatically withdrawn from your accounts each month. You must consider monthly deposits into your savings account as a non-negotiable payment. We’ve all heard the expression, “Pay yourself first.” With this strategy, you’re doing that. Start small and then increase the amount of time. As you prosper, increase the amount you transfer every month.

Develop a Debit-reduction Plan

It’s easy to get into debt, but it’s not so easy to get out of it. Owning money- be it a mortgage, credit card bills, student loans, or other can be extremely stressful. When faced with debt, you can feel overwhelmed, powerless, and out of control. It’s important to remember that you didn’t get into debt overnight, so you can’t expect to get out of it immediately. Debt reduction takes time and requires a plan. Dave Ramsey’s book The Total Money Makeover is a great resource to get you started on debt-reduction tactics and techniques.

Success

You may think you’re living on an easy street when your income far exceeds your expenses, your savings account is flush, all consumer debt is paid off and you now actually have disposable income! However, newly acquired financial gains can make you passive and cause you to take your foot off the gas. To reach read financial success you need to; INVEST IN YOURSELF We’ve already spoken at length about the importance of this. Benjamin Franklin had one dominant investment strategy; “If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest.” If you work harder on yourself than you do on your business, you`ll go from making a living to making a fortune.” Jim Rohn. Always keep that in mind.