PAY ATTENTION. THIS WORKS! Managing your family business is like any other business -- CASH FLOW IS WHAT KEEPS THE LIGHTS ON.
What that means in practical terms is that you don't have to pay off all of your credit before you save. You have to have enough cash available to maintain the lifestyle you want. We live in an age where it is impossible to function on a cash only basis. We can't buy a house with cash. We can't pay cash for a new car. And many of the things we want to be comfortable can be bought with credit. The key is to develop a CASH FLOW PLAN that allows you to save (invest) and manage your credit at the same time.
- Based on your salary, set an amount that you can contribute to credit -- i.e., $500 per month. Set a cash-flow plan with your credit cards (better to use only one card) that will retire your debt in 3 years. At approx. 16% interest, you can support about $15,000 in credit. Pay this amount faithfully (the minimum payment would be about $285, so you are always paying more than the mimimum payment). In the months where you don't buy anything, the balance is reduced more rapidly. If you have an emergency, perhaps you can pay the minimum payment for a couple of months. But always return to the plan.
- Based on your salary -- set an amount to save (invest) -- i.e., $500.00. Deposit this amount faithfully -- 30% in a cash-based saving account (emergency fund), and 70% in a non-retirement investment account. A non-retirement account is liquid, and penalty-free if you need to make a large withdrawal. If you don't know how, learn how to invest in low-medium-high risk mutual funds (this money will grow faster than your savings account). You will learn how to balance the risk with practice. Understand this law of investing -- "The natural gravity of the stock market is UP." Over time, your mutual fund investments will grow faster than your savings.
- Adjust each of these strategies as your financial situation dictates. But like a business, manage your cash-flow in each of these financial categories with discipline, and you will prosper.