2011: Traditional personal finance overhauled

“We’re not in Kansas anymore, Toto,” said Dorothy in The Wizard of Oz; which pretty much sums up my view of life in America, 2011.

So what is to be done?

The “new normal” means that each of us has the opportunity to starting from where we are to create future successful results from this moment on. That is, if we choose to unleash the mainstream media “normalcy bias” honed over generations to perpetuate (no matter what) the illusion of normalcy!

Central to the illusion of normality is a consumer-based definition of success designed to override concerns in a changing economic landscape. All around us, however, the hard evidence virtually screams the naked truth of the many ways in which the “normal” we once knew no longer exists.

Below are my personal finance recommendations that fit but aren’t exactly the same as those of traditional advisors. Why? Traditional recommendations typically ignore the risk factor represented by how money works in the context of your monetary system. The same as with health problems; Without knowledge of the cause of the symptoms, treatments often lack full effectiveness.

When it comes to personal finance success, responsibility for how we earn, spend, save, and invest is obviously essential. However, financial goals can easily elude us if we lack the full story about money. The missing piece is systemic in nature. The impersonal mechanisms of the monetary system, overlooked and underappreciated, wear out to leave families vulnerable; undermining the goals of stability and wealth creation.

Also known as hidden tax. Who benefits?

Central banks around the world (US Federal Reserve) issue currency at the precise moment it is borrowed through an automated procedure called fractional reserve banking. Therefore, the money is actually a debt instrument (Federal Reserve Note). This interest-bearing private profit system was designed centuries ago.

Over time, debt grows compounded, and purchasing power declines as the cost of living increases. The cost of living rises as companies add the interest cost of bank loans to the cost of the goods and services we buy.

And so the gap grows between the haves and the have-nots.

That brings me to the fundamental question of how much purchasing power $1.00 has in today’s market. A dollar is only worth 4.5 cents and an online inflation calculator proves my point. An item purchased for $1.00 in 1913 (when the Federal Reserve System was created) would cost $22.10 in 2010; a 2000% increase in inflation!

It’s a fact: qualified advisors are definitely helping families reduce their debt and modify their budgets. That being said, the “good debt, bad debt” conversation is still a conventional truth; lead individuals and families to believe that they can adjust their budget and lifestyle here and there to get to better days.

Unfortunately, such family gains may not last. Without a working knowledge of money as debt, even the most sincere efforts can fail as the rising cost of living erodes hard-won progress. By following conventional financial wisdom, the solution to keeping up and making ends meet could well end up, once again, as participation in the vicious cycle of credit and debt. Who benefits?

More options with the big picture.

When we add the missing money piece to our knowledge base and decision-making process, we also gain additional financial strategies. Those who set out to explore alternatives outside of the traditional personal finance box tend to develop a new part of their brain. They discover a world of possibilities (perhaps previously underappreciated) along with the thousands of others on the same mission!

These are my personal finance action steps designed to help individuals and families build a solid financial foundation. Savings and investments are very important but in the 2011 economy they will be more SUSTAINABLE when a current strong foundation has first been attended to. You’ll know you’ve completed the “critical” step once you have more money coming into your home than going out for at least four consecutive months!

1. Write down your short-, medium-, and long-term financial goals and post them somewhere for easy reference.
2. Review your goals (at least) weekly.
3. Find out your exact financial status today. How much money a) comes in and b) goes out each month? Create a line item and categorized breakdown of money coming in and going out. Don’t forget things like eating out and entertainment.
4. Track your expenses and out-of-pocket expenses accurately for at least a month. Save all receipts and record out-of-pocket information on a daily basis. Also determine the exact (or average) amount of money you bring in each month.
5. Is more money going out than coming in? If so, how much exactly?
6. Use your list of current itemized expenses to create an action plan for how and when you will reduce or eliminate items that exceed the amount of money currently coming into your household. This can mean a creative reduction.
7. Create an action plan for how and when the income coming into your household will increase. As debt is reduced or eliminated, this action step becomes the most important in staying ahead of the cost-of-living debt curve over the long term.
8. As you focus on ways to increase cash flow, you may want to consider a standalone merchant or service that people will always need and a better fit for you. For example, auto mechanics, computer technicians, hairdressers, hairdressers, drinking water providers, pet sitters, delivery service providers, etc.
9. Make debt elimination a high priority; the ultimate goal is to consistently live within your means and pay as you go.
10. Once your credit card debt is paid off, get rid of all but one credit card because access to credit is actually an instant gratification state of mind.
11. DO NOT keep the only remaining credit card in your wallet. Leave it frozen in a container of water in your freezer. This tactic builds time in the instant gratification decision-making mindset of a credit card in your wallet.
12. You may even want to reallocate existing assets to build your “more money out” household budget base more quickly. Since money (as debt) is worth more today than tomorrow, it’s better to put it to work today! A stable present situation will increase your well-being. Increased well-being empowers a healthy decision-making process
13. Use cash first and foremost. Most people will pay more attention to what they spend when it comes directly from their wallet.
14. Stop buying entertainment. Shop purposefully using coupons, during sales, and buy in bulk whenever possible. Usually buy recycled products, including for cars.
15. Include your children in the how and why of your decision-making process (if you accept this mission) and invite them to imitate your thoughts and efforts.
16. If you have savings and/or investments to keep, keep some of YOUR money completely out of the reach of the banking industry. They consider their own interests before considering yours! More and more people are moving their bank capital into hard (tangible) assets.
17. Specifically per 16 above, consider anything you have in savings, retirement funds, or the stock market. (Remember the 2008 stock market and FYI: the US government is currently floating the idea of ​​nationalizing 401(k)s and IRAs given its nearly $14 trillion deficit. In other words, people they would lose control over their account and the government would ration annuity-like payments instead).