How Do You Allocate Your Money - Part 2

I have promise in my article "How do you allocated your money" to extend the topic a bit by discussing about the Type 1 and Type 2 people. How these two types of people should allocate their money for financial success.

If you have read my previous blog, you'll notice that Type 1 people belong to those who always overspent while Type 2 people are those who will spend first and save the rest if there is any balance.

Both type belong to unsystematic type of people and most of the time only live by today freely. They either do not really care for the future as future might not come or their earning is too little but there is so much things that they want to spend. With the easy access of credit card, people start to spend future money and that is how they got trap in the cycle of debt. Rolling bigger and bigger like snowball.

There are two things that this two types of people need to do:

One, set up a systematic saving program no matter how small the amount might be. Start from $1 a day in the piggy bank that is kept by your trusted family member or $30 a month by transferring from salary account to fixed saving account that require two signature before you can draw out your money and no ATM Card please. When you start to feel the habit of saving and getting use to it, increase the amount to $2 a day or even $100 a month on top of what you are already doing.

If both ways still can't work, buy an insurance plan that give your money back after certain number of years. A hundred percent sure work way because if you withdraw your money half way, you are not getting much back. Hahaha!

Second, cut your credit card into two pieces and consolidate all the debt (if any) to one bank or financial institution. Try to negotiate a best term for repayment. Develop a habit of asking this life saving question: "Do I have the ability to pay back if I take a loan now?" If you do not have ability to pay back, do not borrow in the first place because you problem will grow bigger instead of smaller.

If you really need to borrow, have the commitment to pay it back regardless is from friends, family members, banks or financial institution. What people scare most is that you borrow and don't show up. If you dare to show up in front of them and keep telling them you are going to pay them back, people are more willing to believe you than those that always hide and never show up. (Please make sure you really pay them back bit by bit every time you see them and not just keep telling them that you will return them money but no action!)

If you follow the above two steps diligently, your self-esteem and finance will definitely improve tremendously. Your problem will be gone before you know! Never take a short term solution for a long term problem!