Second, you have to get in control of your debt and you have to do that immediately. You have to take a look around and see what debt you can get rid of right away. Personally, I like to take a look at how many places you are in debt and then start reducing that number. I think that that builds confidence. If you owe money to five people and, suddenly, you just owe money to four people, it's almost like you'd knocked out 20 percent a year debt just because you are dealing with fewer people. Sometimes it's not as gratifying to be paying off, say, your high-interest debt. Sometimes it's just as nice to be able to knock out one loan so that it's no longer nagging at you.
Third, you absolutely have to adjust your lifestyle. That's an area that people have trouble with, because they've established habits and they're not willing to change them. So, you have to circle the wagons as a family, you have to pull together. You have to bring everyone in your life together and inform them of the situation so that you can't hide it anymore at this point in your life. All of those dirty little secrets about secret spending can't be secret anymore.
Fourth, you gotta get everyone on-board and thinking, "How can I bring in more money?" There are only two ways to get ahead: spend less; earn more. So, you gotta ask yourself, what can I do to earn more? Can I work more overtime? Can I find time to work a second job or do something extra part-time? And then take a look around and ask yourself, "What can I sell?" And then go through your house and start getting rid of some stuff. We all have tons of stuff that we can get rid of.
Do everything to get more cash coming in, to have more money that you can direct at your debt. And once that's addressed, start putting money into savings.
OK, let's say that someone has followed your advice with respect to debt-repayment, and they're now well on the way to getting their finances in order. What must that person then do with the money that's accumulating? How should it be divided up to ensure preparation for short-term needs and long-term goals such as retirement?
If you are personally going to handle your own money, then I would put it into something that you personally will understand.
One of the problems that I have with people is that they tell me, "Well, I watch so and so on television and he says that I should do this with my money, and he's training me to do …" Listen, if you take an amateur and you give them just a few skills, you're still dealing with an amateur.