When it comes to wealth generation, another important factor that is hard to follow is “living within your means.” For many people, living in debt has become the norm. It is common for the average person to be buried in debt before they reach the age of 25. A consumer-­‐driven economy based on floating credit also creates the impression that wealth means more products. After taking a hard look at your assets and income, now you have to check your lifestyle and see where you can cut down on expenses.

1 Write down your expenses. Do not lie to yourself. There is nothing like seeing it in black and white (or red). Keep track of your expenses on a spreadsheet or if you prefer, in a notebook. It gives you a concrete idea of where you are spending too much and where you are spending too little. If you are looking to save more, write down everything you buy and keep track of it. Do you really need to spend $5 a day on designer coffee? That amounts to $1800 dollars a year just on your morning cup of Joe. Is it paramount to have the latest car every single year when you are hip deep in auto loans?

2 Cut those credit cards. The average person owns at least seven cards. The average number you need to sustain a good to great credit score? The answer is one or two. One well-­‐managed card does more for your credit score than the dozen overextended cards you have. If you can manage without one, why not cut them all? Your credit score is not just affected by cards, but by other loans you have in your name, like your mortgage or auto loan.

3. Ruthlessly cut out all the services you do not need and monitor those you do. One millionaire famously counted the sheets in toilet paper rolls because he thought suppliers were overcharging him. He was right.

4. Before you cut those cards however, understand the utilization ratio: the total credit used versus the total credit available to you. Many people keep multiple cards for fear that one or more lines will be cut, increasing the ratio over time. The goal is to have a very low ratio compared to debt, low balances and even lower interest.

5. Get a free copy of your credit report. Dispute any outdated items. Keep in mind that items should slide off, not stay on. Focus on judgments, liens and any items that undermine your potential to lenders.

6. Understand how interest affects your debt. The wealthy understand how interest works for investments, for loans and how it compounds over time. Those who are not wealthy do not. Compound interest is interest that is added to the principle at certain intervals on the debt. This means that the loan/balance of a certain loan gets higher over time and you end up paying more interest. Compounding rates differ but can be legally done on a yearly, quarterly, or even daily basis. A loan with a starting principal of $1000 charged with 20% interest per year turns into $1200 at the end of the first year and so on. In contrast, simple interest does not add to the principal of the loan, but is the amount charged for use of that money or loan.

7. PAY DEBT OFF ASAP. Pay more than the minimum on loans. Satisfy the interest and part of the principal—the debt amount will lessen over time and the bonus is you pay it off faster. The more you pay now, the less you pay later.

8. Keep records of any and all transactions over the Internet or phone, especially if you are fixing your finances. a. Print or save any changes to your account. b. When calling customer service, ask for the representative’s employee number and record the time of the call in the event you need to follow up on a request. c. Keep exact files and amounts. d. Keep copies of everything.