Personal Finance Advice for Making Money and Saving Money

How much money do you want by the end of this month?

CPA's, financial planners, and money managers agree that the more you
understand personal financial strategies, the more likely you will make money,
savee money, and build wealth. Wealth can be defined in many terms. For our
discussion, wealth will be defined as the amount of money and assets a person has
at a point in time. Wealth can come and go without solid strategies. In order to
have wealth, you will need to know how to make money, savee money, and
understand some basic financial principals regarding debt, debt management,
credit, interest rates, savings, compound interest, money, debt-to-income ratio,
mortgages, income, budgets, credit card debt, and risk.

Money management is critical to accumulating wealth. This site provides insight on
how to manage your money wisely in order to have more of it. A free money
management software program -"Ace Money Lite" is also available. Let's take a
look at debt ratio and then compounding interest with the Rule of 72. Then let's
explore credit and budgets.

BusinessWeek says
that total household
debt in the US was
more than 100% of
disposable annual
income last year.
Now that is scary.
The total consumer
debt is at 1.7
trillion dollars. (You
can visualize a
trillion dollars as a
stack of $1000 bills
placed one on top
of the other, flat
side on top of flat
side, reaching 67
miles high.)

The personal credit
card debt carried
by the average
American is $8,562
and the total
interest paid in
2001 was $50
billion.... an
average of $1000
in interest per
consumer. The
average consumer
caries 8 cards and
20% of cards are
maxed out.

There were 1.3
million credit card
holders declaring
bankruptcy last
year. Bankruptcies
have exceeded 1
million per year
every year for at
least 7 years now.
If you keep your
debt-to-income
ratio low, you will
more likely qualify
for the lowest
interest rates and
best terms when
you apply for
credit.

What is a "Debt-to-Income Ratio" and why is it so crucial to our credit?

Your debt-to-income ratio (DTI) is a key indicator of your true financial picture.
It is definitely the lending industry's measure of fiscal health. Your
debt-to-income ratio is calculated by dividing monthly minimum debt payments
(excluding mortgage or rent, utilities, food, entertainment) by monthly gross
income. For example, someone with a gross monthly income of $2,000 who is
making minimum payments of $400 on debt (loans and credit cards) has a debt
to income ratio of 20 percent ($400 / $2000 = .20).

This formula will vary slightly from lender to lender but only slightly. Some
include the mortgage but raise the acceptable ratios... others do not. While
variations will result in different percentage outcomes, the overall concept is the
same: a debt-to-income ratio compares debt load to income.

Authorities seem to agree that a debt-to-income ratio (without a mortgage,
utilities, etc.) of 10% or less is great. debt-to-income ratios at 20% or higher
are yellow lights as one emergency could topple the consumer big time. Yet,
according to Motley Fool in the article Our Credit Crunch,

"Still, far be it for the credit card industry to poo-poo your request for a line of
credit. Even if your debt-to-income ratio is 50% or more, you'll probably have
little trouble qualifying for a credit card. Never mind that mortgage lenders
preach that your debt level -- including mortgage and all revolving unsecured
debts -- should not exceed 36% of your gross monthly income. In their eyes,
that leaves just 8% of your income for non-mortgage debts." Click here if you don't own a home and would like to apply for a Mortgage.

Click here if you own a home and would like No Hassle Refinancing! GoApply.com.

Conclusions
America's Total Debt Report states , "America has become more a debt 'junkie' -
- than ever before with total debt of $32 trillion (household, business, financial
and government sectors), or $115,322 per man, woman and child."

If you might be saying to yourself, "so what... that's not personal debt", think
again. We had better start learning to clean up our own yard before we start
thinking about cleaning up the world. As stated in the report just listed, "In
some ways we may be SHORT-CHANGING OUR NEXT GENERATION, but blaming it
on others will not make it better. Acquiring knowledge and taking action is an
individual responsibility."

We need to start getting our debt-to-income ratio back in line as individuals first
and as a nation second. We need to teach ourselves responsibility first, and our
children second. Many Americans are using this simple yet effective technique
to lower their debt-to-income ratio. Click here to find out how they are doing it.