The new year is almost upon us. We need to start thinking about what we want to accomplish financially in 2006.
Take a snapshot of where you are with your personal finances. Did you manage to eliminate all of your debt this past year? or Did you at least, get rid of some of your debt? If you were unable to do so, how come?

The reason I ask you about your debt elimination is because it is the most important, the most critical component, of your financial picture. If you’re not out of debt then you’re sending money to a lender rather than to your investment accounts. If you want to build wealth, and you still have debt, than make it your top goal to get out of debt in 2006.

Here is what you will need to do:

1. Accumulate an emergency fund. As quickly as you can, save $1000 and put it in a money market account. Promise to use this money only in a real emergency. ” Starbucks is not an emergency.”
2. Cut up all your credit cards and DO NOT GET INTO ANY NEW DEBT. This separates the men from the boys. If you have the guts to do this step then you have assured yourself success in eliminating debt and accumulating long term wealth. It’s hard, but it can be done. I did and have never looked back.
3. Get a sheet of paper and at the top in bold capital letters write ” The Borrower is a Slave to the Lender”. Below that list all of your debt from lowest to highest. At this point everything other than your mortgage goes on this list. Plaster it on your refigerator door. You want to see it everyday and be reminded that you are bound by the shackles of your master (Lender).
4. Take control of your spending and eliminate the BS stuff. Those are the things you can do without until you are debt free. If you can’t find anything to get rid of, than you’re not looking hard enough. If you still can’t find something than get another job. Eliminating debt should be so important to you that you will do whatever it takes to get rid of it.
5. Start putting any extra money you have towards the smallest debt and pay the minimum on all the others. When the small one is paid up apply what you were paying on that one up to the next highest debt. Dave Ramsey calls it the “snowball effect”. In this scenario you are chasing the snowball, rather than the snowball chasing you (debt is the snowball chasing you).
6. Don’t give up. You will screw up a few times. You’ll spend money and then realize maybe you shouldn’t have. That’s OK, we all will make mistakes. Just don’t stray and don’t give up. Get right back on your plan and before you know it debt will be a thing of the past.

Here’s to a Healthy, Happy, and Most Prosperous New Year.

Regards