Gordon Robertson on the 10-10-80 Rule

CBN.com It is Money Monday, and we’ve got some financial advice for you. We’re going to give you some advice on finances.

The reality is that most Americans do not have control of your own funds. It’s sort of a national shame how much we all carry on these revolving credit card loans, and we just allow ourselves to be eaten alive by our creditors.

It’s seemingly impossible to get out of debt but I’ve got good news for you: it is possible. But it starts with you saying, “Yes, I want to take control of my money. I want to look at it honestly. I want to look at it objectively,” and, “Am I living within my means?”

Any debt-reduction plan always starts with a budget. You’ve got to have an honest evaluation of what are your sources of income, how much does that total on a monthly basis, and then what is your outgo.

You need to be following what I call the “10-10-80 rule,” which is ten percent going into a tithe; ten percent paying yourself and going into savings; 80 percent is what you live on (that includes all of your debt payment), and be sure to budget some of that for you to have fun. If you’re not having fun along the way, you’re not going to stick with the plan.

Let’s focus in on how to get out of debt. So many people need to have some plastic surgery, and by that, I mean you need to take those credit cards out of your wallet and cut them up. If you are addicted to credit card debt, if you somehow get an emotional fix as you go shopping, then you are an impulse purchaser and you’re not living within some kind of budget.

It’s so much better to use cash or a check or a debit card as opposed to a credit card, because then you have the real sense that you’re paying real money and a balance in an account is going down. So that’s the first step.

The second step is to look at all your debts and get them all together and total them up. Now, there’s two ways to approach this. One is to take the smallest debt first and say, “I’m going to eliminate my debt.” It’s kind of like weight loss. If you lose five pounds in the first month, then you’re more likely to stick to any particular diet. If you can take your smallest debt and pay it off, then you are rewarded, and you have a sense of satisfaction that you’re actually improving your financial lot. Another way to approach it is to say, “Which are my highest interest rates?” and, “I will pay off the highest rate first and then go down to the lowest interest rate and try to get rid of debt.” If you do that way over a longer period of time, you’ll actually come out ahead financially, because you eliminate those higher interest rates. But most of us aren’t geared that way. We want to have, sort of, a quick emotional pickup of getting rid of debt. So take the smallest one and pay it off, and then get a sense of satisfaction that you’ve eliminated one.

While you’re eliminating, please don’t add anything more to it. Don’t put anything more onto those credit cards. Don’t reward yourself for eliminating a debt by going out and making another charge. There are so many things that, if you look around your home you can ask yourself if you really need that? Make that evaluation and then go on.