Whilst working with this formula with my clients, I found that people who live within their means tend to spend their money roughly within 40%-30%-20% rule. That is, their fixed costs are roughly 40%, their variable costs 30% and discretionary 20% of their net income. The more I worked with this formula more I realised it was an excellent way to achieve two things. First, it provides you with a simple effective method for planning and allocating your finances, and secondly, it is perfect method for getting you out of debt and into wealth. The most critical category is fixed costs. The fixed costs of people who are living comfortably within their means are generally around 40% of their income. People with fixed costs above this percentage, tend to lead lifestyles that cost them more than they can afford. The size and quality of their homes, cars, furniture and other items that they have borrowed for, have forced them into excessive debt. Because fixed costs are comprised of debt and committed payments, they are crucial in determining your ability to create wealth. If you want to be wealthy, you have to be committed to dropping these costs below 40%.

When clients first come to me, their fixed costs are often 50%, 60% or even 70% of their net income. The aim is to reduce that percentage to 40% or less, over time. Creating wealth is about building strong financial foundations that cannot be shattered regardless of what we may be faced with in future. Regrettable, strong foundations take a little time to build. People in severe financial hardship usually have fixed costs that are greater than 65% or 70% of their net income. This is usually due to excessive debt or insufficient income. People who are in financial crisis, where they tend to live from payday to payday and seem to be going from one financial problem to next, tend to have fixed costs between 45% to 60% of their income. If their fixed costs are approximately 40% of their income, they are living comfortably within their means, and if their fixed costs are below 40%, they usually have excess money that could easily be channelled into additional savings and investments. So key to good financial management is managing and controlling your fixed costs. Remember, it is all done by measuring your fixed costs: if your fixed costs are 40%, you are living within your means, if your fixed costs are above 40% you will be putting yourself under financial strain, and if they are below 40% you will be in a surplus position. Therefore, if you want to accelerate your wealth, keep your fixed costs well below 40% mark and invest surplus.

If excessive debt is keeping your fixed costs high, formulate a debt free plan and do not go deeper into debt. Learn to live with cash. It is far more finite and when cash runs out, you know you definitely cannot afford to buy those extra purchases. If low income is your problem, consider all alternatives to increasing your income. These may include: part-time work, turning hobbies or crafts into cash or investing in additional training to further your career prospects.

Also, to decrease your fixed costs you may have to make some difficult decisions about way you live. Is house you are living in far too costly for you? Are you running two cars when one could suffice? Can you downsize anything now, which is costing you far too much money? Are you trying to live well above your present means buying clothing, accessories or electronic gadgets that you cannot afford? Are you a shop-oholic, and can never resist a bargain - regardless of whether you need it or not? Are your credit cards always to maximum limit and you cannot afford to pay balance? These are often difficult choices to make, but well worth it in long run. Remind yourself that you can have bigger house, cars, toys, etc - later, when you can better afford them. If you get a bigger mortgage to upgrade your house or borrow for a better car, you will increase your fixed costs. By keeping your fixed costs as low as possible, you will accelerate your progress to becoming wealthy. Your plan should always aim at decreasing your fixed costs below 40% by either increasing your income or decreasing your debt, or both. Once you have achieved this, use extra money to add to your savings and investments. This is guaranteed way to accelerate your path to wealth. Copyright © Ann Marosy, 2002

The 40%-30%-20%-10% formula is featured in The Money Program: Managing 6 Stages of Wealth. Visit: www.moneta.com.au

There are a handful of federal student loan consolidators and, right now, volume of loans they are originating is large, but manageable. Most consolidations are completed in 45-60 days. But, you can bet that number of people seeking consolidation is going to grow as deadline (June 30, 2003) approaches, and lenders will see an unprecedented number of requests that will most certainly bog system down to some extent. So, if loan consolidation sounds like a good idea to you, read on to see if it warrants your further investigation and, if it does, get your application in quickly.

Is Student Loan Consolidation Right for You?

Federal student loan consolidation is a great financial opportunity, but it's not right for everyone. To make best choice for you, you should consider following: Q. Can you take on a longer repayment term in exchange for lower monthly payments? A. For most borrowers, loan consolidation extends repayment term from standard 10-year (Stafford loan) term to up to 30 years, depending on your balance. A longer repayment term means that, unless you prepay your loan, you will pay more interest than you would on your unconsolidated loans. You can control your interest cost by choosing one or more of following: ·Request a shorter repayment term than your balance allows. ·Loan consolidation programs offer a number of repayment options. If you can afford it, choose an equal payment plan. You should always make monthly payments that are as large as you can comfortably afford, and an equal payment plan will cost you least because you are paying all principal and interest due each month. A graduated repayment plan will reduce your monthly payments in early years, and you might need to choose one of these plans to make ends meet, but they will cost you more in total interest. ·Prepay your loan whenever you can. Just send a note in to your loan servicer with your over-payment asking that it be posted to your principal balance. ·Don't get behind in your payments. Interest will continue to accrue on your unpaid balance, costing you more.

Q. Do you owe enough and have enough time remaining in your repayment term to really make a difference? A. In today's rate environment, regardless of indebtedness, most people who have graduated recently or have been repaying their loans for less than 5 years will benefit. To get a rough estimate of your savings with a consolidation loan, go to www.ConsolidateYourLoans.com, click on "Calculate My New Loan", complete simple worksheet and click "Consolidate".