Whilst it is important to become relaxed and carefree with our financial matters, this does not mean careless. We become carefree with money when we know that it is not a scarce resource, we work on increasing our income, we invest a little time on a regular basis to plan and review our finances, and we systemically set aside part of our earnings regularly to build our savings and investments for future. We are careless with money when we don't keep track of what we are spending and squander money on things that are wasteful, extravagant and not needed. I often compare money to water, another important commodity in our lives. Both are essential and critical to our survival, however, we rarely worry about water in same way we do about money. We systematically set aside water when it rains in dams and reservoirs to provide us with water ‘on tap' when we need it. We are careful not to waste water, however, at same time we can relax and not have to worry about it on a day to day basis. When we apply same reasoning to managing money we are well on way to becoming wealthy.

After we resolve our beliefs about money and realise that becoming wealthy is within our possibilities, next step is to put aside a little time to set goals and do some planning. Planning does not have to be an arduous affair. It takes approximately one to two hours upfront to prepare your plan and, thereafter, an hour a month to review or revise it.

The first part of your plan is to set some goals. For example, accumulating $500,000 in income-producing assets in 15 years is not a difficult goal to achieve. If you save $170 a week into investments returning an average of 15% per annum for 15 years, you will have your half a million dollars. Goals will help you focus on future and increase your willpower to prevent overspending. The more concrete you make your goals, more committed you will be to achieving them. Set timeframes and break them down into manageable steps, as in example above, to make your goals more realistic and attainable.

Along way, however, we also need to manage our day-to-day spending to ensure that we set aside required savings to achieve our goals. In designing Money Program, I used a simple, effective formula that everyone can apply to easily manage their finances. I call this 40%-30%-20%-10% rule. This formula is used to measure your expenditure and cash outflows. You divide your expenditure into four categories and calculate total of each category as a percentage of your net (after tax) income. The four categories are Fixed Costs, Variable Costs, Discretionary Costs and Savings.

Fixed Costs are your essential costs that are known and have to be paid on a regular basis. For example, mortgage or rental payments, personal loans and credit card repayments, insurance, council rates, and school fees. These costs are usually determined by your lifestyle choices, size and cost of your house, cars and major possessions, and therefore difficult to change without making major adjustments to way you live. However, because fixed costs are comprised of debt and committed payments, they are critical in determining your ability to create wealth, as well as your capacity to lead a stable financial lifestyle. If your fixed costs are too high, you will probably be living from payday to payday worrying about next large bill that arrives. If your fixed costs take up too much of your weekly pay packet, there will be less to spend on other essential costs, and often little for luxuries - unless you go further into debt.

There's a similar lesser-known boom happening in world of federal student loans, because refinancing or consolidating them can also help borrowers save thousands of dollars in interest expense.

The two most common types of federal student loans available today are Stafford loans (for students) and PLUS (Parent Loans for Undergraduate Students). The variable interest rates on these loans are lowest they have been in over 30 years - currently, Stafford loans carry a variable rate of 3.46% while student is in school, deferment and grace, and 4.06% in repayment. PLUS loan interest rates are currently 4.86% regardless of student's status. If those rates would hold over standard 10-year repayment term, that would be end of this story. But, they won't hold. Federal student loan interest rates reset every year on July 1; Stafford loans rates can climb as high as 8.25% and PLUS cap is 9%.

The great news for borrowers is that consolidating these loans locks in a low interest rate. The formula for determining a Federal Consolidation Loan interest rate is to take weighted average of interest rates of loans borrower wishes to consolidate and round it up to nearest 1/8%. So, for example, if a borrower had only Stafford loans in repayment issued since July 1, 1998, variable interest rate on these loans is currently 4.06%, and fixed interest rate for that borrower's consolidation loan would be 4.125%. That's 4.125% for life of loan - which can be up to 30 years depending on borrower's level of indebtedness.

Now, that's a deal every person with student loans should be considering right now. Because on July 1, 2003 rates will reset.

And there are other advantages to federal student loan consolidation. With extended repayment and graduated repayment options, borrowers' monthly payments can be reduced by 50% or more - especially helpful to recent graduates trying to make ends meet. And, if a borrower has multiple lenders and multiple monthly payments, consolidation lets borrower make a single and (generally) a lower payment to a single lender - simplifying bill payment and improving cash flow. Finally, federal student loan consolidation is free - there are absolutely no fees to consolidate.