“In today’s perplexing world of uncertainty, inflation, unemployment, stagnation, and recession can control of money, one wonders, be the sovereign remedy for all these ills?”

-Glyn Davies, History of Money

IF YOU SPEND every penny you make and then some, you’re never going to get ahead. It’s as simple as that. For most people, saving money requires some sacrifice. If that thought scares you, just remember that most things in life worth having are worth working for. Saving is the one trait all wealthy people seem to share. They have learned how to pay themselves first.

One of my all-time favorite books on money is The Richest Man in Babylon, by George S. Clason. It’s a classic, and I highly recommend reading it and adding it to your personal library. I think it’s amazing that the principles taught in a book written nearly 100 years ago still apply today. But it just proves that sound money principles are timeless. One of the lessons the wise mentor teaches his eager pupil in this book is that a part of all you make is yours to keep. What a profound concept!

Too often, every last dime of what we make is paid to the mortgage company, the credit card company, the department store, the grocery store, the piano teacher, and the liquor store. When everyone else has received their due, there is nothing left for us. If that’s you, your priorities are out of order. Wealthy people learn to pay themselves first.

Your goal in saving is to begin putting aside a minimum of 10 percent of your net monthly income. Over time that 10 percent is going to be used for three specific phases of saving. In order of priority, they are:

  1. Creating a cash buffer for emergencies that is equal to one month’s take home pay.
  2. Increasing free monthly cash flow to 10 percent of your net monthly income.
  3. Building a substantial nest egg to invest for a comfortable retirement.

Let’s take a look at each of the three phases in a little more detail.


Too many people live paycheck to paycheck. That’s not the way wealthy people live. The first step in becoming debt-free is to create a cash buffer for emergencies so an emergency doesn’t push you farther into debt. Saving one month’s take home pay is just a starting point. There are always going to be emergencies in life, and not just the ones that send you or a family member to the hospital. Tires blow out, cars break down, jobs get eliminated, and roofs leak. You can’t plan for every emergency, but I assure you they will happen, and generally at the least convenient time. If you have some cash on hand, it can help you deal with the emergency without doing it the old fashioned way of putting it on a credit card.

The goal of this phase is to create a cash account equal to one month’s take-home pay in the next 60 days or less. You may think this is an insurmountable task but I’ll share some simple ways for you to bulk up your savings below. We don’t want to delay paying off your debts any longer than is needed to build up a little reserve. If it’s unrealistic to save one month’s take-home pay in the next 60 days, then start with something more realistic, like $500-1,000. That’s enough to deal with most minor emergencies without taking your focus away from getting out of debt.

I don’t want you to delay starting your rapid debt payoff for any more than 60 days. I honestly believe you can get a month’s pay in reserve in a matter of days or weeks if you really set your mind to it and follow some of the strategies I’ll share with you below. Most people have hundreds and some even thousands of dollars available to them in some very obvious—but often overlooked—places.

You should set a goal to find yours and build your cash buffer in the next 30 days. I know you can do it if you focus and sacrifice. At that point, you need to move to phase two, which is to free up some cash flow from your current monthly expenses to accelerate your debt payoff. In fact, you can even start working on phase two at the same time you’re building your cash reserve. These two phases focus on slightly different parts of your financial world, so it’s entirely possible, and recommended, that you tackle them as quickly as possible.

When it comes right down to it, you need to start living off last month’s income rather than this month’s paycheck. That’s the buffer we’re looking for. Once you get debt-free, you’ll want to increase that cash buffer to 3-6 months of take-home pay. That will enable you to weather almost any emergency that comes up without going into debt to do so.

For example, if you bring home $2,500 each month after taxes, you should build a cash emergency fund of $2,500 as quickly as possible. This money needs to be liquid and easily accessible in the event of an emergency. You can keep it in a bank or brokerage account money market fund that earns interest, so it’s growing while it’s not being used. Don’t put this money into anything that has a penalty for withdrawing it, like a CD or some mutual funds. I’m all for making money grow, but the number-one priority of this money is to be readily available in the event of an emergency.

However, don’t leave this money in a shoebox in your sock drawer either. That’s probably too accessible and will make it too easy to get at if you are tempted to go on a spending binge. If you keep this money in a bank where you have to physically go to withdraw it, you’re more likely to think through things before acting emotionally. On that drive to the bank, you may figure out a way to deal with your challenge without using your emergency money or going deeper into debt. Set up a simple savings account that is separate from your checking account so you’re not tempted to spend this money for anything other than a bona fide emergency (and so you can’t get at it with the swipe of a debit card).

Many people have a little money put away in their IRA or 401K, and they may be tempted to skip this part of the process because they view that money as their cash buffer. If you have some money saved in a qualified retirement program, don’t touch it. Taking money out of those plans before retirement can be costly.

There are usually tax and other penalties associated with early withdrawals, so only use those funds as a last resort. Get a separate cash buffer started today so you can leave those retirement funds alone to continue to grow tax deferred or tax free.

I don’t want to minimize the importance of saving for retirement and investing, but all things should be done in their proper order. Making 5-10 percent on an investment while you’re paying 18-21 percent on credit card debt makes no sense to me. That debt must be retired before your investment has any real value to you. Until then it’s what I call “vapor wealth.” It looks good on paper, but when you look at your whole financial picture, it’s not really there.

I’m convinced that most people can get a big start on their emergency fund by simply getting rid of a few things they own that they don’t use or need. If you’re like me, things just seem to accumulate around my house until I reach the point where I need some space and I realize I’ve got too much stuff that I don’t use. Most of this stuff is probably still in good condition and would be valuable to someone. Honestly, selling it off is not much of a sacrifice at all. This is an easy sacrifice compared to many other things.

The Internet is an amazing tool for finding people who will pay for your clutter. From online classifieds to eBay, there are hundreds of places to match up buyers and sellers for almost anything. If you’ve never sold something on eBay, you should get registered and learn how to do it. Selling on eBay is a skill every adult should have. It’s the one place where you’ll find an almost instant market for any item. When you post an item for sale on eBay, you can literally turn it into cash in a few days. That’s a powerful tool you can use to turn “things” into cash. It’s easy to use, and eBay has great training resources for new sellers. When I want to sell something for the best possible price, it’s my first choice.

You don’t have to be a computer wiz to make money selling stuff online. I’m no tech genius, but I’ve personally earned thousands of dollars using my computer and the Internet to sell my unwanted stuff.

Those who know me know that I like cars. It’s one of my weaknesses. And, when I get a car, I always like to put new wheels on it. I think the wheels make the car. This is one of my wife’s biggest peeves. She thinks I’m a nut. I’ll admit it’s not a wise financial decision to change the wheels and tires on a car when they’re brand new. By doing it, I’m basically adding cost without increasing value. But there’s just something about having a unique set of shiny chrome wheels on my car so it doesn’t look like all the other cars of the same make and model on the road.

All the old wheels and tires end up out in my storage shed or in a corner of my garage. I always think I’ll just include them in the deal when I sell the car, but in the meantime, they take up space and serve no real purpose. Awhile back, I ran out of room in the storage shed, and my wife suggested it was time to get rid of some wheels and tires. She suggested I let my oldest son list them on a free, online classified site operated by a local radio station. I thought that listing them would make her happy, but I had no expectation that anyone would actually pay money for my old, used, stock wheels and tires.

Boy, was I wrong! My first set of wheels and tires sold in a few days for $400. It was the easiest money I’d ever made. It didn’t take me long to put the rest of my inventory up for sale. I’m happy to report that every set I’ve listed for sale has sold in a matter of days. I’m batting 1,000 when it comes to selling used wheels and tires. My shed is now looking better and so is my emergency fund. Everyone’s happy, too.

Here are a few ideas that may help you jumpstart your emergency savings fund:

  • Have a garage sale. I hired my kids to do all the busy work like putting on the price tags and placing signs around town. I placed an ad in the local newspaper and in the free online classifieds, with the dates, time, and address. My wife and I contributed some tools, small appliances, and our old bikes and clothes. As motivation to clean out closets, I told the kids they could keep the money they collected from selling their own stuff. You wouldn’t believe all the toys and old bikes they contributed to the cause. We included some old baby furniture and clothes, and even a few old, unopened wedding gifts. We collected a couple thousand dollars in a single day! The kids can’t wait for next summer to have another one.

If you’re half the pack rat I am, you may be able to reach your emergency fund goal in a single day with a garage sale. I can honestly say that I miss nothing that we sold. I have more space and more money, both of which are more valuable to me than a bunch of old stuff I hadn’t looked at in years.

  • Sell your second car, boat, RV, motorcycles, pets, guns, or collectibles. I realize I’ve probably named something in that short list that’s sacred to you, but this step is about sacrifice. When you consider the cost of these luxuries and how much they are worth, you’ll see that you can make some great progress with a few simple sales. The peace of mind a debt-free life will bring makes it easier to make these kinds of sacrifices. It won’t take long before you realize you really can get along without those little extras. Plus, when you see the immediate impact the money they bring in has on your debt problems, you’ll be looking deeper for more ideas. If you’re not willing to part with a few of these luxuries to reduce your debt burden and money stress, you must like stressing over money way more than I do! By trading these things for money now, you’re ultimately trading them for time and money later when you’ll be able to enjoy them more.
  • Downsize your living arrangements. In extreme cases, you may need to consider selling your house to reduce your debt burden and free up some cash to help with your other debts. This is not an easy decision, but it’s one that may be necessary to get back on solid financial footing. I remember when I was living in a small basement apartment as a newlywed college student. We bought all our furniture at the local thrift store. It wasn’t new and it certainly wasn’t the latest style or color, but it was clean, functional, and cheap. We didn’t know any better, and we got along fine. I can’t say I was any happier when I moved into the large home I now live in, which is furnished with the best of everything. It may be nicer than my old apartment, but I don’t sleep any better than I did and the food still tastes the same, even though the kitchen is bigger and nicer. It’s all relative. If you really need to make some immediate progress, you may have to swallow your pride and downsize your housing requirements.

Unfortunately, houses are not always a great investment like they once were. For many, a house is now a lifestyle choice, not an investment. Housing is often the single biggest expense in most of our budgets, which means it’s also possibly the area with the most potential for savings to apply toward your debts.

The point here is that you may need to face the harsh realities of your situation and make some hard decisions. Remember that if you make the sacrifices now, they will only be temporary. When you’re back on solid footings and have ample financial reserves, you’ll then be able to make decisions to enhance your lifestyle without adding to your mountain of debt.

  • To summarize, in the next 30 days you need to put aside an emergency fund equal to one month’s take-home pay (if possible) in a safe, liquid place, like a bank savings account or money market fund. After you have all your consumer debts paid off, you’ll want to increase that fund to 3-6 months of your take-home pay. Emergencies happen. And when they do, you’ll be prepared to deal with them without increasing your debts.


When I teach people how to analyze investments in the stock market, one of the things we talk about is looking at the “free cash flow” of the company. In my experience, free cash flow is one of the key drivers of business growth, and it’s going to be one of the key drivers in your personal quest for a debt-free and wealthy life. “Cash flow” is the term used to describe all the income a business or an individual generates. “Free cash flow” is the portion of that income that is left over after we pay our basic monthly obligations.

In other words, free cash flow is the money we have available to save, invest, or spend on discretionary items. Some people call this their discretionary income. Most people who are in debt have made the choice to spend their discretionary income—or free cash flow—on unnecessary items. We’re going to use your free cash flow to accelerate your debt payoff. Our goal for this phase is to free up at least 10 percent of your net monthly income.

If you just keep making minimum payments on all your debt, you’ll never retire them and you will continue to be enslaved to your lenders. The goal of this phase is to create some additional cash flow from your current income to add to your minimum payments and eliminate your debts faster. You begin this phase after you have an adequate emergency fund in place.

If you bring home $4,250 per month in total income, I want you to trim your monthly expenses in order to create $425 in free cash flow from your current take-home pay to create what I like to call a “debt hammer” to crush your debts faster. You’re probably muttering to yourself that you don’t have enough income to make ends meet as it is, and coming up with another 10 percent of free cash flow from your already stretched budget is impossible. But I want you to try and I’m confident that if you make a few sacrifices, you can do it.

There are two primary ways to create free cash flow: increase your income, or cut your expenses. Let’s look at each of these areas and try to identify exactly where that extra 10 percent is going to come from. Let’s first look at your income.

Bringing home more money than you currently make is one way to find some extra cash. Here’s a list of ideas to help you immediately increase your income.

  • Ask for a raise. If you’re doing a good job, you may have some leverage to get an increase in your salary. Good employees are hard to come by. Getting a raise may be as easy as asking. You’ll never know for sure until you ask. So ask today!
  • Ask for a promotion. For the same reasons just noted, it’s worth asking. It may not happen immediately, but showing some ambition to your superiors may help them recognize the great job you do and your desire to progress in the company.
  • Work overtime. If your company allows, volunteer for overtime or holiday shifts. You’ll likely get paid a higher wage for overtime or holidays, so it’s even better than working regular hours.
  • Get a second job. If the opportunity to work more isn’t available with your present employer, look for a second job to work evenings or weekends. There are lots of companies looking for responsible adults to work part-time.
  • Have your spouse take a job. Aside from personal choice, many families need two incomes to survive. Your situation will dictate whether this is a viable option or not. Remember that sacrifices can be temporary if you put all your focus and effort into getting out of debt and staying out of debt. If you’re getting by right now on one income, this second paycheck may be able to go 100 percent toward your debts.
  • Put your kids to work. Learning to work is a valuable lesson all kids need to learn at a young age. And, while you may not believe it now, they will take great pride in helping the family. There are plenty of opportunities for kids to work—babysitting, caring for pets, and mowing lawns, to name a few—and then they can cover some of their own expenses and reduce the burden on the family’s monthly budget.

Now let’s turn our attention to cutting your expenses. You’ve probably heard a million times that you need a budget if you want to control your money and your spending. Everyone talks about a budget, but few people really take it seriously and create one. Of the few who actually do create a budget, not many then use it to help them get the upper hand on their money problems. A budget is a powerful tool if it’s created and used properly. A good budget is like a treasure map that leads to financial freedom.

Let’s talk for just a moment about keeping records.  Part of the problem for many people I meet who struggle with debt is that they simply don’t know where there money is or how much debt they have.  Keeping good records will help you stay on top of things and make faster progress to your goal of a debt-free wealthy life.  It’s easier than you might think with some of the great new technology that’s now available.   I’ve devoted an entire chapter (Chapter 10) to show you how this technology can literally put your 60-Day Money Miracle Plan on autopilot.

I’m convinced most of us would make the fight financial choices if we could simply see the impact of our choices before we make them.  These powerful tools give you that capability and I believe they are indispensible if you really want to get on the right track financially.  Without these kinds of tools, you’ll continue guessing about the impact of your financial choices and when you guess, you’re bound to make mistakes.

When you use a personal financial management tool, like MoneyDesktop, you’ll be able to quickly and easily create a workable budget that will serve as your own personal treasure map. It’s impossible to keep track of all this stuff in your head. If you think you can, I’m here to tell you that you will fail. You must create a printed budget to follow for this step. It’s not going to take much time to create or follow, but it must be written if you really want it to work.

Now go through this list one line at a time and identify the areas where you can free up some cash flow from your current expenses. Every time you find an area you can lower, put the new lower payment in the next column and then calculate the savings in the next column. The final column is where you keep a running total of your monthly cash flow savings. Keep in mind; we’re shooting for 10 percent of your current take-home pay in free cash flow.

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Here’s a list of 29 ideas to help you cut your expenses and create free cash flow in your budget.

  1. Temporarily suspend all contributions to your retirement accounts, like your 401k and IRA. As I said earlier, it makes no sense to make 5-10 percent on an investment and continue to pay 18-21 percent on a credit card balance. This holds true even if your employer matches retirement contributions. This change won’t be permanent, but you must do it.
  1. Call your credit card company and ask for a lower rate or payment. You’ll never know if they will work with you until you call. You may be pleasantly surprised that they will lower your rate or payment just because you asked. If they ask you why, tell them you’re considering transferring your balance unless you can get a lower rate or payment. They may do it just to keep your business.
  1. Cancel your cable or satellite TV service. I love my news and sports, but, just like you, I can get it all online for free.
  1. No more trips to the car wash. You have a hose and towel at home so get busy.
  1. Wear your shirts one more time between dry cleanings.
  1. Stop eating out for breakfast, lunch, and dinner. This is often one of the biggest cash flow creation areas. Take a sack lunch to work, and eat at home before leaving for the office.
  1. Take a break from golf. I can’t believe I put this on the list, but golf isn’t cheap. You just have to trust me on this one. Your game will improve more by practicing your chipping in the back yard and spending an hour on the free putting green at the local course than spending $50- 150 per round to play. When you’re back on your feet financially, your game will be better too.
  1. Mow your own lawn this summer. I love the smell of fresh cut grass and the look of a well-manicured yard—especially when I’ve done it! If you live in an area where it snows, shovel your own driveway and walk this year.
  1. Adjust the deductibles on your insurance policies. You can save instantly by increasing the deductibles on your insurance policies. Rather than keep them at the minimum of $100-250 that most insurance companies allow, consider going up to $500-1,000 to dramatically lower your premiums.
  1. Drop the collision and comprehensive coverage on your automobile insurance policy and keep just the required liability coverage. Collision and comprehensive coverage are usually the most expensive parts of the policy. You may not be able to do this if you have a loan on your car because the lender will require it to protect their collateral. Call your agent and tell them you need to lower your premium, and they can explain your options.
  2. Consolidate your insurance policies with one company. Most insurance companies will give big discounts when you have both your home and auto insurance with them.
  1. Get your books at the library rather than the bookstore.
  1. Cancel the gym membership. Spend $10 on some used exercise videos and work out at home. I believe that physical exercise will help make this journey to financial freedom easier and less stressful. You can also walk around the block or take a bike ride to stay in shape

14.Try a “staycation” this year instead of a vacation. Visit somewhere close to home and save money on gas or plane tickets.

  1. Go with your natural hair color for a change. People will think you spent big money for your new color, but it’s all natural. If you have kids, buy a clipper set at Wal-Mart and cut your kids’ hair. Anyone can do a crew cut!
  1. Buy generic drugs. They really are no different, except in price. Just because something is more expensive doesn’t mean it’s better. Trust me on this one.

17.Pay your bills on time. Late fees and service charges are a very unnecessary expense. Get organized and save a ton of money that you can spend on something valuable, like getting out of debt.

  1. Buy the store brands rather than the national brands at the grocery store. Sure, they may taste a little different, but they will still fill you up as they save you money.
  1. Reduce your child-care expense. Spend more time with your kids and save money at the same time. That’s a decision that’s good for mom, dad, and junior.
  1. Ride a bike to work. With gas hovering at $3 per gallon, a little bike ride around the neighborhood can save a bundle. Leave the car in the garage and driveway rather than taking it out for a trip of less than one mile. You’ll save on gas and get in shape at the same time.
  1. Carpool or ride public transportation at least once a week or more. Your buddies at work want to save money on gas just as much as you. It may not seem cool to carpool, but if you bring it up, I’ll bet you’ll be amazed at how fast you get a car full of co-workers.
  1. Use Skype for long distance calls to friends. This is a free Internet phone service owned by eBay. It’s very easy to use and totally free. I use it to call home when I’m on the road and overseas. To be totally free, the person you call must also have a computer and a Skype account, but again it’s free for both parties and a huge money saver if you talk often to someone outside your area code.
  1. Stop smoking. Save a bunch of money and do your body a favor at the same time.
  1. Adjust your thermostat. A few degrees up or down will mean instant savings on your utilities. You might also consider having the utility company come to your house for an energy audit. It’s usually free, and they can give you a few energy (and money) saving ideas. They often offer discounts to convert to average usage billing where you pay the same each month even though your usage may vary. It’s also a great way to stabilize your average monthly utility costs too.
  1. Cancel all optional phone services on your cell phone and landline.

Things like caller ID and call waiting are expensive options that you can live without until you’re debt-free. You may even consider canceling all but one phone account for your home or family.

  1. Brew your own coffee. When you’re trying to get out of debt, you can get by without $5 lattes.

27.Watch a video. You can rent a movie at the local McDonald’s from the Redbox for $1 that the whole family can watch rather than paying admission for each person at the local theater. You may not be the first one to see the new shows, but they will still be new to you when they come out on video in a few months.

  1. No more lottery tickets. The odds are against you in this game. Why waste the money when you get a guaranteed return by saving and applying that money to your debts.
  1. Drink lots of water. Your dinner and grocery bills will drop immediately if you skip the liquor and soda. Your cash flow will increase, and there’s a good chance your waistline will decrease. You win both ways.

I could go on, but you get the idea. You can easily find the extra money in your budget if you change a few things and make some sacrifices. You need to free up 10 percent of your take home pay as quickly as possible to add to your current debt payments to start the rapid debt elimination strategy you’ll learn in the next step.


Once you have all your debts paid off, the free cash flow you now have can be used to build up an impressive nest egg that you can invest for retirement and use to enhance your lifestyle.  This part of the process is what you’ll be doing for the rest of your life, after you create your own 60-Day Money Miracle.