There is a great deal of discussion about “toxic assets” and how they have dragged our nation into its current financial dilemma. But in my opinion, the “toxic assets” are only a symptom of the true problem.  The root issue is really the mindset of the people who made terrible decisions.  Those horrible decisions resulted in the mess that you and I are now tasked to clean up.

We can’t do much about that.  What’s done is done.  And we can’t really do much about other people either.  We can wring our hands all day long but other people are simply beyond our control for the most part.  We can do very little to control them.

What we can control, however, is ourselves and the decisions we make about our life and finances.  I bring this up because I think we have an unbelievable opportunity to improve our financial lives right now.

Do you have any financial behaviors that need to be cleaned up? If so, now’s the time to do it.  Really… take a minute to think about it.

Is your spending out of control?

Do you have a financial plan?  If so, are you sticking to it?

Do you track your average monthly spending?

Do you let your emotions impact your investment decisions?

If you answered “yes” to any of the questions above, don’t gloat when you read about the trouble that AIG and other financial firms face.  You’ve got some “toxic assets” to clean up too. But unlike these sloppy giants, you don’t need a government bailout.  There are simple steps you can take to detoxify your financial situation.

1.  Identify any trouble spots. Take soil samples.

Review the questions above.  Is the issue that you spend too much? Has your income dropped because of the economy?  Do you invest emotionally?  Are you & your spouse or partner on the same page when it comes to money or do you constantly bicker about bucks? Do you have a financial plan that you stick to?  Do you know where you are going financially and how you’re going to get there?

What exactly is the problem?  Even if your answer is, “ALL OF THE ABOVE” write down exactly what the problems are.

2.  Assemble the equipment & tools to fix the problem.

Assume for a moment that your income has been slashed as a result of the economy. As a result you are burning through your savings and your financial plan went up in smoke.  You’ll need a few different tools.  First, you need to know how much you spend each month on average. I wrote a nice little piece about that at Frugal Dad.  (If you subscribe to my site, you’ll get a detailed white paper on how to really pinpoint what your spend and it will only take you a few minutes each month to do).

Next you need to know how much savings you have and what your income is.  This way, you can easily compute how long your money is going to last.  For example, lets say you spend $5000 a month after taxes.  You have $25,000 saved and even though you lost your job, your spouse still brings home $2500 each month.  That means that you can draw $2500 each month from your savings.  Add that to the $2500 your spouse brings home, and you’ll have enough money to last for 10 months.

3.  Send in the clean up crew.

Make a plan and execute it.  You have 10 months to find a good job so get going.  Take on part-time work if you can but make sure to leave time for your job search. 

You do need to have a “plan B” in case things don’t turn around in 10 months.  That may include taking more drastic action like taking on renters or moving back in with family.  They may be hard steps to take but remember its not the end of the world and its not forever. Tomorrow is another day.  But don’t wait for 10 months before you create your “plan B”.

Problems are solved by brave people and Wealth Pilgrims are among the bravest.  What toxic spills are you going to clean up now?  Do you have the tools you need?  What other resources do you need?  What questions puzzle you right now?

Like this article? You will love getting my free brilliant financial updates! No spam, and I won't give your email address to any other person or company.That's a personal promise. Neal Frankle, Certified Financial Planner, Los Angeles, California

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