Most Americans dream of retiring without worries, free of debt, and with enough money to travel and live comfortably.  However, at age 65, 97% of Americans don't have enough  optional income to write a check for $600.  Only three percent are actually financially free.

According to a program offered by Melaleuca, Inc., people who get out of debt and save every month can be millionaires when they retire - if they start early enough.

On the other hand if you are near retirement and have not built up a nest-egg, it is still worthwhile getting out of debt and saving what you can.

The following seven-step program incorporates some of Melaleuca's ideas, found in a 2004 booklet entitled "Financial Freedom."

Step 1: Give back

Wealthy people give back to the community.  A rule of thumb is 10% of your earnings as donations to churches, non-profit organizations, and charities.  Giving first to others empowers you and "deepens your relationship and understanding of money. "  According to the pamphlet, it "elevates your financial peace" and "makes you less selfish." 

Dave Ramsey said, "The great misunderstanding, the paradox, is that we believe that the way to have more is to hold on tightly." 

Melaleuca CEO Frank VanderSloot said, "I believe in the law of contribution: when you give to those in need, you prosper."  Malachi (3:10) said when we tithe God opens the windows of heaven  and pours us out blessings "that there shall not be room enough to receive it."

To get out of debt you may need to decrease your expenditures and increase your income.  Look for ways to reduce costs like getting rid of a second car, selling toys like boats and skidoos,  reducing phone and Internet expenses, becoming more self-sufficient, eating more at home and growing a garden.  One suggestion is when eating out buy share an entree.

Increasing income sometimes is harder than reducing expenses, because you may not choose to give up quality time with your family. You might look for ways that as a family you can make extra  income and build relationships at the same time.  One family grows berries and cans jellies; another has a family lawn care business.

Step 4:  Put aside money for reserves

Put into short term savings monthly reserves for lump sum payments.  Take your known expenditures from last month, last quarter or last year and save each month to pay for these expenditures.  Anticipate new expenditures for this year. Prorate the total so you are saving a little each month.  Save for car or home repairs, house insurance, medical expenses, gifts and vacations. Plan for taxes, furniture and clothing purchases. 

Step 5: Power roll your debt

Pay an extra $200 from the money you have saved from reducing expenses to pay down your debt.  List all of your debt and pay down the smallest amount first, using the $200 to accelerate the payment.  When you have paid that off, take the $200 and the monthly payment for the bill you paid off and put it toward the next lowest debt.  Pay off the next lower bill, adding the money you saved by paying off the previous debt.   Pay off the minimum amounts on higher bills as you continue to pay off the lower bills.  Carry on until you have paid off all your debt, using  this accelerated schedule. Negotiate and arrange lower payments at lower interest rates.  Include your credit card debt, your auto loans, student loans, and mortgage on your list.  Calculate the total months it will take to pay off all your debt at the accelerated rate.  Celebrate being debt free even if it takes 10 years or 15 years.  Track your progress on a month basis.

When you are finished, take your accelerated monthly payment and put it into savings.  You will be amazed at how much you save in interest and how much you can save toward retirement if after paying off your debt, you use the accelerated payment for retirement savings.

Step 6: Subtract your regular monthly payments

Finally,  subtract your regular monthly payments from the income you have left.  These expenses may include utilities, monthly insurance payments,  phone and Internet connections, and auto insurance. 

Step 7: Pay cash for the balance

Studies suggest that you can save up to 20 percent on food bills if you pay cash.  Somehow you are less likely to part with cash than if using a debit card. 

As well as food, in this fund you might include gas for vehicles, entertainment and weekly allowances.  By paying weekly allowances you can leave it up to the recipients to budget their pocket money.

Subtract  all your expenses to this point from your income to arrive at this amount.  Divide the amount by the number of weeks to get a weekly amount.  (Use four weeks for 28 days or 4.3 for 31 days in a month.)

Examples of how this system works are found on the attached web pages.

John Fisher, April 2004