TOPIC 9

The academic arena across the globe is in an upheaval over digitalisation of

education. The present-day teachers are at crossroads; they live in a digital world
where information flow is rampant, but its assimilation is too low. Present-day kids,
even from their kindergarten classes, are familiar with LCD projector, Power Point,
internet, etc. They even handle touchpad and mouse without any training. It seems
these characters have become an inherent quality among the new generation.

Technology has revolutionised the educational scenario from primary to higher

education. Now, nursery rhymes are not recited by the teacher; instead, it is played
in a computer and projected. Even the dances for kids are shown through video.
The teacher just sits as a technician.

During our school days, when the teacher tells a story, we used to imagine
characters. For example, when the teacher depicts the picture of Bhima in
Mahabharata, all the students in a class visualise different picture about Bhima. But
if you ask the present-generation schoolchild to draw the picture of Bhima, he
would draw the caricature of cartoon character Chotta Bhima.

Creativity suffers

Students are losing their capacity to imagine, thus adversely affecting their
creativity. Parents seem to be attracted towards this technology transformation and
are inclined to send their wards only to schools having smart classroom. Smart
classroom means less interaction with either teachers or friends and more addiction
to digitalisation.

From childhood itself, our students are losing personal contact with teachers and
friends. Even friendship is made only through social networking websites or through
SMS. Their emotions, affections, and feelings are all expressed through digital
communication.  This attachment with digital world continues at their degree-level
and postgraduate-level through online courses and virtual labs. Is digitalisation
good? Or, is it harmful? This is a perplexing question. There are many proponents
and many opponents.

Language

In higher education, one of the major harm that digitalisation has caused is in the
usage of languages, including English and regional languages. Evolution of language
occurs catering to the need of the computer. If a computer cannot understand a
word, we modify it accordingly. Present-day students lose contact with words and
many do not know how to construct a sentence. It is really pathetic that even a
postgraduate student or a Ph D student does not know how to write a request letter
or a leave letter. They understand only the SMS language.

If there were no spell check and grammar check in Microsoft Word, many would
have suffered badly. No one even cares whether the error shown in the Word
document is right or wrong. Sometimes correct word or sentences are written
wrongly, as they click the option shown in the computer. Similarly, even a
Mathematics student does not know how to use a log table, as he has been
addicted to calculators from his schooldays itself. For doing even simple
calculations, the students need calculators.

LCD-based teaching  

Technological intervention has created a paradigm shift in the teaching-learning

process. In many colleges, teachers have shifted from blackboard teaching to LCD
teaching mode, which is easy on a teacher’s point of view and attractive from the
point of students. A major drawback of this is that teachers spend less time on
preparation and updating of topics. Once a slide is prepared, it is for their lifetime.
Even students find this LCD-based teaching more comfortable as it contains
minimum points with less explanation, so that they can easily digest.

Dependence on internet

The students do not like to read books, and prepares for the examination from the
Power Point either provided by the teacher or downloaded from internet using
GOOGLE. The students are so addicted to GOOGLE that they are not even willing to
check the reliability of the information gathered. Once, when I gave an assignment
on Plant Development for a student, she wrote whatever information she could
gather from GOOGLE. When I read it, I found many mismatches as she copied
scientific and literary information together. The students are not able to analyse the
correctness of the information gathered. They do not know how to correlate the
gathered in formation. The teacher who teaches the minimum has become the
popular figure on campuses, and, accordingly, teachers also are changing their
mode of instruction, partly because of convenience.

The conventional libraries, with huge buildings and having different sections
harbouring books on varied subjects, are being slowly replaced by digital library.
Digital library has already become the accepted part of present-day higher
education. The students are adapted to read the softcopy of textbooks and other
reading materials. Many institutions have even stopped subscription of hardcopies
of many journals and magazines. Even the publisher prefers e-journals and books,
as the cost of publishing hardcopy is high.

A major advantage of digital library is that it can be accessed from any part of the
world. The e-journal consortium of UGC, for example, has been of great use for
many students in remote places where there is no proper library facility.

Online courses 

Many universities have started massive open online courses (MOOCs) and even
virtual labs. The e-Pathashala, an initiative of UGC, and ICT-enabled courses of IITs
are the perfect examples. Virtual labs have created a universal lab for everyone.
Students can understand the basic functioning of most of the high-end experiments
through virtual lab. They can even do practical from any part of the globe, and
teachers can monitor them sitting in any part. One of the potential benefits of
MOOCs is the ability to make frequent updates to reflect changes in technology or
the thinking on a subject, which will otherwise take more than a decade to appear
in a textbook. The discussion boards available on the MOOCs platforms can produce
intense debate on a particular topic.

Even though online lectures by video are fine for conveying facts, formulas and
concepts, but they themselves cannot help anyone learn how to put those ideas
into practice. Nor can they give the students experience in planning an experiment
and analysing data, participating in a team, operating a pipette or microscope,
persevering in the face of setbacks or exercising any of the other practical and
social skills essential for success in science. You only understand something when
you know how to do it.

Practical skills 

Almost by definition, practical skills have to be acquired through experience. They

require the hands-on, problem-solving activities that have traditionally been the
domain of laboratory courses, field trips, internships, and, eventually, project work
in the lab of a more senior academic. In the science subjects especially, the
standard vehicle for teaching practical skills is the lab course. Labs are places where
students get an opportunity to engage with real lab equipment, to analyse
authentic data, and to experience the wonder of observation.

But, unfortunately, many of colleges do not have sufficient facility to do all practical
experiments, and the students are forced to train in experiments that are needed
for their university examination. This lapse in our system could be rectified using
virtual labs. Many experiments in biochemistry and molecular biology that need
costly chemical and instruments could be carried out using virtual labs. Similar to
working scientists, the students can collect real data from remotely controlled
instrument. Even though these cannot be a replacement for a real science lab, it is
better than not doing anything. At least when the students get an opportunity to
see the real instruments, they would be able to understand the basic mechanisms.

Digital revolution

Transition is part of human civilisation and there will be objections to a new

technique at every stage of our civilisation. This century, fortunately or
unfortunately, belong to digital technology and its influence will surely linger in
academia. Society has embraced the internet as axiomatic to individualised
learning, personal empowerment, and cultural evolution and, more recently,
revolution. People born after 1990 have never known life without the internet; for
them, it is as integral to learning as it is to their social lives. Even religious sermons
are carried out through online or digital resources. All aspects of education – from
information acquisition to adaptive learning – have been forever altered by
technology.

One major apprehension about virtual labs and examinations is that malpractice
may take place and hence may be difficult to judge the quality of students. On the
contrary, digitalised examination will reduce the malpractice by the students as well
as the teachers’ point of view. Even if some manipulations are made, one could
easily be apprehended.  The pace of technological change has generated much
soul-searching about how internet-delivered courses will change the art of learning.
It will make higher education more accessible by lowering its cost and enhancing its
impact across our great and highly diverse society. Technological advancement in
education may necessitate transformation in teaching community, not the
replacement. 

FINANCIAL FREEDOM

You can shorten the path to early retirement if you start with the right
strategies.
MORE

The Simple Formula That Can Help You Achieve Financial Independence

8 Ways to Teach Your Kids to Be Financially Independent

Ever since I retired at age 50, I’m often asked how I managed to reach
financial security. Looking back, I see that the key factors fall into four
categories—family support, career choice, money management, and
personal habits and attitudes. Here’s how you can use these building
blocks to reach your goals.
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Start from a Strong Foundation

Some of us were fortunate to start out in families that instilled integrity,
prudence, and hard work. If that’s your experience, you can be grateful.
But, if not, then it’s still within your power to cultivate those qualities
now. Not only will that create the conditions for your own financial
success, but it will benefit everyone around you as well.
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Throughout you will need patience. Typically the personal and financial
decisions that will pay off in the long run require sacrificing a little today.
Patience helps you live with the reality that true rewards usually require
some short-term discomfort.

Choose a Career Wisely

Your choice of career is one of the most important decisions you’ll ever
make. You need to love your work if you want to be great and prosper
from it. So pay attention not only to your gifts, but to what makes you
enthusiastic about getting up in the morning. Then, find a career path
that plays to those strengths.

If you’re just starting out, and it suits you, a high-paying career in a

technical or professional field will clearly advance your cause.
Competence in math or technology can be a first-class ticket to building
wealth. But, if that’s not possible, at least be aware of the financial
implications of your college education and early career choices. A
graduate in an esoteric major with five digits of student debt starts out
life doubly handicapped. You can pursue your passions, integrate them
with a professional track, and stay out of significant debt—but only if you
make informed choices.

If you’re already in a career, look for mentors and other professional

relationships that complement your skills and personality. Having been
on both sides of the equation now, I can tell you that older, more
experienced people generally enjoy counseling a talented and
enthusiastic newcomer. It’s a relationship that pays dividends on both
sides. So be open to wisdom when it’s offered. You don’t have to take
every piece of advice, but it can be your starting point.
Learn to Manage Money
You might start out with a great family foundation. You might have a
high-paying career that you love. But unless you live on less than you
make, it won’t put you any closer to financial freedom. In fact, if you
develop expensive tastes in houses and cars, and need to look as affluent
as your neighbor, you could wind up worse off financially—no matter
how much you make. You can start heading in the right direction by
simply tracking your expenses, as well as learning about saving and
budgeting. Identify the few areas where money spent truly pays off in
better quality of life for your core interests. Spend there, and cut back
everywhere else.

Next, find a mentor to help you become a confident investor. You need to
master any fear of stocks, so you can profit from them in the long run.
Offset the risk of stocks by allocating into other asset classes as well.
Start small and carefully, but do start. Learn and abide by a few bedrock
investing principles: diversification, patience, simplicity, low expenses.
Track your net worth and your overall portfolio return each year, so you
know what direction you’re going, and why.

Related: Find the right mix of stocks and bonds

Once your career and finances are on track, you can explore more
entrepreneurial paths for wealth building—perhaps by owning a small
business or real estate. These can leverage your time and money, getting
you to financial independence years earlier. They can be fun and
rewarding too!

Keep Your Perspective

Even with all these potent ingredients for success, be sure to take life one
day at a time. Again, cultivate patience. You’ll need it for the long
stretches.
 Remember the goal—financial independence —but don’t obsess on it.
Don’t sacrifice the present for the future; it won’t turn out as planned
anyway. Make time for your loved ones and meaningful activities, even if
you must work longer in the end. As great as it is to achieve financial
freedom and retire early, you don’t want to arrive there having missed
out on life along the way.

Financial independence
From Wikipedia, the free encyclopedia

This article may need to be rewritten entirely to comply with

Wikipedia's quality standards. You can help. The discussion page may contain
suggestions. (November 2013)

Financial independence is generally used to describe the state of having sufficient personal wealth
to live, without having to work actively for basic necessities. [1] For financially independent people,
their assets generate income that is greater than their expenses. For example, a person's quarterly
expenses may total $4000. They receive dividends from stocks they have previously purchased
totaling $5,000 quarterly, while also having more money in other assets. Under these circumstances,
a person is financially independent. A person's assets and liabilities are an important factor in
determining if they have achieved financial independence. An asset is anything of value that can be
liquidated if a person has debt, whereas a liability is related to debt, in that it is the responsibility of
one possessing it to provide compensation. (Homes and automobiles with no liens ormortgages are
common assets.)
It does not matter how old or young someone is or how much money they have or make. If they can
generate enough money to meet their needs from sources other than their primary occupation, then
they have achieved financial independence. Age is potentially irrelevant with respect to financial
independence. If they are 25 years old and their expenses are only $100 per month and they have
assets that generate $101 or more per month, they have achieved financial independence, and they
are now free to do things that they enjoy without having to worry as much. If, on the other hand, they
are 50 years old and earn a million dollars a month but still have expenses above a million dollars a
month, then they are not financially independent because they still have to generate the difference
each month just to stay even. However, this needs to take into consideration the effects of inflation.
If a person needs $100/month for living expenses today, that figure will be $105/month next year and
$110.25/month in the following year to support the same lifestyle assuming a 5% annual inflation
rate. Therefore, if the person in the above example obtains their passive income from a perpetuity,
there will be a time when they lose their financial independence because of inflation.

Contents
  [hide] 

 1 Approaches to Financial Independence

 o 1.1 Asset Accumulation
o 1.2 Expense Reduction
o 1.3 Calculation

 2 Passive sources of income to achieve financial independence

 3 References
 4 Further reading

Approaches to Financial Independence[edit]

Since there are two sides to the assets and expenses equation, there are two main directions one
can focus their energy: accumulating assets or reducing their expenses.
Asset Accumulation[edit]
Accumulating assets can focus one or both of these approaches:

 Gather revenue generating assets until the generated revenue surpasses living/liability
expenses.
 Gather enough liquid assets to then sustain all future living/liability expenses
Expense Reduction[edit]
Another approach to financial independence is to reduce regular expenses while accumulating
assets, to reduce the amount of assets required for financial independence. This can be done by
focusing on simple living, or other strategies to reduce expenses.[2][3]

As you work towards your goals this year, you may have already run into some
challenges. Well, congratulations! This is part of the valuable, learning process in
achieving your dream… but this is only the beginning of your journey to financial
freedom, and …

What is financial freedom?

Financial freedom is much more than having money. It’s the freedom to be who you
really are and do what you really want in life. And many of us, especially women, lose
site of this by putting others first and playing many different roles such as parent,
spouse, employee, friend, and more.

If you want to be financially-free, you need to become a different person than you are
today and let go of whatever has held you back in the past. It’s a process of growth,
improvement and gaining spiritual and emotional strength to become the most powerful,
happy, and successful “you” possible. That is the true reward of financial freedom.
Money Does Not Make You Rich.

Just because you have money does not mean you have financial freedom. In It’s Rising
Time!, I talk about how people like Ed McMahon from The Tonight Show and Nicole
Murphy, the ex-wife of actor Eddie Murphy, had millions of dollars and lost it all. Nicole
Murphy spent her $15-million divorce settlement in less than four years. And towards
the end of his life, Ed McMahon faced foreclosure on his Beverly Hills home and owed
$747,000 in credit-card debt.

Both of these examples illustrate that even if you have a lot of money, if you don’t
know what to do with it, it will be gone.

And ladies, do any of these statements sound familiar?

 I will find a rich man to take care of me.

 I don’t want to deal with finances and will ignore it.
 I’ll take the easy road today and deal with the consequences in the future.

If so, you are not alone as these are common choices women make. But if you don’t
take financial matters into your own hands, your chances of having a secure, financial
life are slim. The good news is that it’s not rocket science.

You can take control of your situation, no matter what it is, and enjoy financial
freedom.

Enjoying the rewards of financial freedom is simply a matter of increasing your financial
education and determining where you are now financially and where you want to go.

To start your journey, check out the Triple A Triangle™ from It’s Rising Time! I’ve

broken down the process into three, easy-to-understand areas that include: Aspire to
achieve a goal, Acquire knowledge and Apply what you’ve learned to be successful.

I know it can be scary to make change happen, but think about it: if you don’t take
action now, what does your financial future really look like?

How to Achieve Financial Freedom

Financial freedom is the ability to do whatever a person wants to do without being
limited by money concerns. For some, it may mean becoming a billionaire, while for
others, it may mean being content with what they have. Taking the right actions will help
you become closer to your idea of financial freedom.
Ad
Steps

1.

1
Develop a long-term plan. You need clear goals to keep you on track in order to be
successful.

 On a piece of paper or computer document, make a list of each goal that you want to reach in
order to be successful. Some examples are to pay off your credit cards, save money for a down
payment for a house, or retire at a certain age.
 List a desired target date for reaching each goal.
 List an estimate of what it will cost to reach each goal.
 Ad

2.

2
Make a budget. A budget is your playbook for how to spend your money. You need it to keep
your spending within reason and help you to ensure that you have enough money to cover your
current needs as well as to save for your long-term goals.
3.

3
Resolve to live debt-free. If you are currently in debt, plan your budget so that you can get out
of debt more quickly by making extra payments. If you are not in debt, continue to live that way
by putting off your purchases until you have saved enough to cover them.
4.

4
Reduce your expenses. Cutting spending by even a small amount on a regular basis will make
a big difference in the long run. Live frugally by learning to recognize the difference between
want and need.
5.

5
Increase your income. It is wise to have more than one source of income, both to increase
your savings more quickly and as insurance in the event that you lose your job. There are a
number of ways to supplement your income, from working a part-time job to developing streams
of passive income.
6.

6
Invest your money. Your money will grow much faster if you invest it rather than leaving it in a
savings account. The increase in value will enable you to reach your goal of financial
independence much more quickly.
12 Steps to Financial Freedom in 2012
by J.D. Roth
Published on January 1st, 2012

46Comments

We discuss many aspects of personal finance at Get Rich Slowly. We explore ways to earn more
money, get out of debt, and build an emergency fund. We talk about the psychology of money
management, and we share tips and tricks for making the most of your savings and your career.
Basically, we do our best to help readers take control of their financial lives.

Sometimes it’s easy to get lost in the little details of money management. Sometimes we forget the Big
Picture. Because of that, I like to devote my annual Happy New Year post to a colossal summary of the
collected wisdom at this site.

If you’ve resolved to take control of your finances in 2012, this article is the place to start. It’s
packed with tips and resources for making the most of your money. And as I do every year, I’ve added
one tip to the list.

Here then are twelve simple but effective steps to take control of your finances in 2012.

Step #1: Set financial goals

The road to wealth is paved with goals. If you don’t know why you’re doing this — why you’re making
sacrifices, why you’re working so hard — it’s too easy to fail. But if you set goals, they can help guide you
even when things get tough. When you have to make decision, your goals can help you stay focused on
what’s important.

For your goals to be effective, they have to be personal. They have to mean something to you. Right now,
one of my goals is to save money for travel. A couple of years ago, my goal was to save for a Mini
Cooper. Before that, my goal was to get rid of 20 years of debt.

To keep your focus front and center, you might use web-based tools like Joe’s Goals, StickK, or 43
Things. You might find an accountability partner. Or you might advertise to yourself. And be prepared for
setbacks.You’re not going to meet your goals without mistakes. Stuff happens. The best way to deal with
problems is to have a plan before they occur.
 Step #2: Track every penny you spend
The authors of Your Money or Your Life urge readers to “keep track of every cent that comes into or goes
out of your life.”

[This is] the best way to become conscious of how money actually comes and goes in your life as
opposed to how you think it comes and goes…This is the step that somehow makes the biggest impact.

Last year, I stopped tracking my spending. I was spending less than I earned, and I figured it was too
much work. I regretted that. In fact, I’ve vowed to resume tracking my spending again in 2011. I’m glad I
did. I was able to see some trouble spots (comic books!) and make corrections.

It doesn’t matter how you track your spending — the most important thing is to do it.

 You can use a cash notebook.

 You can use an online tool like Yodlee or Mint. (I tried Mint, but it didn’t work for me. I’m trying Yodlee
now.)
 You can use a piece of software like Quicken. (Here’s a list of 16 powerful personal finance programs.)

Whichever method you choose, stick with it. Make it a habit. Don’t fudge the numbers. Record your
transactions as soon as possible. Most of all, don’t judge yourself. Tracking your spending is an exercise
in data collection; it’s not the appropriate time to change your habits.

   

Step #3: Develop a budget

After you’ve tracked your spending for a few weeks (or months), use the data you’ve collected to develop
a budget. According to The Millionaire Next Door, budgeting is one thing that sets the wealthy apart from
the rest of us — 55% of millionaires keep a budget.

Many people — myself included — fail to budget for a variety of reasons: it’s boring, we don’t think we
need it, or we don’t know how. But this simple act can provide a roadmap for your money.

There are a variety of budgeting methods you can choose, from Andrew Tobias’ three-step budget to
the 60% budget. My recent favorite (and a favorite of GRS readers) is Elizabeth Warren’s balanced
money formula: 50% to Needs, 20% to Savings, and everything else to Wants. Simple but effective.

Crave more budgeting tips? Check out this article highlighting 13 tools for building a better budget. Hate
the idea of budgeting? Consider the spending plan, a budgeting method for non-budgeters.
 Tip! Spend less than you earn. This is the fundamental money skill. It’s common sense, yet many people
never learn to do it. Only by spending less than you earn can you hope to build wealth. This is easier to
do if you track your spending and develop a budget, but those steps aren’t completely necessary. Even if
you do nothing else in this list, spending less than you earn can put you ahead of your peers.

Step #4: Review your bills (and ask for discounts)

At least once each year, you should review the contracts and agreements you have with various banks
and service providers. This is also a great time to review your financial accounts to be sure everything still
matches your needs.

 Read your credit-card agreements and make sure you understand everything. (If you don’t, then ask
questions.) When I read my own agreements, I just dial the customer service line and ask for clarification.
 Check your service levels. We have a tendency to keep paying for the same service we’ve always had,
whether it’s with our phone, our electricity, or our gym membership. Now’s a good time to make a quick
check to be sure you’re only paying for what you need.
 Ask for lower rates. In 2009, G.E. Miller shared how he cut his cable bill by 33% without losing any
service. Many GRS readers reported similar success. Look through your monthly bills to see if there are
any you could call to ask for a reduction on.
 If you rent, review your lease or rental agreement to be sure you’re clear on all of the policies. While
you’re at it, consider asking for a rent reduction. Sound crazy? If you’re a good tenant and regularly pay
on time, it’s not so far-fetched.
 Review your insurance. Are you carrying policies with three different companies? Consolidate them at
one place. Check the deductibles on your auto and homeowners insurance. Are they too low? Could you
afford to raise them and “self-insure” the first $1,000 of damage? And is your liability coverage high
enough?
 Go over your investment accounts. Check your balances and asset allocation. Are you too heavy in
stocks for your risk tolerance? Should you own more stocks? If so, shift things around to get to your target
allocation.

This task may be boring, but it’s important. Terms change all the time. Your own financial situation
changes. Spending one afternoon a year to review your agreements (and ask for discounts) can keep you
from getting trapped in contracts you don’t want and save you money in the process.

Remember: You always have the right to ask for a discount, but it’s not your right to receive one. It never
hurts to ask, but if the answer is “no”, don’t be a jerk. Thank the person who helped you and move on.

Step #5: Optimize your accounts

For seventeen years, I was an account holder at a large national bank. I paid an $8 “service charge”
every month, as well as many other fees. I received terrible service and earned no interest. Over the last
couple of years, I’ve finally begun to optimize my accounts. If you haven’t already done so, consider the
following:

 Open an online high-yield savings account. Interest rates are about as low as they can go, and should
increase in the months and years ahead.
 Choose a rewards checking account. Believe it or not, it’s possible to find checking accounts that pay
interest. The best online checking accounts are paying about 1% right now, depending on your balance.
 But you can usually find an even better deal through your local bank or credit union. Check out this list of
rewards checking accounts for rates of up to 5%.
 Use a rewards credit card. If you have trouble with credit, it’s best to avoid plastic altogether. If you can
use credit responsibly, be sure to choose a credit card that pays you. Avoid cards that carry an annual
fee. Find a rewards program that matches your lifestyle. But don’t choose a card just because it offers a
signup bonus or because it gives you a discount at your favorite store. Remember: your goal is to find a
useful tool. Look for a long-term relationship you can live with.

It’s important to choose accounts and systems that work for you. I signed up for a rewards checking
account at a local credit union, but the nearest branch is fifteen minutes out of my way. I never used it, so
the credit union closed the account. I compromised by opening on online checking account instead. I earn
a lower rate, but it’s an account I’ll actually use.

Tip! When optimizing your banks and credit cards, consider using multiple accounts at each institution.
For example, I have ING Direct subaccounts that allow me to target my savings. I save for vacation in one
account, for a car in another, and I use a third account for emergency savings.

Step #6: Start an emergency fund

For years I lived paycheck-to-paycheck. I spent everything I earned. This worked well until something
went wrong. Suddenly I’d find myself without money to pay for a car repair, or facing an expensive
doctor’s bill. I financed emergencies with credit cards. Eventually I saw the light and built up a rainy-day
fund.

After you’ve optimized your accounts, make it a priority to save for emergencies. In The Total Money
Makeover, Dave Ramsey explains why he believes an emergency fund should come before anything
else:

Since I hate debt so much, people often ask why we don’t start with the debt. I used to do that when I first
started teaching and counseling, but I discovered that people would stop their whole Total Money
Makeover because of an emergency — they felt guilty that they had to stop debt-reducing to survive.

Open an online high-yield savings account and add $20 or $50 to your account
ever time you get paid. Two years ago, I opened an account at ING Direct,
where it’s simple to schedule automatic deposits. After you’ve saved
$1000, then you can attack your debt.

See also: Learning to love the emergency fund.

Step #7: Get out of debt

Are you struggling under a heavy debt load from credit cards or student loans?
Make it a priority to unload some of this this burden in 2012. At the end of 2007, I said good-bye to 20
years of debt — it feels fantastic to have that weight off my shoulders.

If you have the mental discipline, you’ll save money by paying down your high-interest debt first. But if
you’ve tried that method before and failed, consider using adebt snowball. Pay your debts starting with
the smallest balance first. Here’s how:

1. Order your debts from lowest balance to highest balance.

2. Designate a certain amount of money to pay toward debts each month.
3. Pay the minimum payment on all debts except the one with the lowest balance.
4. Throw every other penny at the debt with the lowest balance.
5. When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can
at the debt with the next-lowest balance.

The debt snowball can give you awesome psychological payoffs, keeping you motivated to stay in the
game. It’s not mathematically ideal, but it worked for me (and for many others besides). However you
choose to get out of debt, stick with it. Don’t give up.

Tip! The perfect is the enemy of the good. When you spend so much time looking for the “best” choice
that you never actually do anything, you’re sabotaging yourself. And an ideal solution that you don’t follow
through with is worse than a good solution that you’ll actually use. Choose a good option and act.

Step #8: Fund your retirement

If you’re young, you probably don’t think you need to start a retirement account. You’re wrong. No matter
how old you are, now is the time to begin saving for retirement. The extraordinary power of compound
interest favors the young — and in a big way! In The Automatic Millionaire, David Bach writes:

The single biggest investment mistake you can make [is] not using your [retirement] plan and not maxing
it out.

If your employer offers any sort of retirement-contribution matching, such as a 401(k), be sure to take
advantage of it. It may not be “free” money, but it’s darn close. Also consider starting a Roth IRA.

After reading The Automatic Millionaire a couple years ago, I opened a Roth IRA at Sharebuilder. It was
easier than opening a checking account. I’ve managed to make the maximum contribution since 2006. In
2008 and 2009, I maxed out my 401(k).

Don’t understand retirement accounts? No problem. Download the free Get Rich Slowly Guide to Roth
IRAs, which explains everything you need to know about these accounts.

Step #9: Automate your finances

Over the past few years, I’ve been moving toward a system
 of paperless personal finance. Along the way, I’m learning the value of automating routine transactions.
When you make things automatic, you remove the human element, making it more difficult for you to
mess things up.

The classic example is overdraft protection. By tying your checking account to your savings account, you
have a safety net if you bounce a check. But there are other ways this can work for you. For example, I’ve
set up automatic payments with the gas company, the cable company, and my auto insurance company. I
also make automatic deposits to my online savings account.

One terrific advantage to automation: when you pay your bills and do your saving and investing
automatically, it’s easy to tell how much you have left over to spend at the end of each month!

Tip! Do what works for you. There are few hard-and-fast rules in the world of personal finance. I can
suggest methods that have worked for me (and for others), but only you can determine if these methods
are appropriate for your own circumstances.

Step #10: Earn extra money

You can meet a lot of your financial goals by reducing your spending and using the right tools.
But nothingsupercharges your progress like a boost in income. How can you earn extra money?

 Ask for a raise. Several readers have written to tell me how they’ve given themselves a raise through
ambition and ingenuity. Here’s one example. (Don’t know how to ask for a raise? Here’s how to negotiate
your salary, either before or after you’re hired.)
 Switch employers. Not every employer is able or willing to offer raises, even when they’re merited. If
you’re in a position where a raise isn’t possible, consider finding a new employer.
 Take a second job. Many people find that the best way to get out of a financial hole is to temporarily take
a second job. Nobody wants to work more than 40 hours per week, but sometimes that’s what’s needed
to get out of debt or to save for a house. Just remind yourself that you’re doing this for a short time.
 Use your hobbies. Yes, it’s possible to have money-making hobbies. You’re not going to get rich
playingWorld of Warcraft, but many people use productive hobbies to earn a little extra income.
 Volunteer for medical research. In August 2008, I earned $120 for a couple of hours spent participating
inmedical research. GRS staff writer Donna Freedman has earned extra cash by giving blood and
watching porn (though not at the same time).
 Sell things. When I decided to get out of debt, one of my first steps was to sell a bunch of the stuff I’d
bought with that $35,000. I used eBay, Craigslist, garage sales, and the Amazon Marketplace to sell the
things I no longer needed or wanted. The money I earned jump-started my debt reduction.

Another effective way to increase your income is to pursue entrepreneurship. While working to defeat my
debt, I started a small computer consulting business. It didn’t generate a lot of income, but it did provide
$2,000 a year that I wouldn’t have had otherwise!

Step #11: Learn the Art of Conscious Spending

Being frugal doesn’t mean you have to deprive yourself. You’re not giving up the good stuff for the rest of
your life. Instead, frugality is about choosing to spend it on the things that are important to you while
 cutting back ruthlessly on the things that aren’t. Ramit Sethi calls this conscious spending, which is a
fantastic way to describe it. Conscious spending implies that you’re actively choosing to spend on some
things and not on others.

Contrast this with how most people spend. We tend to spend on reflex. We buy things because we’re
expected to, because everyone else does. We spend to have what other people have. We sign up for
gym memberships that we never use, subscribe to
magazines we never read, and pay for golf clubs that
get buried in the garage.We make impulse purchases
at the grocery store — or even on large items, like
computers and cars. Most of the time, people spend
without thinking.

But with conscious spending, you evaluate every

purchase. You ask yourself: “Will buying this help me meet my goals? Will it make me happier? Is it
congruent with who I am and what I want to do?” I know this sounds like New Age mumbo-jumbo, but it’s
not. These questions can have a powerful positive effect on how you spend and save.

Conscious spending isn’t restrictive; it’s liberating. It lets you cut back on the things that aren’t important
to you so that you can spend on the things that do matter. Learning to practice conscious spending is a
sure way to improve your quality of life.

Learn more: Conscious spending in action.

Step #12: Educate yourself

Knowledge is power. Personal finance doesn’t have to be a mystery. Subscribe to this site. Read other
personal finance blogs. I recommend:

 The Simple Dollar

 I Will Teach You to Be Rich
 The members of the Money Scribes network
 The members of the LifeRemix network

Visit your public library. Borrow money books and self-development manuals. Here are four of my
favorites:

 If you’re in debt and can’t seem to find a way out: How to Get Out of Debt and Live Prosperously
 If you’d like to know more about investing: The Random Walk Guide to Investing
 If things are tight and you need to find creative ways to make ends meet: The Complete Tightwad Gazette
 If you want a motivational manual to prompt you to pursue your goals: The Magic of Thinking Big
You don’t have to agree with everything in a book to get something out of it. I read a lot of personal
finance books — some are good, but many are not. Even the worst books usually have one or two things
I can pull from them. Learn how to read a personal finance book so that you can pick and choose those
pieces appropriate for your life.

Blatant self-promotion! I wrote my own book precisely to help people who are struggling with
money. Your Money: The Missing Manual contains all of the advice I wish I’d had when I was
digging out of debt and learning to boost my income. If you like what you read here at Get Rich
Slowly, you should like this book. It has tons of new stuff (as well as a few favorite nuggets from
the past).

Final thoughts
Taking control of your finances can be intimidating — there’s so much to do! — but it doesn’t have to be
that way. One effective solution is to take a vacation day from work: designate one specific date as your
personal“Money Day”. Use this day to finally set up Quicken on your computer, to open a retirement
account, and to call around for a better deal on your insurance.

The good news is that you can get out of debt. You can save for retirement. If I can do it, so can
you. Best wishes for a prosperous new year!

Note: This is a new version of an article I share every January. I update it annually, incorporating new
tools and techniques.

GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates
may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest
rates and CD rates from Synchrony Bank, Ally Bank, GE Capital Bank, and more.

WEALTH GENERATION

Where will you be FINANCIALLY five years from today?

The financial secret of moving from where you are and where you want
to be?
Would you like to know the financial secret behind moving from where
you are and where you want to be? Try to answer this question. “Where
will you be financially five years from now? 10 years from now…? 20
years from now…?”

You may get answers like “I will be financially stronger”, “I want to be

financially better”. Are these answers specific? If you don’t know where
you want to go exactly, there is no focus. When there is no focus; there
will be lot of distraction. Distraction either leads to mediocrity or
destruction.

How to refrain yourself heading towards mediocrity or destruction? You

need to set Specific, Measurable, Achievable, Realistic and Time bound
Financial Goals. That is S.M.A.R.T. Financial goals.

Let me take you through step by step to set SMART Financial goals.

 1) List down Financial Goals:

Write down all your financial goals like buying a house, kid’s education,
Vacation, Retirement and so on. You may wonder why this mechanical
act of writing financial goals is so important. You can be thinking
something without actually realizing what that something is. It is
intangible and so it is not clearly defined in your mind.

When you start putting that thought into words and you try expressing it,
an amazing thing begins to happen. By creating it in words, that abstract
thought now takes on body, shape, form, substance. It is no longer just a
thought. It becomes something which motivates you, or creates a gut
feeling inside.

Your dream becomes a goal the moment you write it down. Say one of
your dreams is to buy a house. You dream about it a lot. But the moment
you started writing it down, your mind will ask yourself “when, where,
how many square feet, how many bedrooms?” This writing gives clarity
to your goal and it forces your mind to find out the ways and means to
achieve the goal.

 2) Categorize and Prioritize:

You need to categorise your financial goals based on the timeframe.

Generally the financial goals less than 3 years are short term financial
goals. The goals to be achieved in the next 4 to 7 years are medium term
goals and the financial goals to be achieved after 7 years are long term
goals. This categorization will help you in building a roadmap to achieve
your goals and also in selecting the right investment products.

Your daughter’s wedding would be more important to you than the

international vacation. Buying a house is more important than buying a
farm house. This prioritization will help you in creating a better financial
plan. Suppose if you are in deficit, you know which financial goal need
to be compromised and which are all the financial goals you want o
achieve irrespective of the deficit.

 3) Fixing a target date:

Fixing a target date for your financial goals may look like a dump idea.
How do I know in advance the date of buying my house, the date of my
daughter’s wedding? But if you are not fixing it, then you will not be
financially prepared for that. If you are financially prepared and the goal
event is not taking place at that time and getting postponed for some
reasons, you will not have any financial worries. You will be financially
ready from thereafter with on enough money to meet that goal.

Fixing a target date will psychologically influence your thought process

to work on that goal. Also the moment you fix the target date your mind
starts running a countdown. Only when you know that after how many
years from now you want to achieve the goal, you will be able to make a
financial plan.
 4) Estimating the cost:

First you need to estimate the cost as of today. If you are planning to
save for your daughter’s wedding which is expected to take place after
10 years, first you need to calculate the cost of the wedding in today’s
prices. Then you need to adjust it for inflation of 10 years. Now you will
have the future value of your target.

 5) How much to save?

Once you have found out the future value of the goal, you can easily
decide on how much you need to invest in order to reach the targeted
future value. Initially you may only be able to contribute less. But year
after year you can increase this contribution based on your
increment/promotion/income growth.

So you need to take into account the expected growth rate on your salary
or business/professional income in calculating how much to save
towards each and every financial goal.

 6) Budget the savings:

As you know by now exactly how much to save towards each and every
goal, you need to accommodate these savings in your budget. If you do
this year after year, then you can see all your financial goals becoming
reality. The difference between a goal and a dream is the written word. I
am confident that you will come to find that financial goal setting works
and that it will soon become a way of life for you.