An asset is something that you own that has a cash value.  It either creates passive income or can be traded for cash.  So let’s start in the most obvious place: you are your own asset.  You have skills, and you have a job that pays you to use those skills.  This creates income, or cash flow, for you.

To delve a little further, you can build assets as well.  For example, if you start a business or an online blog, etc., and it puts revenue in your pocket, this is an asset.  Of course, its true worth has to be measured against any expenses (known as liabilities) that you have to pay to keep your business or blog running.  If you have an interest-bearing savings account, or a 401(k), or you’ve invested in stocks, these are assets that can create passive income.  You can also access them relatively quickly in cash form.

Some people do not consider their homes or cars to be assets since they do owe money and make monthly payments on them, but they can be listed as assets.  They obviously do not create any immediate cash flow, but they can be sold for a cash value.  What makes people not consider them to be assets is the fact that they will likely use this revenue for a new home or car, so it will not stay in their pockets for long.

If you create a new product or write a song, you’ve built an asset.  Your product will likely be trademarked and/or patented, your song will be copyrighted, etc.  It doesn’t matter what you’ve produced in this example.  If it will be sold to multiple people and continue to generate income, it is an asset.  The amount of income may decline over time, however.  A new and better product might be created by someone else, your song gets lets airplay every month.  In order to keep the cash flow high, you need to either make occasional improvements to what you’ve made or make something new.

Your debts take away from the value of your assets, so in order to maintain a positive cash flow, you need to ensure that your assets are working to their full potential.  Is your product selling well?  Is your blog getting enough hits?  Are you getting the best interest rate on your savings account?  How risky are your stock investments?  Make a list of your income versus your expenses to measure your cash flow.  You’ll see how close you are to your money-making goals and where you may need to make some adjustments

Plan to Stick Around for a While

First, regardless of your situation, you should be planning on remaining in your new home for at least five years.  If you’re considering buying a home that you may or may not stay in very long, you may want to look for a different house or simply wait out the economic downturn; you won’t get any value out of your purchase, and you’re likely to lose money when reselling so soon.

Better Bargaining With Sellers

Beyond that, you can find quite a few bargains right now.  It has been difficult for many sellers, leaving them more open to price negotiation.  While some may try their hardest to stay close to their desired price, others may be more desperate to simply get rid of the house at the best price possible, especially if their house has been listed for a frustratingly long time.

Foreclosed Homes

And then you’ll also encounter foreclosed homes, where the homeowner has been unable to make their own payments; it’s a sad situation for them, but it does leave a good deal on the table for you.  You just need to learn the right time for you to jump at it—that’s going to mean a little homework for you, an important step in order to avoid extra financial surprises.

First-Time Homebuyer Tax Credit

If you’re looking to buy your very first home, you get an extra benefit if you act before December 1, 2009.  You could qualify for a tax credit of up to $8000.  Of course, there’s some fine print to read ahead of time (you can start with www.irs.gov for all the information), but you also do not have to pay it back in any form.  This could help put the house you’re hoping for more within your reach.

Good Credit Rating

Finally, mortgage rates are exceptionally low in many areas, which means you’ll pay less interest on your loan than you would if the economy were doing well.  However, no matter what kind of deal you find, you still need a high credit score.  As prices and interest rates have loosened, credit restrictions have tightened.  You want to make sure your score is a minimum of 720, higher if you can manage it.  Your deal might be canceled out by a lower score.

Home prices may rise again at any point along with interest rates, so now is a great time to look for a new home.  As always, though, make sure your credit score is excellent and that your job is steady right now, and don’t forget about your tax credit!

• How often will you need to stop at the bank?  If this will be a regular part of your daily or weekly routine, you’ll want to choose one that has a convenient location for you.
• Do you travel often?  If so, is it necessary for you to be able to access your bank in person?  You might want to choose a bank with locations covering the entire country.
• Do the bank’s hours fit your schedule?  If not, do they offer the right online banking options for you to use after hours?
• Most banks do offer online banking.  You can check your current balances, transfer money between accounts, and even pay your bills.  Most often, this service will be free.  If not, you may want to avoid using that particular bank.
• You’ll want to compare available interest rates; they will differ across the board, and there will be different requirements to meet in order to qualify for the offered rates.  For example, most banks require a minimum balance of $10,000 to receive the best interest rate for a money market account.  The bank that I use only requires $2500 to get the market rate.  Quite a difference.
• Does the bank offer interest-bearing checking accounts?  These ones typically require a minimum balance just like most savings accounts, but if this is a priority for you, look for a bank that provides this service.
• Does the bank charge service fees?  What is their overdraft fee?  How much do they charge if you go below a minimum required balance?  Do they charge you for using a different bank’s ATM (in which case, you’ll pay that bank’s ATM fee and your bank’s fee as well)?  If you’re likely to end up in these situations, you should find the bank with the lowest fees.
• Will you be opening more than one account, such as a checking and a savings?  Is it important for them to be linked together?  Or do you simply prefer the ability to easily transfer money between them online?  You’ll want to choose a bank that offers the best rates across the board so you get the most out of it.  You may have to sacrifice in a few areas; for example, you might accept a couple points less in interest on your savings than you’d get at another bank if the checking benefits are better at this bank.
• Is the customer service good?  How were you treated when you asked for information on accounts?  How did the other customers appear to be treated?  Ask for people’s opinions to help you get a better view of the overall picture.
• Is the bank FDIC insured?  If so, your deposits are protected up to $100,000.  If the bank is not, don’t bother.

You’ll be doing a lot of reading and asking a lot of questions.  Don’t be afraid to take your time and explore every option before you choose a bank—you want to be sure you’re getting the best benefits to meet your banking needs and wants.

If you’re like most people, you’re admittedly afraid to see your spending habits written down.  It’s scary, and seeing any negative habits on paper can give you that uncomfortable sinking, twisty feeling in your stomach.  Well, too bad!  You have to do it.  Get someone to hold your hand or offer you a shoulder to cry on or fix you a drink.  You’re going to make a financial checklist so you can get on the right track, right now.

Check Your Spending

Start with your income.  Next, write down all of your monthly expenses.  Include all of your bills, groceries, gas for your car, and yes, even the random but common little expenses like eating out, going to the movies, your weekly magazine, and your daily cup of designer coffee.  You’ll see right away how much of your extra cash is being spent on unnecessary items.  You can make dinner at home, join a movie rental service like Netflix for cheap, read your magazine online, and brew your own coffee for less than $10 a month.

Invest Your Finances

Once you figure out where to cut back, you’ll see a little bit more wiggle room with your money.  Take that money and start a savings.  Invest in an IRA, your 401(k), a CD, a Money Market, etc.  Even a few dollars a week saved can add up quickly enough to come in handy when an emergency arises.

Plan to Get Out of Debt

Make a plan for getting yourself out of debt.  You’d probably have even more extra money if you didn’t have to pay those darn credit cards that keep accumulating interest.  Take some of the extra money you found from cutting back and put it toward your debt.  Start by paying off your smallest debts first, then take that amount you were paying to that account and add it to your payments for the next smallest.  If you follow a plan like this one, you’ll slowly but surely climb out of the hole.

Check Your Future

Don’t forget about your future.  Set some financial goals, and write those down on your checklist, too.  Writing down your goals has been proven to increase your chances of actually achieving them.  Where do you want to be in 5 or 10 years?  Even better, where do you SEE yourself in that time?  Don’t dream it, do it.  It starts by being honest with yourself and writing it all down.  What are you waiting for?

• Have your paycheck direct deposited into your checking account.  It will save you a trip to your bank and you’ll have access to your money sooner.  You will still get a stub for your records showing the deposited amount, taxes taken out, etc.
• Go a step further and arrange to have a certain amount or percentage of your paycheck direct deposited into a savings account.  You won’t have to consciously think about saving money because you’ll automatically be paying yourself first, and if that money never passes through your hands, you won’t be tempted to spend it and probably won’t miss it.  Even a small amount can be helpful by time you need to access your savings.
• Sign up for online bill payment or even automatic payment.  If you opt for automatic, make sure you trust yourself to have available funds in the account you attach to your bill on the due date.  If you have a creditor that doesn’t offer you the option to pay online, most banks offer bill pay programs.  You simply enter your creditor’s information and your bank will send them a check.  With this option, you’ll want to allow yourself an extra couple days before the due date, as your bank’s check still needs to reach the creditor by mail.  In all cases, you’ll be saving yourself the time of writing out a check, as well as saving money on envelopes and postage.  You’ll be more likely to avoid late fees, too.
• Consider transferring high balances on your credit card to one with a lower interest rate (visit BankRate.com for best deals).  Some companies may even offer you a no-interest deal for a certain period of time.  I personally took this option because I knew that interest was the factor preventing me from paying down my balance as quickly as I could.  If you’re confident that you can pay off the debt within the time frame and refrain from adding extra charges to that card, this can be an option for you.
• If your immediate financial future is looking bleak, but you know that you can get yourself back on track with minimal help, try contacting your credit card companies or other lenders and asking if they have a financial hardship program.  If they do, you can potentially have your monthly payments and/or interest rate reduced for a short period of time.  They might even waive your monthly payments completely for a couple months.  (Be careful, though.  Those charges might be tacked onto your next set of due payments, so read the fine print.)  Your credit rating will mostly likely take a hit, but if you can get back on track right away, your score will improve right along with your financial situation.
• If you know you need more help to get out of debt, consider a debt consolidation service.  They essentially pay off your old debt for you and approve you for one large loan to cover the cost, leaving you with only one monthly payment.  The good news is that you could owe less overall than before, as these services are able to negotiate with your creditors to lower your payments.  The bad news is that all of those accounts will be closed, leaving you with no emergency credit cards, the interest rate on your new loan might be high, and your credit score will definitely drop.  However, if this is your only way out, you have a better chance of getting out of debt quicker and redeeming your credit score faster than if you opted to file bankruptcy or simply stopped paying your bills and got sent to collections.  Just beware of scammers that claim they can completely eliminate your debt right away (usually if you pay them a large sum of money) or secure a low interest rate for you.

You can keep track of your own finances with a budgeting program, as well.  Knowing exactly where your money is going can help you get a good idea of how much money you might be wasting.  Renegotiate as many debts as possible to save money.  Even simpler things like adjusting your cell phone bill can help.  (For example, do you text a lot?  Add a feature to cover x amount of texts for x amount of money to save, etc.)  Consolidating your finances in these ways will allow you extra time and money to enjoy the more exciting parts of life.