Do you work for your money or does your money work for you? Are you too busy keeping up with the Joneses and going broke, or are you living within your means? Do you have too much debt? According to the Federal Reserve, the median U.S. household income is $43,200 and the typical family's credit card balance is about 5% of their annual income. Five percent of YOUR hard earned money is going to creditors instead of to you! Wouldn’t you like to get it back? Here are some tips to get you on the right track.
- Pay attention to where your money goes. This means, take a few minutes to create a financial plan, a.k.a. budget, for your money each month so you can tell it where to go rather than wondering where it went. If you are not single, work on this plan with your partner so you are on the same page. There will be less fighting about the finances if you’re both involved in delegating where the money goes.
- If necessary, get an extra job and put those earnings toward your debt.
- Don’t use your credit cards anymore if you can’t pay the balance off each month. Using cash rather than credit will help you spend less because it’s harder to let go of cold hard cash! In fact, a Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash.
- Pay more than the minimum due on the card with the lowest balance. When that one is paid off, roll that payment onto the card with the next lowest balance. Example: Card 1 has a minimum payment of $50 and Card 2 has a minimum payment of $30. If you can, pay $100 on Card 1 until it’s paid off meanwhile making your $30 payment to Card 2. When Card 1 is paid in full, take that $100 and apply it to Card 2 in addition to the $30 minimum. So, you’ll be sending $130 to Card 2 until that is paid off. Apply this system to all of your debt until you are debt free!
- If at all possible, stay away from Debt Consolidation Services and Debt Settlement Agencies!! If you turn to one of these companies in hopes of saving yourself from getting bad credit or to be able to make one payment rather than several, you could be disappointed. Though they promise to have your debts paid off in 3-5 years, it will hurt your credit as much as a bankruptcy would. Many of these agencies offer a false sense of security when in fact they are scamming you and charging high monthly fees for services you could actually do yourself. However, if you have trouble budgeting or paying bills on time, seek a reputable financial counselor that will help you. Often, local banks or colleges will offer these services.
- Imagine yourself debt free. Imagine that the money you send out each month to your creditors was no longer having to be sent out but instead, being sent to a high interest savings account or mutual fund. Hmmm. Then you could buy what you want when you want and own it right away. Sound appealing?
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