Seems like everywhere you look, you get the same old advice for getting your finances on track. All fluff… no real meat.
Well, we put our heads together and compiled this list of 19 tips to help you get out of debt, and stay out of debt for good. These tips are easy to put in to action, simple to understand, and proven to work!
1. Stop the bleeding
- • Take your credit cards out of your wallet. Instead… stash a $50 bill in your wallet for emergency use only. (And, no… those fabulous shoes or awesome seats at the game are not an emergency.)
- • Put each credit card in a zip-top baggie filled with water and stick them in the freezer! When you are tempted to purchase something, you’ll have time to reevaluate as you wait for the giant ice cube to thaw. (Step away from the microwave…)
- • Figure out how much money you earn each month and create a budget to ensure you live BELOW your means. If you continue to spend more than you make each month, you’ll never stop the bleeding.
2. In case of emergency, don’t break out the plastic.
- • Trim the fat from your spending until you have money left over at the end of the month. It will probably hurt a little (or a lot) to do this. You will have to give up some luxuries and conveniences. Cook more at home, make your own coffee, rent movies instead of going to the theater, wash and iron your own shirts… you get the point. It may even be necessary to get a second job, at least for a while as you rehabilitate your spending.
- • Sock away every extra penny until you have 3 months of living expenses (rent/mortgage, utilities, food, doctor visits, insurance, etc) in a separate savings account. Now, say “hello” to your emergency fund!
- • Psyche yourself into saving by making it as easy or cool as possible. Set up automatic transfers from your checking account each time you get paid. Use a special amount as a reminder of why you are working so hard to get out of debt (like saving $20.19 every week because your son will graduate high school in 2019 or $65.00 a month because you want to retire when you’re 65). Make one of those thermometer-shaped tracking charts to keep tabs on your savings and hang it on your fridge or bathroom mirror so you are sure to see it every day.
- • Treat your payment to your emergency fund like it was any other bill. (No… treat it like your most important bill.) Pay YOURSELF first. Your future is riding on it!
- • Your Emergency Fund is for true emergencies only (job loss, blown transmission, leaky roof, broken ankle, etc.). If you are running short at the end of the month, figure something else out. Do not steal from yourself!
- • Continue building your emergency fund over time until you have enough to cover 6 months of your living expenses. (But once you have a good 3 months saved up, you can begin devoting some of your earnings to debt reduction.)
- • Pat yourself on the back when you do have an emergency and are actually able to pay for it in CASH instead of adding to your debt. Just be sure to replenish your emergency fund so it is available when you need it the next time!
3. Be a ruthless debt eliminator
- • Once you’ve stopped the bleeding and established your emergency fund (3 months’ worth of expenses) it’s time to focus on debt elimination.
- • Split the amount you were paying to your emergency fund down the middle and put half in savings and half toward debt.
- • Decide which card to pay off first and put all your debt reduction funds toward that one debt. (Just be sure to keep making timely minimum payments to any other cards you may have.) Which card you start attacking first is up to you. Some choose the card with the highest interest to save more over the long run. Others start with the card with the smallest balance for a feeling of quick success. Still others choose a card based on what it was used for… like that pricey Mexican vacation you went on with the love of your life – who is now your ex. (Don’t want that debt hanging around any longer than it has to!)
- • Once one card is paid off, add its payment to the minimum on the next debt you’re going after. (For example, you were paying $120 a month on a card that you just paid off. Add that entire $120 to the minimum on another card to pay it off even faster. Once the second card is paid off, add its payment to the next card, and so on. It really adds up after a while and accelerates the rate at which you can knock out your debt.
- • If you get a raise or a higher paying job, don’t increase your lifestyle just yet. Devote that extra cash to debt reduction for greater benefits down the road.
- • Once everything is paid off (except your mortgage and student loans because the interest rates tend to be pretty low and you can deduct the interest on your taxes) dump everything you were paying toward your debt into building your emergency fund up to 6 months of expenses and saving for your future.
4. Get Credit Smart!
- • To keep your credit score high, use your cards regularly for normal purchases. Just be sure to pay them off every month. You can even make weekly payments so there is no danger of falling behind.
- • Pay on time, every time! Late fees really suck.
- • Buying big ticket items (like appliances and vacations) on credit is a good idea for the buyer protection they afford, but DO NOT make the purchase until you have saved up enough cash to pay it off in full. (Note: some appliances are emergencies, like you heater during winter months. Others, not so much. It may not be fun, but you can certainly wash dishes by hand and dry your clothes on a rack while you save up the cash you need to replace your dishwasher or clothes dryer.)
If you have any questions, please give us a call at 770-952-5168 or contact us online.
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7 Ways to Improve Your Credit
This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.