Struggling with debt does not mean that you must be overcome by it. The following are some methods you can incorporate to improve your financial picture.
1. Stop buying on credit. Credit is a useful tool provided that you have it under your control. That means paying off your credit cards in full each month, avoiding the revolving credit charges that only exacerbate the problem. None of the methods that follow even matter until you get your debt under control first.
2. Establish a budget. Where is your money going? Where is it coming from? Establishing a budget is a sensible way to track your income and your outgo, giving you a real world look at how you handle money. Your income may be static, but your expenses can fluctuate monthly. Your flexible expenses include your utilities and transportation expenses. Your fixed expenses are your mortgage, car payment and insurance. Calculate your expenses for the past 12 months then divide that number by 12 to get a monthly average. If your expenses are above your income, you have some work to do.
3. Attack the waste. You may have a thrift mentality, but your budget says otherwise. Likely, after further scrutiny, you see areas where cutting back makes sense. Drop those services you do not need or are duplicate. For instance, if you have both a home and a cell phone, then get rid of the land line. Also, look at ways you can combine services. For example, bundling your home and auto insurance to one insurer can save you money. Other ways that you can save money are numerous including, brown bagging your lunches instead of buying, brewing your own coffee or canceling delivery of a newspaper and magazines.
4. Monitor your spending for a month. If you want to get a good handle on waste, then monitor your spending for a full month right down to the last dime spent. You will quickly see where your money is going: $10 for weekly dry cleaning, $3 for a latte or lunch out every day. Often it is the little things that add up. If you were to remove one or more could you survive? Only you can answer that question.
5. Establish an emergency fund. Once you get a handle on your money, set up an emergency fund. That fund should cover things that you previously used credit cards to cover such as an emergency trip to the veterinarian for your cat or dog, the deductible for your car following an accident or any other expense that might catch you buy surprise. Ideally, you will have three to six months of your salary saved. Start small and you will have a week’s worth of income set aside in no time.
6. Set up a savings plan. With everything else now under control it is time for you to set up a savings account or fund that long dormant account. Consider creating multiple accounts including a Christmas or birthday fund, a vacation account or other special savings account. Save as little as $10 per week and you will have $520 saved after just one year.
Money Monster Tamed
If you still struggle with your finances, then ask for help. A financial counselor can help you get on track, by equipping you with the tools that will support your efforts. Check with your county or state consumer affair office to learn what options are available to you.
See Also — 5 Tips for Reining in the Family Budget
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