If you have been troubled by economic downturns or if you are overwhelmed by debt for any of various reasons, you don’t have to give in to stress and worry about your financial situation. You may have already been hit by mortgage payments and credit card bills that keep you awake at night, worrying about how you recover. The good news is that you can read on to learn some tips and techniques that will help you become debt free for life.
The first suggestion that you should implement is to know where you stand. Keep track of every penny you spend for a full month. This includes money put into parking meters or on grabbing a candy bar from the vending machine at work. This is likely to reveal some ways that your money disappears without much to show for it.
Next, you need to create a budget. Distinguish between hard expenses and optional expenses. One of the high priority “hard” expenses is to pay money into a savings account first each month. If you arrange for it to be deducted from your pay check electronically, it won’t seem as difficult to save. Your savings account is intended for larger, future projects such as educational needs.
Build an emergency fund. When you have an emergency fund of $500 or $1000, you won’t worry about that trip to the dentist, or the new tire that is required. You can use funds strictly for this type of emergency, rather than trying to increase a credit card balance.
Using the budget you created earlier, concentrate on paying off the obligation with the smallest monthly payment amount. When that is cleared, put all your efforts into paying off the next largest amount. Repeat this process with the next largest obligation until all of your debts have been erased. Many people can accomplish this goal within two to three years.
Choosing an accountability partner is another way to control expenses. Decide on an amount that is the limit for unapproved purchases. For example, you may decide that any single item purchase larger than $100 requires justifying the need for the item to your partner. Each month, go over the budget and spending comparison to make sure you are continuing with your spending limits.
There are only two ways to speed up the get-out-of-debt process. You will either need to reduce your expenses or increase your income. Look back at the expense tracking that you did early on and think of ways that you can reduce these costs. Transportation and housing are often the largest budget outlays, but there are many small items which could be reduced. Adding income doesn’t have to be a second job. It could be having a yard sale or placing items on consignment at a thrift store.
The practice of living within your means will seem difficult originally. As you see the debts melt away, your stress level will go down. You will find new ways of doing things that do not require going back into the debt overload mode. A simpler lifestyle which you choose is far preferable to one that is due to forced cutbacks.
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