Debt is a scary thing. For those that have never been in deep, I applaud you. It took years of financial irresponsibility to finally admit to myself that there is a problem, and to figure out quickly what the solution was, and how to get out. Managing debt should be taught at a young age. Not talking about college courses that you need to pass the class, but real life lessons, that I will no doubt pass on to my children when they become of spending age. To avoid making money mistakes like so many out there, follow a few smart ways to manage personal debt.
Save for the Unexpected
This goes out to all; those that are currently in debt and those that hope to never fall down that hard road, what would you do if you had an unexpected charge hit you, how would you pay for it? Do you have available funds that you can use, or would you need to put it on a credit card? If you don’t have the money now, charging will just add extra money payments to make until you can pay it off. If you can save even three months’ worth of expenses in an account to pull out when you need it, emergencies will be less of a financial burden.
Keep Housing Costs Down
Maybe you have heard the phrase “house poor” when it comes to the size and amount of the house you are currently paying for. If you tie up all of your income into your home, it does not leave much leftover for anything else, so you could be living in a beautiful, huge, house, but you may never see what it’s like outside of that compound. If you live in a house that is in relation to the size of your family’s need, you can comfortably live, enjoying life experiences, and not stressing as much during job loss to figure out how to pay the outrageous mortgage.
Figure Out a Debt Payoff Plan
If you have let the finances slip and are carrying over a credit card balance each month and are starting to pay interest, you will quickly find out that making the minimum paying every month will not pay down the balance much. So, unless you want that debt gone in less than thirty years, you should figure out how long you want to have the balance paid off by, and start to figure how much to pay each month to have that cleared out by the goal date. Depending on your balance, you could potentially be paying hundreds-thousands each year just in interest.
Continue to Live Off a Modest Salary
If you ever have gotten a raise at work, what are your first thoughts? Now I can afford leasing an expensive car? If you have received a yearly bonus, what do you do with the money, blow it on yourself? If saving does not even come close to the top of the list of things to do with the money, then it may be time to start living on a modest salary, affording what is necessary, and the rest can be put to better use elsewhere, say retirement. If you have an affordable house, car, lifestyle, you should be able to afford living off a lower salary, even if you are making the big bucks.
Stick with the Program
Like anything else that is hard in life, you need to work for it. You will not remain free of debt, or have a plan of attack in becoming debt free, without patience and discipline. If you are looking to pay a set amount each month in order to have debt paid by a certain time, then try setting automatic payment each month so that you do not have manually schedule and avoid the temptation to spend elsewhere. The more money you have available in your checking account, the more you could be tempted to spend.
Come Up with Extra Income
If all else fails and you are just having trouble making ends meet, in addition to probably needing a budget to curb spending, maybe you just need a little extra income in order to stay ahead. With the number of items sold on eBay and Craigslist with ease, you can easily part with items collecting dust around the house and make a few bucks in return. If regular paychecks are in order, you could try picking up extra hours on the weekends with a second job. It may hard on you, but no one ever said that having personal finance success was easy either.