Who Doesn’t Have Personal Debt?
Cars, pets and chocolate candy bars are never the same shape or size. They all come in different shapes and sizes, personal debt is no different. You can have credit card debt, outstanding student loans, mortgage debt, ongoing car loan debt. The list is almost endless. Practically everyone has some type of debt nowadays.
Case in point, try buying a house without a mortgage, or going to college without a student loan…it’s almost impossible. But who cares about what type of personal debt you have; debt is debt and it can strangle you. Now if you are one of those individuals who have the natural ability to keep their debt under control, congratulations. But if you accumulate more debt than you can afford to pay off each month then you need a new approach. If you do not approach your debt with a different frame of mind you will keep on accumulating it and eventually reach the point of no return where your debt ends up controlling your entire life.
If you are drowning in debt all you want is a life-preserver. You may find it hard to believe but your safest life-preserver begins with you and how you approach. It was most likely your financial habits that got you into debt trouble in the first place so that would be a good place to start if you want to make changes.
Step #1 – Stop Accumulating
During your debt reduction and management process keep in mind that it is a slow process, so be patient with yourself.
One financial habit that gets most people in trouble more often than not is their monthly spending habits. Do you know where your money goes every month? Have you ever made a list of your monthly expenses? Are you living from pay check to pay check? Running out of money at the end of every month? You are not alone; it happens to a lot of people. But here is where you can be different from other people. Your personal debt issues may be similar to others, but you are going to take a different approach to dig yourself out of any debt pit you are currently in. Read on to learn how.
Check Out Your Spending Habits
Even though it may seem tedious, for one month track your expenses, you may be surprised as to what you will find.
Make a list of everything you spend money on. Even if it’s just a simple cup of coffee or a pack of gum, put it on the spending list. Then compare those monthly expenses to your monthly income. Do the expenses exceed the income or vice versa? Next, pinpoint any expenses you can reduce or eliminate so that your spending does not exceed your monthly income. Financial experts call that “living within your means”. It’s also called budgeting. Oh no, not that awful concept of budgeting, yes, budgeting. Unfortunately budgeting gets a bad rap, it sounds so old-fashioned, but it really can help keep expenses in line.
Got A Spending Plan?
Lots of folks have issues with the concept of budgeting.
If you really want to change your spending habits though, you will need to get over any hang ups you may have about “budgeting”. Think of a budget as simply a spending plan with restrictions. Budgeting sounds constraining. Well the purpose of a budget is to help you pull in the reins on your spending, so it should be constraining. A budget will help you change your spending habits and stop spending money you do not have. If you are in the bad habit of believing that every want is a need and you should get whatever you want; reverse that thinking, you will eliminate a lot of financial worries.
Step #2 – Pay It Down, Down, Down
It is so easy to get into debt but oh so hard to get out of it. Finding ways to pay down your debt is easier if you take it step by step.
If you live from pay check to pay check and think that you do not have any extra money, think again. Everyone can find some extra money. Just check out your teeny, tiny, innocent purchases. Who me? Yes, you. Are there any of life’s little extras that you can cut back on? Umm, café lattes, appetizers and drinks at restaurants, lunches out, shacks from the office vending machine, buying stuff you never use but buy because it’s on sale.
Regardless of how much extra money you find by cutting back, extra money is extra money. Now find the place to apply that money and get your biggest bang.
If you have loads of credit card balances, start there. Use your extra money to pay more than the minimum amount due on your credit cards. Whenever you just make minimum payments instead of paying the entire balance you are adding to the cost of your purchase and that is such a waste of money. Use your bonuses or raises to get a jump-start on your credit card balances. Pay your credit cards down to zero and get in the habit of paying off your entire balance every month. If you have more than one credit card with a balance, start paying down the one taking more of your money…that’s the one charging you the highest interest rate.
Once your credit card debt becomes manageable, try another new financial habit. Stop using your credit cards for every purchase, instead, switch to paying with cash. Not a debit card but good old cash. Old fashioned? Probably, but it could save you lots of financial headaches in the long run. Think about it, by using cash you will have no choice but to keep your spending limited to the amount of money in your pocket; after all, how many times can you go to the cash station?
It’s Up To You To Keep It All In Balance
Ahh, balance. A concept that sounds great in theory but is not always that easy to implement, especially when it comes to personal finances. But with the right approach, you can change the direction your finances are headed.
If you can stop your personal debt from building up and creating a momentum of its own you can stop it from overwhelming and controlling your life. You do that by simply changing your thinking about debt. Take charge; stay ahead of it and never let it pass you up again. That begins with making two promises to yourself. First, promise that you will stay committed to the process of changing your financial habits, regardless of how long it takes. That promise will help get your debt under control since your financial habits are what loaded on the debt to begin with. And then promise yourself that once your debt is under control, you will make it your personal mission to keep it that way. Personal debt is a burden that can get too heavy sometimes. Once your debt load is lightened up, why load up again. It’s all up to you.