Debt and Money Management
Debt is an issue many Americans are struggling with. Due to the recent financial crisis a lot of people are frustrated and don’t know what to do. The truth is saving money has never changed. It’s simply a matter of managing your money effectively. It doesn’t matter what the market does, those that stay out of debt are in the best position. Debt is more than uncomfortable, it’s costly. Free yourself from fees and harassing phone calls. The best way to stay out of debt is to manage your money from the start. There are three basic steps to money management:
Check out where you have been – Look at your receipts, bank accounts, etc and look over how you spend your money. You might be very surprised with what you come up with.
Figure out where you are – Write a simple budget. Take your expected income and decide how to spend it. Don’t forget the necessities like mortgage, car payments, etc.
Make Priorities. If you are in debt, make smart choices about where to spend your discretionary income. If you have a high interest credit card, start by paying that off first. Then move onto other debt like your mortgage or student loan payments. Always pay the minimum on everything, but pay more to the debt that costs the most to keep.
Dream where you want to go – Choose a vacation spot, create a fantasy of where you want to be in five, ten or twenty years. Knowing your end goal will make a big difference in how you spend your money.
Money management works best when you combine short and long term goals. Putting aside a fifty bucks a week for a couple years might sound a little difficult until you consider that effort turns out to be over $5,000. What could you do with that money?
Maybe you can’t afford 50 a week, what about twenty bucks. Skipping a movie night or quitting smoking can quickly add up to some serious money. Would you rather be an expert movie goer or have a decent down payment?
The biggest secret to money management is compound interest. You could easily make a million dollars if you start early enough. Even a hundred bucks a month, if put away in your twenties, will grow exponentially by retirement.
Haven’t you ever wondered how that blue collar worker can retire to the Bahamas? He might have only made minimum wage his entire life, but he knew early on the true value of saving. It won’t happen overnight, but it also won’t cost that much. The true cost is time. If you have that on your side than you are well on your way to accomplishing all your financial dreams.
When you take an honest look at what you’ve been spending and create a solid budget, you can make serious progress. And more importantly, you can keep yourself out of debt. In this day and age it is so important to keep your finances in order. As the market recovers, it will be those that kept a cool head that will reap the most rewards!
Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice.
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