I highly recommend that people come out of debt and stay out of debt, especially as the economy hits hard times. This is not a good position if you lose your job, the entire burden of lots of debt. Better be debt free, with a good emergency fund and a small budget. This is recession-proof their personal finances.
Here’s how to get there in six steps:
- Reduce expenses. The first step is to stop the bleeding. If you try to get out of a hole, stop digging. So make the decision today not to use your credit card, except in an emergency case. Reduce your spending in any way you can, at least for the moment you try to get out of debt. Consider tracking your spending for a week or two at least, write each purchase, so you can see where your money goes. Some suggestions for reducing restaurants, outlets, magazines, expensive coffees and other drinks and snacks, new gadgets, non-essential purchases of clothing, non-essential purchases of furniture or home, I’m not suggesting that you do not eat or go out to have fun – but I think you have narrowed down on these types of expenses. Find other ways to have fun that don’t cost more.
- Save an emergency fund. With the money you save in step 1, start saving an emergency fund as quickly as possible. Let’s say you identify $ 200 per paycheck that you can save off some items of expenditure (for example – the amount may vary). Now put $ 200 in a savings of each paycheck, and less than 5 checks, you have a $ 1,000 emergency fund saved. This is extremely important, because there will always be unforeseen emergencies occur (you must go to the hospital, your car breaks down, you have the house floods, etc.) and many people use cards credit to pay these fees when they do not have an emergency fund. If you have an emergency fund
- Make debt elimination a priority. Once you have a small emergency fund saved ($ 1,000 is the best way to start, but you may need as little as $ 500 funds) to start the flow of money to the repayment of debt. Make it a priority, or you will not be in it. This means making your first deposit every payday: setting up an automatic payment from your bank automatically when you pay an additional amount in your best interest debt. Pay the minimum on your other debts, for the moment, and once you pay more interest debt, save more money all in your best interest debt … and so on, until all debts are paid. An alternative is to pay your debt smallest first, then focus more on the next debt, and so on.
- Scale back your lifestyle. While step 1 you were asked to find ways to cut spending immediately. There are changes in the longer term, you can do that and it will make a big impact on your expenses. For examples, you can optionally pass in a smaller house and get rid of a lot of clutter in your home that requires a lot of space. You can work in the kitchen at home instead of eating while working out. And decide that you do not really need the computer, TV, video game system or Smartphone. The one that you already have are enough.
- Make sacrifices and buy on cash. This is an extremely important habit may become the keystone to this whole plan. Although many people buy on impulse buys and put on credit cards so they can do it now, this is rarely necessary. It is rare that you really need to make a purchase immediately. A much better practice is to place until you have enough money to buy the issue on cash. Make it a habit to wait. Of course, you may need new shoes, but can you wait until you have $ 50 to buy? Yes, you can. Of course, you may need a new computer, but you can save up to $ 1000, you need to do this? It’s possible. It is even possible to make your car longer and save enough to buy your next car on cash. in exchange my SUV and the payment of the balance in cash. The key is to wait, implement, and buy in cash.
- Make a commitment to stay away from credit. Get a part of the debt may well be inevitable – Student Loans, for example, or home loans are generally considered good debt, especially at low interest rates. Even car loans are not necessarily bad debts, but as I said above, it is possible to save enough money to buy a good used car on cash so that you can avoid entering into debt. But credit card debt is often desirable for the average person. I’m not saying that you should never use credit cards – obviously, they are convenient for online shopping or traveling, even though, for these purposes, you can use a debit card that is supported by a major credit card company in most cases. But my advice is somewhat of a credit card (cancel everything else) and to maintain the balance to $ 0. Use it when you actually have the money in the bank and pay immediately. Do not use your credit card when you have no money – which could lead to problems. Make a commitment to do so, and you avoid credit problems.