Linda has many interests, including finance, reading, learning, cooking, and traveling. She enjoys researching history and writing.
Debt Can Kill Your Dreams
So many Americans are drowning in debt. Their spending and debt habits are so high they are literally in over their heads. But it doesn't have to be that way. You can learn how to live on a budget and control your spending and your debt.
Times are very tough right now, and it may seem like your finances and you are in a deep black hole. But if you are willing to take some steps to learn how to budget your money, and accept some good financial advice and information you can beat your debt problem. It may be tough and painful, but it can be done.
If we look back and take the time to listen to some of our older people and their stories, it was not easy for them either. But they believed in hard work, pay as you go, and saving for emergencies. Many of those older people have now retired and are now able to enjoy a fairly nice standard of living. We can all learn a lot from the advice of our elderly relatives.
Budgeting: Getting Started
These days the majority of average Americans have access to computers and financial software which can help keep track of both your income and your expenses. Excel spreadsheets or other software can assist you in setting up a working budget.
Steps to get started.
- Gather your information about your income and what your expenses are
- If possible try to find a personal finance class or course. Even if you have to pay for it, it will be worth the expense.
- If you can't afford to take a course, go to the library for some books on personal finance.
- Beginning with that information, start a budget: income on one side. expenses on the other
- Now plan what you need for basic expenses. This is your rent, mortgage. utilities, food, and transportation.
- Pay those basics first. Those are necessary expenses.
- Cut out unnecessary spending such as eating out, movies, new clothes and shoes. No new electronic toys. These things are not necessary until you have all your basic expenses paid
- Make a savings plan, even if it is just saving your change or a dollar a week. As your debt decreases, you can increase your savings.
- If you can afford to do it, talk to a financial planner. Some banks provide free financial planning as part of their services.
Paying Down the Debt
Once your budget is finished and you have planned for basic needs, the next step is paying off any debt that you owe. If you have more than one credit card, you might want to check over the bills, see what your balances are and which ones have the highest interest rate. This also includes other outstanding loans you may have.
You will need to pay at least the minimum on any credit cards or loans, but if your budget shows that you have even a little bit of extra money left at the end of the month, you should apply that to at least one of the accounts. You might decide to pay the extra on the account you owe the least amount of money on or the account with the highest interest rate. Let's say that your lowest balance is three hundred and your minimum payment is twenty five dollars. Instead try making a payment of fifty, if that is possible, and in just six months time that three hundred dollar bill is paid in full. If you can add even an extra five or ten dollars each month, you will still get it paid quicker and save on the amount of interest.
After paying off that three-hundred-dollar credit card, you can now make the minimum on another card with the lowest balance plus the fifty you were paying on the first card. Now it won't take long to pay off that second card and you are on your way out of debt.
It is very important that you stick to your budget and make no new debts of any kind. Stick to resolve to pay off all credit cards and start to deal on a cash basis only.
You should also sit down each month and review your financial situation. As you pay down your debt, your budget and your goals will change. Without that heavy debt, you will now be able to start setting goals to save for. Your family may grow, you will eventually need a new car, or you may want to include saving for a home in your budget. And, of course, before you know it, those little ones will be leaving for college. You may even be able to afford a vacation if you have saved the money needed to cover it.
Pay It Down The Debt Snowball Way
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Living on Your Budget
Now that you are actually living on a budget and cutting unnecessary spending, you may have some money left at the end of the month. This money needs to be budgeted as the beginning of your emergency fund. Everyone should have some money included in their budget that is easy to get to for emergencies. Many financial experts suggest two or three months of living expenses while others suggest that you should have between five hundred and a thousand in the emergency fund. You just don't know when the roof will leak, and you will have to tap that "Rainy Day Fund." Or if you happen to hit a huge pothole in the road like I did, which cost me over three hundred dollars, you will have the money to pay the repair bill.
The emergency fund is exactly that: It is only to be used for emergencies. Any money taken out of the emergency fund should also be replaced as soon as possible. The next emergency may be right around the corner.
Benefits of Losing the Debt
It may take some time and some real effort to stick to your budget, but when you are debt free there will certainly be some great benefits that you are going to love.
- The stress over whether you can make the payments each month will be gone.
- You can start to use that money you were paying on credit cards to save for other things and then pay cash.
- You will begin to achieve a sense of security that you did not have before.
- If you are married, you probably won't fight over finances nearly as much,
- Life will become more enjoyable and peaceful.
I think you will find that life is much more enjoyable if you keep things simple, stop trying to "Keep up With The Neighbors," and learn to enjoy what you do have. Debt causes stress. If you have everything you need, why stress yourself out for things you just happen to want? Enjoy your family, friends, neighbors and life in general. What else do you really need?
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2013 L.M. Hosler
L.M. Hosler (author) on August 30, 2014:
Thank you for the compliment RefundSweeper. Yes, this has worked pretty well for me. I am down to where I owe last than $500 on my last credit card. It has taken me awhile but I am almost debt free but for my car payment.
RefundSweepers on August 30, 2014:
Good advice, I have heard pay off smallest debt first, then you can apply what you were paying on that debt to the next smallest debt and keep going until they are all paid off. Nice Hub!!!!
L.M. Hosler (author) on September 30, 2013:
Thank you so much Billy. I have spent my life pinching pennies, making do and saving. Your hubs are always full of some really good information also especially the ones about writing.
Bill Holland from Olympia, WA on September 30, 2013:
I have written about this before and you are right on! Getting out of debt calls for a plan and willpower and determination. Getting rid of old spending habits is crucial....purchase according to need rather than want and stick to a budget. Great information here.