If you’re like millions of Americans, you too have probably said this a time or three. Most Americans are in debt and many of us simply can’t see a way out. But there is hope if you put your mind to it and take steps to change your spending and budgeting habits.
Budget. Most people are resistant to the idea of budgeting. If you weren’t you probably wouldn’t be reading this, and definitely wouldn’t be in debt. But don’t let the word or the idea of a budget scare you. Actually, a budget will help you take control of your finances and you will experience true financial freedom.
Build an Emergency Fund. The only way you’re going to get out of debt is by having cash available when a true emergency arises. A true emergency is an unexpected hospitalization or death in the family. Unfortunately, most people end up having to incur debt when circumstances such as these arise. Your first goal for an emergency fund is $1000. Then build up to cover one month of living expenses, 3 months, 6 months and so on, until you have enough to live on for at least 1 year.
Cut your expenses. Another thing you can do to help you on the road to becoming debt free is to take a good, hard look at your monthly expenses. Your budget will help you pinpoint where you can cut back, such as:
- Cable or satellite. Do you really need 120 channels? You can greatly cut back on your cable package and still have plenty of shows to choose from.
- Daily Coffee or Latte: How many times a week, or day, do you go out for a coffee, latte or cappuccino? At an average of $5 a pop, those can add up quickly. You could put that money toward your smallest credit card balance and really start seeing some light at the end of the tunnel.
- Clothing: How often do you go shopping for new clothes, shoes, purses, and jewelry? Do you really need them? Sometimes we turn to retail therapy when we’re feeling down, and while we may feel better at the moment, we quickly feel remorse when we’ve spent too much and incurred more debt.
Begin paying off debt. Of course this might not sound so easy. But, when you – after getting your budget in place – can see where you have extra money, it will be easier apply that extra money toward the smallest debt balance you have. Once that debt is paid in full, then apply the full amount you were paying on that debt plus the minimum payment owed toward the next smallest debt. Soon, you will experience true freedom from debt.