It took Sean, today’s guest post contributor, a great deal of pain before he realized that simple money tips can go a long way…
Two years ago I burned my business to the ground and hitched my horse toward a sunset of unlimited potential. Well, okay, that’s maybe a bit hyperbolic, though my wife and I did close a successful business so I could become a full-time writer and see if there was gold in the online hills.
It’s not that we love risk, or thought ourselves invincible. It’s just, sometimes a dream is worth buying, even on credit. And unlike the Great Depression, many Americans could lean on credit these last few years. We were no exception.
With mortgages slapping the plastic of our cards, two, three, sometimes four months in a row, credit was both our saving grace and dangling noose. We blew through our savings (a decent sum), lost our house, and ended with heaping debt, all in 18 months.
But we’re hacking this debt a trio of digits at a time, and at an admirable clip.
We’re now realizing our dreams, but it didn’t happen without hard lessons, sound planning and fiscal discipline. We skated along the razor’s edge, and though I’ll probably never have to buy my children’s milk with cushion change again, the lessons learned are with me forever.
Millions of people in this country sink deeper in debt without the planning or strategy needed to find their freedom. If this sounds like you or someone you know, these few habits will help make freedom ring.
7 Ways to Stop Sinking in Debt
1. Have a budget. This is non-negotiable. Trying to save money without living behind the boundaries of a budget is like expecting to find Hawaii by pointing your sails west. Find out how much you have coming in each month, then articulate where it needs to go. Set aside a minimum of 10% for emergencies. This exercise is good for routine, but great for your mindset. You need to know how much you’re spending. If there’s nothing left after monthly expenses, you are spending too much. Change your habits and reduce your spending. Ask yourself the hard questions and chase them with difficult decisions. You’ll be glad you did.
2. Trim the fat. Even if you’re meeting your budget’s baseline requirements, you could do better. Look at your latte factor and find the waste. How much is your cable bill, entertainment budget, credit card bills and clothing allowance? How much are you spending on eating out? Most families have enough to live, but lack the discipline to design a plan and make it work.
3. Pay attention to the interest on your credit cards. Stop using those cards with the highest rates, then start paying off the principle. If you must use credit cards, use those with the lowest rates. If it’s possible to transfer your balance to a card with a lower rate, do so. Even a few percentage points on a large balance make a massive difference to your family’s bottom line.
4. Pay yourself first. You’re worth it and so is your family. Too many people place themselves last. Pay your basic living expenses, then set something aside for yourself before frittering your funds on frivolity. You don’t want to find yourself with nothing but lint and a few wrinkled receipts lining your pockets. Set aside money each month for retirement and emergencies. Then, no matter what life throws your way, you’ll be better prepared.
5. Shop around. You may think you’re getting the best deals, but you’re probably not. Take time to understand your local stores and what each does best, and you’ll trim much of the excess from your family budget. Every store has unique sales cycles, house brands and services, available at lower prices. Familiarize yourself with the rhythms of the places you shop, take time to clip coupons, and exhibit patience. The bit you save here and there will eventually add to a ton of saving.
6. Notice the details. It’s easy to suffer from the slow and steady creep of unneeded expenses. Notice the small stuff around you, beyond the latte factor and toward the stuff bleeding into every day life. Bottled water, printer ink, late fees. Look around and notice the leaks and where they’re coming from. Then fix them.
7. Listen to your left brain. That’s the side that says NO! more often than yes. Wasting money isn’t practical, though it’s something your lizard brain loves doing. It’s easier ordering in than cooking a nutritious, frugal meal. But clothes on sale, 2-for-1‘s and BUY NOW, PAY LATER!!’s will keep you from meeting your goals and building the wall of security that will help your dreams come true. It’s more fun listening to your right brain, but listening to the left helps you stay on budget, steer clear of guilt, and meet your goals.
Without sound financial planning and management, we would not have absorbed the risk or earned the reward. If we’d leapt without preparation we would have plummeted to an unknown and unwelcome fate.
Number crunching isn’t easy and is rarely fun. Consistent discipline even less so. Yet without these fundamental habits, you are begging fate to keep you running around the track.
This is a guest post from Sean Platt, a content marketing specialist and at-home entrepreneur. Follow him on Twitter.
{ read the comments below or add one }
Haave you ever considered creating an ebook or guest authoring on
other sites? I have a blog based onn the same information
you discuss and would really like to have you share some stories/information.
I know my visitors would value your work. If
you are even remotely interested, feel free to send me an
e-mail.
#5 shop around.. would really appreciate an article with more detail specifying stores if possible.
I truly belief starting with a budget is the right way to go, it is very important to know where the money will be going. “trimming the fat” as you say is very hard to do for people that have lived way above their means for many years, but a must.
Other things we can do is have garage sales to sell unneeded items that clutter our basements, attics that may be worth some money, start a penny jar, cook at home more often, etc… Closing unused credit card accounts that have lower balances and can be paid off in a lump sum and making more than the minimum payment on larger credit card balances.
Yes… Everybody needs to have a budget. A plan for at least 3 upcoming months. I think all money problems come from here. People do spent a lot more then they earn.
But it’s not always right to listen to the left side of the brain saying NO.. it will discourage people as well. You need to spent but within reasonable limits.
I think staying within your budget is probably one of the hardest things to do because I always seem to spend more money than I plan on spending
Lately my left brain has been taking over more and I’m surely grateful for that. So I’ve recently put myself on shopping probation. Shopping is one of my weak spots. Granted I don’t spend hundreds of dollars on clothing but $25 here and there really adds up. I noticed that when I’m on a strict schedule for instance to school, work, and then home I think less and less about shopping. So maybe keeping yourself busy with other hobbies can be a financial tip to those who tend to overspend each month.
Great read. Too often consumers do not put aside money for emergencies because it can be “better” spent up front. From what I have experienced, many of those who fall victim to credit issues do so because of emergencies they are not prepared for. Setting aside money when you don’t need it is the best habit to develop for yourself.
Thanks,
Sammy
These are great tips. Most people probably do some of these things, but doing all of them can save you even more.
I really like the idea of “paying yourself first.” This is a concept that is so obvious, but seems to be missed when I’m paying bills, buying food, and fun. I have always thought that if i just took out a bit from my monthly earnings (for savings) and left enough for food and bills, I would spend far less on things I don’t need. How do you motivate yourself to set up a savings account and stay devoted to putting away a bit every month?
Cheers,
Janelle
First time I’ve heard a left brain right brain discussion in relation to personal finance. I guess it makes sense, most of us are in financial trouble because of emotional purchases rather than logic or reasoned choices.
Hi Sean,
Thnx for your thoughts. If you have a chance, can you elaborate on what you took a risk on and why? I think those stories are very fascinating and inspiring, succeed or fail.
If not in comments, perhaps another guest post here or on my site.
Best,
Sam
Thanks for the great common sense reminder. Much appreciated.
#6 (The Details) has to be my favorite. Working through budgets, it is always astonishing how quickly buying lunch/coffee/sodas every day adds up. I never drink coffee, but typically buy a couple bottles of diet coke a day… shocking to think that $3 a day in soda can amount to over $1,000 by the end of the year. Sure, this has overlap with #1 (budgets), but I think the small stuff deserves a special shout out.
Paying yourself first is such an important lesson. Treat your savings like any other bill. I’ve made the mistake for years of vowing to save what was left over after I paid bills and bought food, clothes and other things. Guess what? There was never any left over.
Excellent point. You have to make sure you remove what you want to save from your “field of vision” whether that is your wallet, purse, or checking account. I’m taking the approach of not trusting myself so I have to make sure to have automatic deposits into my savings account. Makes things easier.