Free Advice on Getting Out of Debt and Saving Money
Getting out of debt begins with the desire to live within your means. This often means cutting up your credit cards and refusing to make any purchases that aren't necessary. You must then create a plan to attack your current debt in order to reduce and eliminate it. In addition to getting rid of the debt, you need to begin implementing a savings plan.
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Create an Emergency Fund
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Open a savings account that has enough money to cover an emergency. In order to do this, you must pay yourself first. Take 5 to 10 percent of your income each week and place it in your savings account. Your goal should be to save three months of income. For example, if you make $400 per week, your emergency savings fund should eventually have $4,800. Once you have this amount saved, you can concentrate on attacking your debt.
Pay More Than the Minimum Balance
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Collect all your debt statements and begin paying extra on the debt with the smallest balance while paying the minimum payment on the rest of the debts. For example, if your lowest debt's required payment is $50, pay $100. Once you have paid off the lowest debt, add that $100 to the amount you are already paying on the new lowest debt. For example, if you were paying $50 on the new lowest debt, then you would now pay $150 until you have paid off that debt. Now you can apply an extra $150 to the next lowest debt you have. Continue with this pattern until you have paid off your entire debt.
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Increase Your Income
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Take steps to increase your income and send the extra income to the company to which you owe money. You can increase your income by taking a part-time job, reducing your household expenses, having a yard sale or by selling unused items and books on auction sites. Once you have paid off your debt, you can continue with the part-time work or quit the extra work.
Continue Saving
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Once you have finished paying off your debt, you can create impressive savings for the future. This is in addition to the emergency savings you already established. You can assign a certain amount to go toward savings each month in your budget, or you can begin depositing all the money you were paying toward your debt in your savings account. For example, if you just finished sending $500 per month toward your debts, begin depositing it in the bank.
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