A new decade is here and while the United States continues the slow climb out of a major recession, on a more personal level, Americans have resolved to get with the program and dig their way out of debt. This year, there seems to be more seriousness in the typical New Year’s resolutions.
Learning to live debt free is like any other educational experience. Much advice about saving money is offered on the web and in the media but really getting out of debt boils down to the following two cardinal rules:
Know Where Your Money Goes: One of the biggest threats to any budget is not knowing where the money goes. Buy an inexpensive, small notebook and log income and spending accurately. A spending notebook show a consumer exactly where every cent goes and exactly where effective cuts can be made that can save thousands of dollars a year. Being conscious of frivolous spending makes it easier to see what can painlessly be cut from the budget. Even small cuts in daily spending can add up to big savings.
Live Within Your Means: Credit card usage is not a problem if the consumer pays the card off in full each month but too many consumers use a card to purchase items that they otherwise could not afford. Because interest mounts up on the unpaid balance, that $75 sweater could end up cost $150.00 or more when the credit card bill is finally paid up. Trying to pay off credit card debt while still using the credit card to add more to the debt is a dismal task at best. Using cash forces the consumer to live within his means and makes each payment to existing balances really count. It may take a bit more time to get the things that used to be purchased with credit card, but in the end, enough interest could be saved to actually increase the consumer’s purchasing power.
The recession served as a wake up call to consumers who have spent many years living beyond their means and are realizing that when debt gets to be too much, stress and unhappiness isn’t far behind. Now is the time to start working toward your financial freedom.
