Many Americans are convinced that saving money is a waste of time. Why should they save if they can borrow money every time they need it? A big problem begins when an unexpected event doesn’t allow a person to make the minimum payments on their credit cards.
It”s then when people realize they owe thousands of dollars and lack savings to support themselves during critical times.Credit card debt doesn’t happen overnight; it builds up over months or years. It’s smart to pay attention to the warning signs of financial problems.
The warning signs include:
-Spending more than 15 percent of your income on credit card debt.
-Going over your budget to pay your credit card bills.
-Borrowing money to pay bills.
-Making only the minimum payments each month.
-Maxing out your credit cards.
If you answer yes to any of these questions, then it’s time for what we call “plastic surgery.” As we have plastic surgery to repair or improve our bodies, the same applies to financial matters. Rebuilding credit, saving and avoiding debt are crucial to ensure a happy future.
Follow these steps to get out of debt and plan your financial future:
Organize your budget:Establishing a new budget is the first step you should take to see where you can cut back in certain areas. Look at your daily expenses such as food, personal care and entertainment. As you go through each category, ask yourself: do I need a $5 latte every morning or go out to eat three times a week? Cutting down on daily expenses will provide you with some extra cash to pay your debt off.
Examine each debt:Analyzing each debt means writing down the amounts owed, interest rates and calculating how long it will take you to pay it off paying the minimum balance. The debt calculator will do the math for you.
Pay off one debt at a time:Make the minimum payments on all your credit cards and put your extra cash towards one debt. To select the debt you want to tackle first look at the one that is charging you the highest interest rate (APR). The idea is to get rid of the debt that is growing fastest and start paying it off! When you finish paying off that debt, tackle the next high interest rate debt and so on.
Saving for the future: Once you are debt free, it”s important to continue practicing the same budgeting habits that allowed you to pay off your debt. Saving for the future is your next goal. It”s hard to save money while paying debts, but once you are debt free, planning your financial future needs to be your focus. One option is pouring more money into your retirement account or you can simply have 5-10 percent of your pay direct deposited into a savings account.