Financial Tips

Millions of Americans, including high-earners, struggle with debt. While there is no easy solution, there are a few time-tested ways to help break free from debt. These 10 financial tips may help get you started.

 

KNOW YOUR NUMBERS. Take charge of your finances and know your numbers. Make a list of what you owe this month and compare it to your paycheck. Sometimes seeing it on paper makes it real and easier to face.

KNOW YOUR PAYCHECK. You get paid a gross income, but by the time taxes, insurance, retirement contributions and other deductions are subtracted, your “take-home” pay is less — sometimes much less. Your spending budget should be based on this net income – not gross.

KNOW YOUR SPENDING. Do you really know how much you spend? What you spend each month is different from what you owe. In fact, it’s in addition to what you owe. Keep a journal to track the money you spend on everything including little things like lunches, coffee, haircuts and movies. If you’re like most of us, you’ll be surprised at how quickly it all adds up.

MAKE THE CUT. Let’s start with groceries, for example. Did you know that the average family of four spends about $450 a month on food? That’s a lot of money! Start looking for easy ways to save. In addition to coupons, warehouse clubs can help, especially when you buy in bulk. Skip going out to lunch and pack a few lunches a week. A little quick math will tell you just how much you’ll save in a week, a month or even a year.

GET A SECOND JOB. The bottom line is you need to take in more than you spend. So, look at your paycheck vs. your expenses — and decide whether you need to consider further expense cuts or a second job. The good news is that technology has made it possible to offer many options that work for stay-at-home parents and those that need flexible schedules.

ASK FOR HELP. It’s not always easy to ask for help, but there are several government services available to assist you. Contact your county directly, or check out state and federal websites to inquire about free job training, food stamps and free medical care. Social media sites might also help you find complimentary local services like veterinary services or childcare.

TACKLE YOUR CREDIT CARDS. If you want to beat credit card companies at their own game, pay on time and always pay more than the minimum. You’ll pay off your balance faster and reduce your total cost of borrowing. It never hurts to ask for lower interest rates either. In fact, nearly half of all customers who ask for a lower rate actually succeed. And if you’re really serious, put away the credit cards and use cash instead. You’ll likely find you spend a lot less.

AVOID BANKING FEES. Just keeping an eye on your account balance to avoid overdraft fees will save you money. Most banks offer online banking that makes monitoring your account a breeze. While you’re online, sign up for email and/or text alerts to notify you when your balance is low.

TAME THE SHOPPING BEAST. If you’re tempted by the mall or online shopping sites, stay away. It’s too easy to make unnecessary purchases. Here’s a test to see if you fall victim to frivolous spending. Make a list of your recent purchases. Wait a few days and label each of them as either a “Want,” “Need” or “Just Because.” That should paint a pretty clear picture.

POLISH YOUR CREDIT RATING. A good credit rating enables you to get better terms on all of the money you borrow. Check with the three major credit bureaus — Experian, Trans Union and Equifax — to see where you stand. You can dispute any discrepancies that make you look like a risk. If they don’t remove the items, they’ll include an explanation in your file. Go to www.annualcreditreport.com to get a FREE credit report.

So start gathering your lists, your account balance, your temptations and your credit report and get started. Here are a few other helpful financial sites you might want to explore:

www.mymoney.gov
www.federalreserve.gov/consumerinfo/fivetips_creditscore.htm
www.ftc.gov/bcp/edu/microsites/moneymatters/index.html
www.myfico.com/Default.aspx

With all this information, you should be able to identify pitfalls and figure out a plan to overcome your debt on your own terms.