emergency fund

Mistakes To Avoid When Trying To Get Out Of Debt

Mistakes To Avoid When Trying To Get Out Of Debt

Getting out of debt

Everyone has horror stories when it comes to debt, for me paying off debt is like losing weight. We all have great enthusiasm to get out of debt and to lose weight but most of us never follow through and succeed at either. We all make mistakes, and I have my story book full of mistakes that I made while trying to get out of debt. The one good thing about mistakes is that you learn some valuable lessons that you can share with others so they do not get into the same trap.

Mistake number one

This mistake is always number one with everyone I talk to about getting out of debt, and that is having a plan. Just like losing weight you must have a plan and you must stick to the plan. If you have a spouse both you and your spouse need to follow the plan and don’t deviate from it.

Mistake number two

Do not try to get out of debt without goals or have goals that are impossible to accomplish. Here is what you will want to do instead. First put together a plan with your spouse you both need to establish some creative goals for the family. First you need to setup small goals. These goals need to be something that you feel you can accomplish in a month or two. Then setup some medium goals that might take six to eight months to accomplish and then you need to setup some long range goals that will take one to five years to accomplish. An example of long range goals would be like paying off your mortgage early.

Mistake number three

Do not try to get out of debt without a solid documented budget in place. Most people hate budgeting, but this is a must when you’re trying to pay off debt and become debt free. Again just like losing weight, if you do not plan and setup meals correctly you will not lose the weight. Same with budgeting, if you do not have a detailed budget then you will spend money on items that don’t fit into a budget category and you will find yourself getting deeper into debt. You must have a budget no question about it.

Mistake number four

This mistake I really kick myself over, I took my bonus and raise from work and wasted the money on foolishness instead of paying down my debt. When coming into money either by work or other means you must apply this extra income toward your debt and not increase your spending lifestyle. Take the extra money and apply it towards your mortgage principle or your principle on your high interest credit cards. By doing this it will drive down your debt ratio.

Mistake number five

I kept charging on my high interest credit cards even though I knew I shouldn’t. Some families make the mistake of paying their bills with their credit cards in order to earn points from the credit card companies. This is fine if you are dedicated in paying off the credit cards when the bill comes do. I find a lot of people take the spare cash that they have in their account because they paid their bills with a credit card and they blow the cash. When the credit card bill comes in they do not have any money left to pay off the credit card then you start racking up high interest charges and getting yourself deeper into debt. Be extremely careful of falling into this trap with credit card points.

Mistake number six

I did not setup an emergency fund, this was a huge mistake that took me years to recover from. Every household needs to have an emergency fund for those unexpected home or car repairs or life changing disasters. A family should have six months’ salary set aside in a special account that you do not touch. One never know when disaster is going to hit, disaster could be illness, getting fired, your main source of transportation dies, or you have a major home repair that has to be done. Without an emergency fund you could find yourself in a world of hurt. Start today if you do not have one and keep building to it.

Mistake number seven

Do not keep the same lifestyle you are living today. I tried this and found myself not making any headway in getting out of debt. You must change your lifestyle and cut foolish spending. There are many ways to do this, here are just a few that I found I had to change. Stop going out to eat, wash your car at home instead of spending ten plus dollars taking it to a car wash, drink your coffee at home or work instead of stopping at expensive coffee shops. The list can go but I think you get the picture.

Conclusion

As you read this you will see that most of this is common sense items and mistakes. I just learnt over the years of what to do and what not to do. If someone would have shared these with me I probably would not have stayed over my head in debt as long as I did.

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Posted by Tom in Budgeting
Simple Ways To Save Money

Simple Ways To Save Money

When it comes to saving money I enjoy this game. I treat saving money as a game in order for the whole family to join in and it does not become a threat or a chore. Let’s take a look at some ways we can save money and not make it a negative thing to do.

  • Buy In Bulk

There are many reports by us news, cbn, money magazine and business insider that state purchasing in bulk can save you time and money. Most of the time if you purchase items from warehouse stores like Sam’s club or Cosco you can save on average of about thirty percent over the chain grocery stores.

  • Eat At Home

I know so many people that never eat any meals at home, this is so ridiculous. First eating at restaurants is not healthy for you and the money you waste can easily add up versus the money you would save if you purchased the food and cooked it at home. Example, my wife and I love a good rib eye dinner once a week, if we were to purchase this at a local chain restaurant we would easily spend $50 – $75 for this meal. I can purchase two rib eye steaks for $13 and potato, salad and vegetable I would spend no more than $20 for the both of us.  Right there I would save $30.00 from one meal.

  • Shop Smart

Shopping is a huge chore and many of us hate the thought of going shopping each week for groceries but if you shop smart it can save you time and money. Example, my wife and I sit down and plan out our meals for the week ahead then we put together our shopping list. First, by having a shopping list and stick to it you won’t spend money on things that you don’t need. We also keep track of prices at the local stores and farmers markets. When we put together our shopping list we will make separate list for different stores because we know that items will be cheaper at one store over another. Also we purchase all our fruits and vegetables at the local farmers market because the items are fresh and it puts money back into the community. By shopping this way we save a lot of money each week.

  • Shop with Coupons

In order to save money with couponing you need to mentally change how you shop. You will need to make your weekly meal plan according to what is on sale. Go to more than one store for the items on your shopping list. Be organized with your coupons before heading to the store. Don’t be afraid to stock up on items when they are a fantastic deal.

  • Eat Left Overs

I find that in today’s times many of our younger folks don’t eat leftovers. My wife and I were visiting our daughter for Christmas a couple years back and after dinner our daughter and husband took the leftovers and threw them in the trash. I about blew a gasket when I saw this. Now I am a little old fashioned since I was brought up by parents that grew up during the depression and I don’t throw anything away. Plus many foods taste better if they sit overnight in the refrigerator. So much money is wasted when you don’t eat leftovers and just throw them in the garbage.

  • Turn Lights Off

I find so many times lights left on in our home. I am constantly walking behind my wife and turning off light switches. When she gets up in the morning every light in the house goes on for some reason. This is such waste of money that can be used for other things and it is the simplest way to save money on your electric bill.

  • Conclusion

These are just some simple basic ways to save money for other things. Now if it was me and I did not have an emergency fund set up I would take this money and start applying to my emergency fund and get that set up first be anything else.

In some future episodes we will take a look at some other ways to save money and cut expenses.

Posted by Tom in Budgeting