House payments? Car payments? College loans? Credit card debt?
Does every paycheck disappear by the time you make all your monthly payments? Do you put purchases on new cards because you have no cash left after you pay house and car costs, college loans and maxed-out credit cards?
You’re not alone: Millions of Americans find themselves in this vicious cycle. All they can do is make minimum monthly payments while charging living expenses, like food, clothing and gasoline. Their daily expenses go on newly acquired credit cards, accumulating even more debt. If an emergency arises, like a leak in the roof or an expensive car repair, they plunge deeper and deeper into debt and despair.
Debt breeds more debt: Unless this cycle is broken, you’ll never be free of debt. You won’t know the peace of mind of having money to spare. You won’t be able to save, or invest, to reap rewards of comfortable living. If you don’t take steps to get out of debt, you’ll always be drowning in bills with no rescue boat in sight.
How do you break the cycle of debt? Put the brakes on spending!
- Avoid all discretionary spending. Never buy unnecessary items or charge them to credit cards.
- Find ways to cut costs for necessities like food, clothing, gas and other living expenses.
Stop buying things you really don’t need, like:
Trendy fashions, jewelry, movies or show tickets, snacks, holiday decorations, home décor, cigarettes, soda pop, alcohol, dining out, electronic gadgets, household gizmos, games, gambling, magazines, manicures, make-up, etc.
Cut costs of living expenses:
- Use gas for only necessary driving. Adjust temperatures to save on heating and cooling costs.
- Buy less expensive groceries, proportion meals to avoid waste, skip desserts and treats.
- Negotiate lower phone, cable and internet costs. Shop around for better prices on everything.
Pay off long-term debts faster:
Use what you save by cutting expenses (and avoiding unnecessary purchases) to pay down bills. Adding just $25 extra or so each month toward interest on big loans, like mortgages, saves you hundreds of dollars of debt over time. Be stingy about paying any interest. Call credit card companies and ask them to reduce their rates. Some will.
Get rid of credit card debt:
Start with the card with the lowest balance – or the one with the highest interest rate. As you eliminate each credit card bill, apply that amount to other cards until all are paid. When you have extra money, i.e. tax refunds, bonuses or cash gifts, put it on credit cards where interest is higher than other loans. Splurge later when you’re debt-free.
Save and invest whatever you have left:
Try to invest small amounts monthly in mutual funds to grow into emergency money or nice nest eggs. Once your debt is manageable, see certified planner Ronald Van Surksum: email@example.com for investment options.
Manage Your Money is provided by Advanced Asset Management LLC Ronald Van Surksum, CFP 4555 Wilson Ave SW – Suite 2 Grandville, MI 49418 *For permission to reprint: firstname.lastname@example.org P: (616) 531-5220 C: (616) 450-8439 email@example.com