The best way to get out of debt and stay out of debt is to stop spending more than you make. This is, of course, easier said than done. But no one is a hopeless case if you really want to get control of your money. When you do have control of your money, you will often feel more self-empowered and disciplined. Also, remember that there is no quick-fix solution. Don’t fall for scams that promise to repair your credit rating instantly.
Keep A Spending Journal
The first thing you need to do in order to quit spending more than you make is to keep a money journal. You can’t stop the money hemorrhaging away if you don’t know where the money is going. You need to write down how you spend every penny for a week. Ideally, you should do this for a month, but you might not have that much time to let your money run away from you. If you have more than one person living at home, then you all need to contribute to this money journal.
Don’t worry about not having the time to keep a spending journal. If you have time to read this article, you have time to jot down what you spent. Keeping your receipts and ATM receipts in your wallet or pocket-sized notebook will help for very busy times like having to run to the car directly from a shop in order to make an appointment. The first two weeks of keeping a spending journal are the hardest. After two weeks, scribbling an entry in your journal will become part of your normal routine.
Plugging Up Money Leaks
When you look back at the journal, you can see where every penny is going. It might not seem like much to buy a coffee on the way to work, but over time that really adds up. Just have your coffee before you leave your home, or use a thermos. Are you reading all of the magazines that you subscribe to? That’s another way to plug up your money leaks.
How many times do you eat out or go to the movies? Eating out and going to the movies is just about the biggest waste of money there is in modern living. You get much better food and entertainment experiences from home. Even dinners in the refrigerated section of the supermarket often taste just as good as going to a fancy (and expensive!) restaurant. Frozen pizza technology has also really advanced over the years. Buying a frozen pizza and toppings to add is often much cheaper and tastier than ordering out.
As you are taking the week to write in your money journal, give your possessions a good inventory. Do you have clothes in the closet still with the tags on? Then don’t buy any more clothes. Join a local library instead of spending a fortune at a bookstore every payday. These are just some of the ways you can plug up little money leaks. Plugging each leak up gives you more and more money to get out of (and stay out of) debt.
Only have one major credit card. If you have your own business, then you can have one card for business and one for personal use. Do not have a department store credit card. They not only charge outrageous interest rates, but often you do not save anything by using them. If there is more than one adult in the home, then have one credit card in one name for each adult.
Never be afraid to ask for professional help. If you owe more than $5,000, then you should consider contacting a non-profit debt management service. These groups usually offer counseling as well as loan, but will only offer you a loan only after they thoroughly check out your financial situation. You can ask your creditor what non-profit debt management groups they recommend. You could also ask your bank or your credit card company for recommendations for debt management services or how to renegotiate your credit card interest rate.
Quitting the habit of spending more money than you make is a complex problem, but if you do all of these recommendations, you will be able to take your problem down to size.