4 Steps to Avoid When Trying to Get Out of Debt

Get Out of Debt

Making the decision to get out of a debt is the first step in your journey to financial freedom and security. However, paying off all of your debt isn’t something that happens overnight. It takes careful planning, smart decisions, and commitment.

Here are steps you’ll want to avoid so that you can be successful regaining control over your financial health.

1. Not Changing Your Spending Habits

Humans are creatures of habit, and you’re no exception. We tend to repeat our actions. Why? Because it’s comfortable and what we have become accustomed to.

However, if your goal is to pay off financial obligation, you can’t continue with the same spending habits. This means you’ll have to work extra hard to stop doing things you’ve been doing for months, if not years.

Some of the best ways to improve your spending include:

  • Cooking meals at home
  • Not making impulse buys
  • Separating wants from needs

You don’t have to stop spending on things you enjoy. However, it’s important to make better choices with the money you do spend.

2. Not Creating a Budget

One of the most important tools you’ll need in order to pay off financial obligation is a budget. Without a budget, it’s impossible to gain control of your finances.

Most people don’t create a budget because it “takes too much time.” But the reality is that creating a budget doesn’t require hours upon hours. Getting started is simple.

Start by writing down all of your income. Then write down all of your bills, such as your car payment, mortgage, and utility bills. With the money you have left over, save as much as possible, while also saving some funds for a rainy day.

In the age of swiping cards and mobile payments, it’s all too easy to lose track of how much you’re spending.

3. Trying to Pay Off Too Much Debt at Once

Many people make the mistake of trying to put an end on your debt by paying everything off at once. If you have multiple credit cards and loans, you may put all of your money towards them each month, leaving nothing left to account for emergencies.

Instead of trying to tackle all of your financial obligation at once, prioritize your debt. Start by:

  1. Listing all of your debt
  2. Ordering debt from highest to lowest interest rate
  3. Paying off any small balances (i.e. $200)

Start by paying off the highest interest debt first. Once this debt is paid off, go to the next card or loan with the next highest rate.

You may also want to consider debt consolidation. If you have several credit cards and loans, you can combine them into one loan that is paid at a single interest rate.

4. Not Getting Help

Tackling debt on your own can become extremely overwhelming. Even if you’ve created a budget and prioritized your debt, seeing such large numbers can send you into a mental tailspin.

Don’t hesitate to ask for help and support from those around you. There are also non-profit credit counseling agencies, financial courses, debt counseling, and credit counselors available to help you every step of the way.

Stop Letting Debt Weigh You Down

Carrying around years’ worth of debt gets quite heavy. The good news is that debt isn’t a life-long sentence. With a plan, commitment, and willingness to change, you can finally dig yourself out of your financial hole. Dont make unnecessary money mistakes.

Make financial freedom your future by not making these four common mistakes when getting out of debt.

8 Healthy Financial Habits You Should Start Today

Healthy Financial Habits

Finance is one aspect of your life that’ll affect every other part. Financial security and freedom can make every other facet of your life, including your health and personal relationships, significantly better. And for that, what you need are healthy financial habits.

The earlier you get serious about your personal finance, the better off you and your loved ones will be. To help you with that, here are eight financial habits for financial security and freedom that you can start today.

1. Make a budget

Nothing else will fall else in place unless you make a budget. Calculate your income and expenses based on your financial statement from the past few months. If you want to change your financial situation, you should know where you really stand. And there are so many budget apps available that can make budgeting easier.

2. Limit your expenses

Now that you know how much you spend every month, put an upper limit on your expenses. Unless it’s a healthcare or family-related unavoidable expense, you shouldn’t go beyond this limit.

3. Automate savings

With automatic withdrawals, you can start setting up a savings fund. Setting up one will take a few minutes and once you’re done, the system will automatically deduct it from your salary. When you don’t have access to that money, you’re less likely to spend it.

4. Pay credit cards in full

Credit card interest rates are among the highest in the industry. Keep that in mind whenever you use your card and make sure that you pay your monthly payments in full. Any leftover will carry exorbitant interest rates.

5. Reduce your rent

Rent is one of the biggest expenses that most of us have to make. Ask yourself whether you need a big apartment, especially if you’re starting out. Move to a smaller apartment or get roommates.

With remote work getting regularized, you can also move further away from your office, if it’s possible.

6. Imagine paying in cash

Here’s a neat little trick to help you cut down on your spending. The next time you’re about to buy something, imagine paying it in cash. That will suddenly feel heavier.

If you’re already paying in cash, imagine someone offering you either that product or service or that much cash. What would you choose?

7. Start investing

Earning makes you comfortable, investing makes you rich. Most people can’t comprehend the power of compounding but know that the earlier you start investing the bigger your returns will be.

Spend a couple of hours every day for two weeks to learn about index funds and retirement savings. Next step? Talk to a financial advisor.

8. Develop a secondary source of income

You can only reduce expenses to a certain extent. With an extra source of income, you’ll have more to save and invest in. If you can offer a service, you can find a market through the internet.

You don’t have to start all eight on the list immediately. Pick any two for the time being and focus on them. The rewards will encourage you to stick to every other financial habit.

Boys rule, girls drool

Screen shot 2009-11-30 at Nov 30, 2009, 11.47.53 PMToday is an epic day. I promised yesterday, that I would be stirring up a little controversy this morning. Well, hopefully I can deliver on that promise. The only catch is there are three other bloggers that are in on this action. Consider this the first PF “Battle of the Sexes”. My goal today is to establish why being a man is better for one’s financial situation. To all those that are offended, please understand this is suppose to be lighthearted and the girls have an equal opportunity to bash the dudes.

Now on to the four reasons why being a women is harmful for one’s financial health…

1) The glass ceiling. That’s right ladies, no matter how hard you work, how much education you have, or how many bosses you sleep with, you will probably never be as highly paid as Bob the college graduate whose great uncle is your manager. I’m not saying the glass ceiling is ethical, but it exists. Don’t believe me? Let’s take a look at the ten richest people in the world. Any idea how many of them are men? That’s right all of them. In fact, only two women make the top 20. If you’re a female you’re fighting an uphill income battle from day one.

2) Make-up. Oh don’t even get me started on make-up. Quite possibly the greatest marketing ploy ever: Convince women they are absolutely disgusting, unless they spend hundreds of dollars a year on some blush, lipstick, mascara, etc. I’ve always been dumbfounded by the cash a woman will spend in an attempt to alter her looks. Shoot, while we are talking about make-up, let’s move on to the world of plastic surgery. Breast implants, nose jobs, face-lifts…all a female dominated market. Thousands of dollars wasted. A note to all women: You are all naturally beautiful….why do pay so much to mess up a good thing?

3) Unnecessary purchases. Do you know why coupons were invented? They were invented because women like to shop. Sure they might have saved $0.50 on that cute centerpiece, but did they really need to spend the $29.99 in the first place? Girls will buy anything and everything just because it’s on sale. Girls buy things they don’t need, that they will never use, and don’t even want, simply because they “got a good deal.”

Lastly, and quite possibly the most important reason being a man is better for one’s financial situation….

4) Tampons. I’m still pretty immature and don’t really like to talk about the female menstrual cycle, but I’m gonna give it my best. According to a few different internet sources, the average woman spends $4.00 a month on tampons. That’s $48 a year. Let’s run the number and see what that money could do for a 25 year old individual if invested in a Roth IRA through age 65, with an 11% return….$31,000 spent on just tampons. I don’t even wanna know what that number would be if we included ALL feminine hygiene products. As a male, I think I’ll take that money and go buy myself a Lexus or something I can enjoy 🙂

Now before some of my female readers throw a temper tantrum, please remember this was intended to be lighthearted. When it really comes down to it, there should be no debate on who is better. We all know men are better at EVERYTHING. There really is no argument to be made for the other side, but in fairness, I’d like you all to head on over to these other blogs right now and read their perspective on “male vs female” finances.

Budgets are Sexy

Fabulously Broke

Krystal At Work

Men: be sure to add in the comments below other costs that you can think of that women incur and men avoid.
Women: make your best attempts in the comments below to dispute anything included above 🙂