Thursday, June 21, 2012, AM | 2 Comments
After four years of recession and high unemployment, Americans have become conscious of the financial pitfalls of living in a credit-heavy economy. Emphasizing credit card debt relief, expense tracking, cost cutting, and saving have not occurred to such a degree since the post-World War II era.
It’s easy enough to have the intellectual motivation to get better control of personal finances, but the emotional discipline is harder to cultivate, especially if it is tinged with a sense of deprivation. After years of unrestrained spending, many people just don’t know how to get started. Consider some of the following strategies:
Put the credit cards away, even if that means freezing them in a block of ice. Get all purchases and expenditures on a cash basis, and investigate alternatives to credit purchases like lay-away, a shopping staple that made resurgence during the recession.
Get educated about basic personal finances. There are plenty of popular money experts on television and online who dispense a wealth of information for free. This is a good way to learn the fundamentals, as well as to hear motivational personal success stories.
Make specific lists of goals tied to time tables. Figure out milestones in increments of one, three, five, ten, and twenty years, and then track success toward attaining those goals. Don’t limit envisioned outcomes. Starting small is the first step toward major changes.
Track expenses over a month, categorizing all expenditures with an eye toward building an accurate and realistic budget. Simply the act of observing what is being spent and where will have a moderating effect on spending choices.
Formulate a budget while continuing to track expenses and adjust with an eye toward debt resolution and building an emergency savings account. The goal is always to compete against expense numbers to make them lower, and to make payment and savings levels higher.
Develop an active plan to attack debt. One popular method is to pay off the smallest debt first, then take the amount of that payment and add it to the payment for the next greatest debt, until that one is also resolved. Repeat the process working through all existing obligations.
Join a financial support group or seek counseling and educational classes from a local non-profit group. This is an important step toward identifying spending impulses and learning about triggers that lead to budget-busting behaviors.
One of the most important aspects of taking charge of personal finances is not to go to extremes that result in a sense of deprivation. Just as is the case in dieting, feeling deprived leads to binging. Then the situation becomes overwhelming and lethargy sets in.
Living more economically doesn’t have to mean giving up interests or hobbies, but it may mean finding different ways to pursue those activities in the short term. As debts are resolved and savings accrue, items can be returned to the budget without guilt and without harming the greater financial picture.
Finally, realistic expectations are crucial, especially where credit card debt is involved. Credit cards represent the single greatest source of revolving debt in the United States.
Paying off cards doesn’t just mean attacking the principle, but also meeting the interest and fees attached. This can take years and generally requires considerable discipline. Remember that the end goal, however, is financial freedom.
Ms. Bekiroglu is a published author, freelance writer and editorial consultant for secureloanconsolidation.com. After receiving a Bachelor of Arts degree from the University of South Florida, she faced the mounting obstacle of paying over $24,000 back in student loan debt. Determined to eliminate the debt, she became knowledgeable about money management. She seeks to educate others with tips on managing student loans and other kinds of debt, as well as in general personal finance and money saving tips.
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