Monday, August 24, 2015, AM | Leave Comment
First off, stretch your legs according to the length of your sheet, otherwise you would get cold feet. That means “live within your means.” Many consumers need to rethink their spending habits and return to the basics of building a strong foundation in their personal finances.
Here are some steps you should take to gain control of your monthly finance and reduce your debt:
Track your spending
The very first thing you can do is to know where you are at, financially. You know where your paycheck is coming from and how much. The hard part is to know where it’s going.
The basic rule, which everybody knows, is money going out must be less than money coming in. The difference is your savings.
In order to increase your savings, before you pay for the necessities, and I mean necessities, pay yourself a certain amount every time you receive a paycheck.
You always save when you save before you spend. You seldom save when you spend before you save.
Don’t buy if you don’t need it – period.
Most people think that if you are tight with your money, their friends and acquaintances would think that they are cheap.
Forget about Mr. & Mrs. Jones. The misconception is they do it so I must do it too. Being careful is simply getting the most out of what you buy and not purchasing things that you really don’t need.
Your debt – pay it off or reduce it
Most Americans have some kind of debt that they have to pay off. Some by choice, others by necessity.
If you follow our first step to curb your spending, then and only then will you be able to start paying off your debt quicker. And the quicker it is, the better for you and your kids.
Save, save, save
If you have lost your job recently or have become disabled, how long could you last without a steady paycheck? Financial planners generally recommend that you have savings equivalent to three to six months of bills stashed away.
But you may need more. Stop using your credit card for some time. Let me tell you how I was raised.
When I compare myself with my kids who were born in the States, the way they spend money is so way out of my league.
They tell me “Money is for spending.” But one thing I appreciate is that so many credit card-issuing banks send them application forms, they just trash them.
Even if they spend all their money when they get paychecks, at least at the end of the day, they will not be in debt.
I hope they continue that and don’t borrow like there is no tomorrow.
Be on alert amid bank mergers
When your bank goes nearly bankrupt or because of a variety of problems another bank buys it, what do you do?
You have mortgage with the bank. You may have a line of credit (home equity) for your small business.
In previous and much better life, it seldom affected your account. Hopefully, you are protected even now but not always in some cases. These days, the situation might be a little different.
The terms of your primary mortgage will not change. But the line of credit might. Your rate and how it’s calculated will remain the same, but the acquiring bank could lower your limit or freeze the account – just as the originating bank could have.
Such a move is unlikely at the moment, given how much untapped equity you might still have, but it’s something you should be prepared for in case home values fall further.
If the bank’s address is different and most probably it will be, you should be alert to the change.
If you use a direct debit system, in which the payment comes out of your checking account, you shouldn’t have to worry about the new address.
But if you pay with a check every month or you have set up an online bill payment system, you may need to make changes where you send your money.
Plan for home ownership wisely
Don’t buy a house you cannot afford. Before you buy it, do your homework. The price of the ownership is not only just the mortgage, but you also have to add with it other expenses that are attached to it as much.
The price = monthly mortgage + property tax + insurance + expenses on the home upkeep.
In a Nutshell
Read other posts on this blog. There are many other steps you can take to control your finances and reduce your debt.