This post is part of the Saturday’s Seven series.
Here are seven simple tips for getting and staying out of debt:
1. Write down every single thing you spend money on. This is an essential first step to getting a handle on your financial situation. Once you have established a budget and tracking system, this will also help you reflect on your spending habits.
2. Evaluate your spending and identify areas where you overspend. After you have a clear picture of where every dollar is spent, look for patterns and surprises. For example, maybe you did not realize you spend $50/month at Starbuck’s (and by you, I mean I).
3. Create a budget. Your budget will be your playbook, so make it realistic. If you enjoy Starbuck’s, then don’t cut it out of your budget altogether. On the other hand, if you have financial goals that require saving a greater portion of your budget, you may have to be more frugal.
4. Identify a tracking system – Quicken, Mvelopes, or Excel – that works for you. My personal preference is Mvelopes, but I know there are lots of programs available. Your tracking system does not have to be complicated, just as long as it works for you.
5. Balance your checkbook daily. Paying attention to your finances on a daily basis keeps you focused on your spending and saving goals.
6. Create an emergency fund. An emergency fund is necessary for those un-budgeted expenses. Experts vary in their recommendation of how much to keep in such a fund, but recommendations range from $1,000 (Dave Ramsey) to eight-months-worth of expenses (Suze Orman).
7. Pay your bills on time and in full each month. Late fees, penalties, fines, and interest are big money wasters. Avoid unnecessary expenses by promptly paying bills.
How do you stay out of debt?
photo by emdot
