Sunday, March 05, 2006

Building Stable Financial Future

You may ask, "How do I start?" To start, you must know where you are right now. Know who you owe and how much you owe them. This means writing down everything, knowing where you spend money, how much money you have coming in and balancing the two. Include in the list savings, even if it is just $10/month and increase it periodically. I used this spreadsheet to begin.

Once you have all your bills and creditors written down, list your creditors from smallest to largest and knock out the smallest amount owed first. Some recommend that you list them in order of interest rate, but tackling the smallest amount first will give you a sense of accomplishment once paid off. Once you pay off one bill, apply the amount you were paying and to the next creditor on the list and so on until you have tackled the list. I believe Dave Ramsey calls this Debt Snowballing. Check out his book at your local library.

If you were like me, at times I had no choice but to use my credit cards to make it to the next payday. Do what you have to do, just do it in moderation.

Make up in your mind that you want to get out of debt and stick to your guns. This means, not going to McDonalds, but having a peanut butter and jelly or ham sandwhich with chips. The price you pay eating out once can fund lunch at home for a week. You can splurge every now and then but try to keep it to a minmum.

Back to savings. I think the best thing I've done was open an ING Direct account and utilize automatic deposits every payday. This is what is called paying yourself first.

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