Part of the purpose of this blog was to see if I could give out some PF advice, based on me making my own bad decisions, so that others don't have to go through the same process I am going through. Learn from my mistakes so you don't have to.
Some of these tips are tried and true, and almost all are borrowed from others.
1) Pay yourself first. I set up an auto debit to my HSA, my Emergency Fund and to my ING account. Every pay period, a set amount comes out of my base pay and goes directly to these accounts. I am slowly increasing the amount of my EF and my ING fund (new to me car fund) without having to even think about it. Also do this for your 401K or Roth IRA. This was something that I did not do for a number of years.
2) Make a budget and stick to it. I'm back to a budget and it's been tricky these first few months, I have been tracking my expenses, figuring out where I can cut back, etc. My suggestion is to track your expenses for a month, then review where you spend your money, then sit down and create a budget and see where and how you can economize. I have several set budget items, but some categories change each month(Utilities, Misc) depending on what is happening in my life. If you are very disciplined, you can start this from the get go, others may need to ease into it. You may have to do the envelope method, you may have to use another system, BUT DO IT!
3) Snowflake your debt: I Paid Twice for This has an excellent primer on Snowflaking. One of those lucky folks without debt, use the snowflake technique to increase your Emergency Fund or meet another financial goal.
4) Get rid of your excess credit cards. In this day and age, there is almost NO reason to have (in my mind) store specific credit cards. They tend to carry a higher interest rate and if you are trying to reduce your debt or use credit responsibly, you don't need them. Pay them off, freeze the account, cut up the cards, close the account.
5) Remember to enjoy your money. If you reach a specific financial goal, treat yourself! Save for and buy that flat screen TV, enjoy it! Take yourself out to a nice meal when you pay off a debt. This is not about cashing out your emergency fund, but to give yourself a treat when you reach a specific goal. All work and no play makes Jack a dull boy. Being debt free is completely liberating, but it is a long process. You did not gather all this debt overnight, it will take more than overnight to get rid of it, but a little treat here and there makes the process more palatable.
6) Remember to give to charity: I know there is a lot of debate about donating to charity or tithing when folks are in debt, but I am a big believer that even some charitable donations can be done even on the tightest of budgets and folks should support the charity of thier choice with a donation, no matter how small it may be. I have drastically cut back, but I have two charities that I give to each year, one is a local food bank and one is animal related. This year my givng allowance is very limited but I still made a small donation to each charity. I buy a bag of food every couple months and donate it to the food pantry. I shop the specials and get the items on their needed list. The animal related charity got a very small check this year. A little good Karma does not hurt!
2 comments:
According to Suze Ormond it is better not to close out credit card accounts as it can have a bad effect on your Fico score. If you don't pay an annual fee, pay it off and put it away. Don't use it but don't close it either.
You have to look at your credit cards and see which ones have the oldest and best credit history. It's prudent (and won't hit your FICO in a negative way)to pay off and close your newer cards and pay down/pay off your older cards. Having lots of open cards can also be a red flag on your credit report. You don't want to close a bunch of cards all at once or too close together, but paying them off and closing a couple accounts a year won't ding your record. What can hurt your FICO is closing a number of accounts in to small a time frame.
I suggested closing store cards as they tend to start in the high teens interest rate, if not more (my neighbor has a Home Depot card at 28%, her Visa is at 12%) don't usually give rewards, and if you have a credit or debit card, they are redundant.
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