Drowning in debt? Try taking these time-tested tips.
January 8th, 2024 by admin
One of the challenges some working families face is what to do with their growing pile of bills. And how to change their family's habits to avoid their financial challenges getting worse. Studies show that over 60% of our families lack enough savings to cover a $500 emergency expense.
Here are five key challenges, which may sound familiar:
- You are living beyond your means.
- You lack an Emergency Fund.
- You have high interest debt, including multiple credit cards.
- You ignore contributing to highly tax-efficient savings plans (IRAs, 401 k, 403 plans, and others).
- You ignore financial education opportunities.
Identify some of your habits that push your money-out level over your money-in level and a plan to avoid them:
- Dining out/pick-up orders several times a month. Cut down on the number of meals ordered and cut down the expense of what you order.
- Super-sized cable/streaming or dish plans. Do you use all those entertainment options? Think about any one-month period to analyze your viewing habits.
- Is your cellphone plan the best one for you? And do you really use all the expensive add-on options?
- ATM fees: They are very costly. Go to the bank and get your cash directly if you can.
- Podcasts, online subscriptions, impulse buying of books and clothing, lottery tickets or other games of chance, and "bad habit" purchases such as excessive amounts of alcohol or other addictive products. Try to avoid them for thirty days.
- Too many credit cards, multiple balances, and multiple high interest rates. Try to use one or two and slowly reduce the balances on the others. And avoid the habit of paying the minimum payment required rather than last month’s added charges. Which is never, ever your friend. The credit card companies are charging you extremely high interest rates on what new debt you do not pay off in full.
The National Credit Foundation for Credit Counseling identifies these warning signs:
- Bills paid late or ignored.
- Checking accounts routinely overdrawn.
- Using credit as a permanent extension of your income, rather than living on your income, to maintain a lifestyle you cannot afford.
- You are unwilling to review how you spend your money.
- You do not know how much you owe.
- You are afraid to check your credit report and score.
- You hide purchases from your spouse or significant other.
- Shopping is a necessary relief from emotional stress.
- Get all your monthly and recurring debts written down in one place. You will be surprised to learn how much you owe.
- Track your cash flow. On a monthly basis, what do you spend your money on and how much do you spend on each item?
- Check your credit score. You can check your credit score once a year for free at annualcreditreport.com; or 877-322-8228. It can tell you a lot about your most challenging habits.
- Contact Financial Pathways of the Piedmont in Winston-Salem, a United Way agency, at 336-896-1191 (or 888-474-8015). Set up an inexpensive, brief, and completely confidential conference to go over your basic financial circumstances. Its advisors can help you start a concrete plan to clear a path to better spending habits.
Use the beginning of this new year to find a new financial beginning for you and your family. Because no plan is a plan, but it is not a good one.
Remember: An informed choice is a smart choice.
Mike Wells is a partner with Wells Law, PLLC in Winston-Salem. His email address is mike@wellslaw.us and his telephone number is 336.283.8700. His legal column has been published continuously since 2003.
Posted in: WS Journal Articles