Your Personal Finances
By Steve Gillman
Do you have control of your personal financial situation,
or are you are still in debt and without a plan? Either way you
can use this simple six-step plan to get you headed (or keep
you going) the right way. One caveat though: like any other tips
you have read, these will only help if you if actually used.
Step One - Track Expenses
Spend two months writing down what you spend every penny on
each day. A simple exercise like this can enlighten you as to
where large chunks of your income go. It can also show you very
clearly how little things add up to a lot. It's even possible
you'll be spending less by the end of the first month, just because
you're so aware of the money going out, so you naturally cut
expenses. Categorize your expenses and see how much is going
to "eating out," "renting movies," "electric
bills," and any other areas.
Step Two - Cut Costs
Once done with step one, you can use the information gathered.
Start finding every way you can to cut those expenditures one
by one. That may mean giving up a few things which are less important
to you than your financial future. It may just mean finding better
ways to do things, without sacrificing much at all. To turn down
the heat while at work doesn't hurt. Find cheaper insurance,
groceries, restaurants and more.
Step Three - Apply Savings to Debt
Once you're spending less, you should have some money left
over each month. Apply it to any debts you have, starting with
those that are at the highest interest rate. Once one debt is
paid, apply that "extra" money towards paying off the
next one. Do this right and you'll be living just as well, but
spending less to live that way, and getting out of debt at the
same time (assuming you weren't living too far beyond your means
to begin with).
Step Four - Find New Income Sources
Look for new ways to make some extra income, starting this
search while you're working on step three. Take an extra shift
at work each week or two, ask for a raise, look for a better
job - or a fun second one. Why fun? There has to be some motivation
to make this work.
This could also mean starting a small business on the weekends
or in the evenings. Consider your skills, connections, knowledge
and things you own or control. For example, the rent from an
extra room in your house could provide an extra $4,000 per year,
or if you are single you might cut your rent in half by sharing
your apartment - this is like having extra income.
Step Five - Start Paying Cash
Things are cheaper when you pay cash for them. You can negotiate
a better price initially when paying cash, and you also don't
pay interest. You may have to wait and save for some things (like
the next car), but you live on less, or get to buy even more
of the things you want in time. A credit card can be convenient,
but if you do use one pay it off every time the statement comes
Step Six - Invest
By controlling personal expenses, generating new income, getting
out and staying out of debt, you should have a more coming in
than going out each month. Invest this money. Even if you're
not comfortable with investments like mutual funds or stocks,
at least find the highest-interest bank account you can. You
can save the money to start or invest in a business as well.
These ideas probably aren't new to you. But if you actually
follow a simple plan like this with your finances, you'll certainly
be more financially secure and more relaxed in the future - and
the future isn't that far away.
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