With personal debt at an all-time high, it is clear that many people cannot successfully balance their finances. People who manage to defy the averages give their advice below on how to get and stay financially-stable. Reign in your debt, prosper, and discover a happier life.
There's a lot of luck involved in being financially independent, but you can really help luck out with good planning. Setting up a budget based on your income and exercising self-control to keep yourself within that budget is actually really helpful. Keeping an eye on what you're actually spending means even accounting for your daily Starbucks run (one of my vices, heh), because little stuff like that adds up, especially if money's tight.
We're all at the mercy of things like gas prices, which we can't control but we need to buy regardless. But even so, if you are honest with yourself about how you spend your money (you eat out pretty often, you have a daily Starbucks latte, things like that), you can find ways to cut back a little and ensure that buying necessary stuff like gas (or paying rent!) won't get you in trouble.
Good luck, guys. You can do it.
Heather of Madison, WI writes:
I wouldn't say I'm successful at finances, necessarily, just competent. I try to keep a cushion of a few hundred dollars in both my savings and checking accounts that I never touch and just spend money earned above that cushion. If I have to dip into it, I do, but I hate it! I budget as carefully as possible for all my bills and give myself a generous leeway for day-to-day expenditures--that way, if I don't spend as much as I thought by my next paycheck, I'm pleasantly surprised. I let myself splurge, but keep very good mental tabs on all of my monthly expenses.
When I had a very low income, I used to keep exact track of everything I purchased -- even candy bars from a vending machine. Everything. This has two benefits -- 1) It tells you where your money is going, and 2) When you're taking the time to track what you're spending money on, you often find yourself reconsidering purchases. "Do I really need this? Is it worth the extra ten seconds to record that I got it?" (The latter can work for dieting, too.)
Another tip I found useful: when you budget how much you need for rent/groceries/other bills, also budget for the money you plan to save. Treat your savings account (or whereever you put your savings) as another bill, that you HAVE to pay every month.
Ness of Seattle writes:
I have spent a lot of time in finance and the best way to get yourself out of debt is to creat a plan and stick to it. Decide how much money you will set aside each paycheck for debt and treat that money as if it never in your hands. You will have to change your lifestyle for six months to a year, but after that your credit will be better and more opportunities will open up.
#1 is to start with your collections. After you have culled your debt to a managable limit, make it a point to always pay your bills on a designated day, preferably early.
All this takes a lot of work to get out of the spending habit, but it is worth it in the end.
Remember to reward yourself with a splurge once a month in recognition of your accomplishments in finance. Give yourself a set dollar amount and have fun with it.
Rick of Ontario, Canada writes:
A few years ago paid down all credit card bills. Currently, I avoid using credit card in favour of a debit card, i.e. spend only what I have. I have a Visa and an AmEx card, the Visa card is paid off every month, the AmEx card is used only for corporate travel. It comes down to living within your means and remembering that money doesn't buy happiness.
Heather-Ann of Canada writes:
I used to be in debt so much that I was unable to see the light. One day I started to be realistic and stopped spending on items that were not necessary. I took on a second job and had a budget every month (it's important to follow though!). If I had any extra money, instead of shopping I went to the bank and put more on a bill to pay it down quicker. I cancelled seven out of eight credit cards. As the creditors stopped calling I began to appreciate the "sacrifice" I had made. For example, instead of going out for dinner every week I went once a month. Secondly, I took lunches to work instead of buying every day. This alone help me to save over $100 a month. Also, I would check on-line for what my city was offering for free, such as, comedies, musicals, etc. And there were many more changes I made. It was a small "sacrifice" for less than a year. I was able to pay off most debt and begin saving for my future.
It's easy to "fall off" the budget wagon--I did--but more importantly I got back on it every month and stayed focused on what I wanted in the future. I now have a home, vehicle and a little bit of savings. If you ask me it's so worth it!
Nothing earth-shattering here, but if implemented could make a huge impact on your life at some point.
-- Avoid too many and/or overusing credit cards, and pay them off in full every month.
-- Set up as many bills (and paychecks) as possible on an automatic bank transfer so there's no late fee/credit problems.
-- Know where your money is going so you can identify where you might be wasting money by using Money or Quicken (and link it electronically to your bank if possible to minimize data entry), or just tallying a months worth of receipts every couple of months. You don't need a full-blown, detailed budget. Something as simple as the receipt tally or just comparing deposits and withdrawals from your bank statement from month to month will serve as a decent barometer.
-- Keep luxury/big purchases to a minimum (don't eliminate unless absolutely necessary; sometimes you deserve to splurge a little).
-- Make 'smart' purchases ... Example: We wanted a DVD player to keep the kids busy on long trips. My wife and I also run separate small web businesses. Instead of spending at least $200 (more like $300 or $400) on a decent portable DVD player, I applied that 'credit' to the purchase of a notebook computer that we both use on the road (when it's not playing a movie for the kids), and she uses as her primary computer at home.
-- Buy off-brand whenever it's possible or makes sense (avoid this on electronics purchases, for example).
-- In general, don't buy more than you absolutely need, especially food.
-- Don't try to keep up with the Joneses, especially when it comes to clothes, cars, or electronics.
-- Resist upgrading your electronics items every time something bigger/louder/faster comes out.
-- Take responsibility, otherwise someone else might (bank, credit card company, etc.) and you may be stuck with higher rates, not qualifying for a loan, or not being able to afford a needed or wanted item.