Debt Consolidation Service-debt Counseling Service
Between 1989 and 2001, average credit card debt among all families increased by 53 percent from $2,697 to $4,126. The percentages of families in debt, defined as having total debt that exceeds 40 percent of income, increased by 65 percent. The graph below shows the average credit card debt among families with credit card debt. (figures taken from “Borrowing to Make Ends Meet,” Demos, A Network for ideas and action)
In order to reduce so much of debt, here are ten tips that could help you save money for the future.
Keep an eye on your money. People who can a close account for their money spend less and save more. Keep your checkbook current, and keep a little notebook with you to record credit purchases and what you buy with cash.
Make sure your outflow is less than your inflow. This standard is literally the bottom line. But rather than incessantly searching for ways to decrease expenses, think about ways to increase revenue. Rather than paying a sitter for your children so you can visit a swanky new restaurant Saturday night, consider sitting for a few children Saturday afternoon, so their parents can get some errands done — and you can get some extra dough. Think about the debt-to-income ratio.
Always pay yourself — but start small. Get into the good habit of “paying” yourself weekly. Experts suggest you save 10% of your income. Consistency is the key, not the amount. Begin with something you’re sure you can tolerate — say, $25 a week. Then, once you’ve got the routine down, begin to up it by say, $5/week every month or two.
Ditch debt. Bad money choices happen. Maybe they’ve happened to you. Got credit-card debt? Get out. Paying down current debt is the first step along the path to financial freedom. If you can double your minimum monthly payments, then you can get out of debt in less than three years. But if you’re already in too deep, then you’ve got to get help. Credit counseling agencies help over millions of American households a year manage their debt; our debt management section can help get you going.
Watch your ATM withdrawals. Choose how much cash to take out every week. Make it a little tight, make it last and make an effort to reduce the amount over time. If you have money left at week’s end, then sock it away in your savings account.
Don’t see it so you won’t spend it. Automatic paycheck deductions work. If your company offers a 401(k) retirement plan, then sign up for the maximum possible contribution. Sign up for direct deposit of your paycheck, if available, then sign up for an automatic monthly deduction plan with a mutual fund company to be deposited into an IRA. Automatic deductions for U.S. Savings bonds are also available.
Feather your nest. It’s critical to have an emergency stash of cash for life’s critical moments. A cushion of short-term savings, about three to six months’ worth of living expenses, can help you avoid counting on high-interest plastic or, worse, bankruptcy.
Make friends with your IRA. Every worker with earned income is now entitled to open a non-deductible IRA or — the mother of all IRAs — a Roth IRA. The maximum $3,000 annual contribution equals a commitment of $57.69 a week. That commitment, growing tax-free at the historical interest rate average of 10.6%, will bloom to over $500,000 in 30 years.
“Round up” your monthly mortgage payment. Round up to the nearest hundred in order to up the equity in your home. For example, if you’ve got a $150,000 loan and you prepay $100 a month, then you’ll save $72,952 in interest and shave 71⁄2 years off your loan.
Establish savings and investment goals. Set your goals, but make sure they’re reachable by your own efforts. A goal you can’t control, like one that depends upon your boss offering you a raise, can easily prove unachievable — and there’ll be nothing you can do about it.
