Last Sunday we learned about our financial inventory. We also learned that I’ve been spending way to much money on my hair. Now that we realize the changes that need to be made in our spending, today we will focus on creating a new money plan that will help us address our debt strategically.
You probably noticed that you were over spending on groceries, eating out, hair, shopping, entertainment or other personal care items. Don’t feel bad these are common areas of over spending. Now that you recognize it, it will be easier to cut back and not indulge in the overspending urge. Learnvest. Com recommends asking this question:
“ Is the deal really that sweet if it’s for an item you don’t need? Sure, getting a $300 designer lamp at 50% off might be a steal—if you’re in the market for one and budgeted for it. Otherwise, you just dropped $150 for no good reason.”
Step 1. Be sure to include money for your emergency savings account.
In our new plan to eliminate debt, we need to be sure to include a portion of our money into a savings account. Even though we are trying to eliminate our debt it’s important that we still set aside money to put into our savings account. This is important because let’s say you are trying to pay off your credit card bill but suddenly your car breaks down and you have to fix it. If you don’t have extra cash saved somewhere then you will have no choice but to put it on your credit card. I like to call this riding a debt roller coaster. When this happens it will take you even longer to pay off your debt and it will also add more interest. You just want to make sure that you’re paying off debt as soon as you can, while still putting aside a portion of your extra cash into savings in case of an emergency. I talk more about emergency accounts here.
Step 2. Create a wealth plan for yourself. Figure out how much extra money you have each month after all of your mandatory bills are paid
Notice I didn’t use to dreaded b word, Budget. You want to create a wealth plan. I call it a wealth plan instead of a budget because if you stick with your plan it will help you pay off your debt, save, and invest your money. All of these task will help you build wealth. You want to make sure that you know your weekly cash flow. It’s important because bills can be due at any time of the month. If can try to set up your bills at different times during the month so that you don’t feel like all your bills are being paid at the same time, leaving you with no extra money for savings, debt or investments.
Step 3. Figure out which one debt that you want to pay off, kill it and pay the minimum on your other debt
Yes choose one debt that you want to focus on getting grid of first. When you are focused on eliminating one debt you will be more determined will see the balance move quicker. After you’ve determined how much extra money you will have after all of your main bills are paid. Use the majority of this money to knock out that one debt. While still paying the minimum balance on any other debt that you have. Speaking of credit cards and interests which cards should you pay off first? Some people recommend paying off the credit card with the highest interest first while others recommend paying off the credit card or store card that has the lowest balance first. This way you can knock out one bill at a time and can create small wins. Once the smallest debt is paid off then you move on to the next card. Which ever plan is best for you. Personally, I like to pay off the card that has the lowest balance first because it makes me feel good to be done with one.
Now we know where we’ve been spending our money, which credit card to pay off first, and how much to set aside in our savings we are on our way to a better financial destination.
Hope this post was helpful, if it was feel free to comment below or share with your friends. I’d love to know how your financial inventory is going!