Halloween has finally come and gone and now the Holidays will be here before we know it. As the Holidays quickly approach it can be extremely easy to get caught up in the moment and lose focus of your families financial goals. The goal of today’s post if to help you stay focused on the financial goal of ridding your family of debt whether it’s consumer debt, a car loan, short term loan or home mortgage.
Death and Taxes
There is an old saying attributed to Benjamin Franklin that states that there are only two things for certain in this world—death and taxes. While this humorous, if not true, statement can still be observed today, perhaps one more item should be added to the list of modern life’s inevitabilities—debt.
Debt, whether incurred through necessary expenditures such as purchasing a car or through poor spending habits, seems to grasp every person at one time or another in their lives. The weight of debt on an individual or a family can be fiscally devastating if not lifted in a timely manner.
It Starts With a Budget
Like with almost everything of a financial nature, one of the first places that a family or an individual can start to cut down on their debt is the creation of budget. Planning out and writing down an effective budget can help a family save money, which can then be turned towards paying of the debts of the family.
A quality budget may take time to figure out for some families, especially if they family has never tracked their expenses previously. In order to create an effective budget, one that helps the family save money and pay down debts, a family will first need to know where and when they are spending their money.
Where Does Your Family Spend Money?
Discovering the places that a family typically spends their money, be it at the gas pump, grocery store, or the local mall, will aid the family to know where their biggest expenses come from and how they can avoid the expense before it happens. For example, if the family finds that they are spending a large percentage of their income on gas, which is typically seen as a necessity of modern life, than perhaps a gas budget could be set with alternative forms of transportation, like buses or bikes, filling in where the budget disallows the use of their car.
Creating a budget and adhering to it will be the initial step that a family will need to take in order to climb out of debt. Families should remember that simply writing the budget down without adhering to it will get them nowhere and only once the budget is complied with will they see the savings stack up.
Once a family has set a budget and has determined to follow a more strict economic policy within the home, then they can then begin to take specific steps towards relieving debt. As the following action steps for relieving debt are listed and explained, it should be remembered that these will be at times difficult actions to take; but remember also that the more severe one’s debt trouble, the more severe and extreme the actions will be to rid oneself of debt.
Ditch The Credit Cards
To begin, if credit cards are a serious weakness for the family, get rid of them. While cutting up a credit card may not help to pay off the debt, it will certainly ensure that the family does not incur more debt in the future from credit cards.
This may seem like a drastic step but physically getting rid of credit cards may be the initial step that a family needs to clear the financial storm they have put themselves in. Here again, budgeting and finical discipline will be the only way to weather the first few months without the perceived safety blanket of a credit card.
Once the immediate threat of overspending on a credit card has been eliminated a family can take additional steps to get out of debt. One great way of fighting debt is by listing out all of the debts a family owes and prioritizing them according to which debts should be paid off first.
Highest Interest Debts First
The top debt that a family will want to pay off first will typically be the debt with the highest interest rate. As any person in debt knows, it is the interest rates attached to a line of credit that truly have the ability to drown a debtor.
Because of this not only will a family wish to pay off the highest interest rated debt first but they may also wish to consider contacting the creditor to negotiate a lower interest rate. This practice is more common that creditors would wish people to believe and is highly effective in reducing the interest rates for a family.
Most importantly of all, a family struggling through the dark days of seemingly endless debt should remember that relieve from debt is possible. By following a new and carefully planned out budget and by getting more serious with debt consolidation and payment, a family will be able to break loose from the bonds of debt and live a financially stable and debt free life.