It can be extremely easy to get caught up in the moment and lose focus on your family’s financial goals. The goal of today’s post is to help families stay focused and get rid of debt once and for all.
Families have a lot of responsibilities. They have dinner to cook, bedrooms to clean, laundry to process, and homework to get done, but amidst these many tasks, one job can go undone if you’re not careful—Family finances.
Prioritze Paying Down Debts
There is an old saying attributed to Benjamin Franklin that states,
“…but in this world nothing can be said to be certain, except death and taxes.”
While this poignant statement can still be seen as true today, one more item should be added to the list of modern life’s inevitabilities—debt.
Debt can be incurred in many ways. People fall into debt through necessary expenses like buying a car or a home. But debt can also occur due to poor spending habits. Whether this debt was accrued responsibly or irresponsibly, the weight of debt on a family can be fiscally devastating if not lifted in a timely manner.
Start with a Budget
The very first thing every family needs to do, regardless of their financial standing, is to create a household budget. Planning out an effective budget can help a family create a financial plan of action that will help them save money and pay down debts.
A quality budget may take time to figure out for some families, especially if the family has never tracked their expenses before. In order to create an effective budget, a family will first need to know where and when they are spending their money.
Download a Free “Family Debt Plan” template HERE.
Where Does Your Family Spend Money?
Your family may spend their money on groceries, gas, rent, or utilities. You might also be spending more money than you realize on unnecessary expenses like movie tickets or new clothes. Either way, taking a hard look at your bank statements and receipts can help you determine where your family spends their money. Then you can create a more mindful budget of how you would like the family to spend their funds. For example, maybe you spend a large percentage of income on gas. Then you can create a family gas budget, and a plan to save on travel costs by using alternative forms of transportation, like buses or bikes. That extra money you save from sticking to this new gas budget can all go toward debts.
Now go through the rest of your common monthly expenses and do the same thing. Make a budget for how much you actually want to allow yourself to spend on that category, and then form an action plan for how to cut costs in that area as well.
Remember that this action plan can sometimes be difficult. Your family will have to make sacrifices and life adjustments. But living strictly for a short amount of time will allow your family to live debt-free in the long term, making all the difficult new financial practices worth it in the long run.
Ditch the Credit Cards
If credit cards are a serious weakness for the family then get rid of them! Try using a Netspend prepaid debit card as an alternative to credit cards. Netspend prepaid debit cards are a good way to budget yourself in daily expenses, rather than using a credit card. This is because a Netspend card will only have the money you put on it, so you will be spending your own money when you use a Netspend card, rather than accruing more debt.
Sure, credit cards can come with lots of benefits, but your family’s spending practices don’t work well with credit cards right now, then feel free to just get rid of them. This may seem like a drastic step, but physically getting rid of credit cards may be the first necessary step to stop the increase of debt and relearn financial discipline.
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 to list all the debts a family owes and prioritize them according to which debts should be paid off first.
Highest Interest Debts First
The first debt that a family will want to pay off will 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 causes borrowers to drown in debt. Because of this a family should not only pay off the highest interest rate debts first but also contact the creditor to negotiate a lower interest rate. Asking for a lower interest rate is more common than creditors wish people to believe and is highly effective in reducing the interest rates for a family.
Most importantly, a family struggling with seemingly endless debt should remember that relief is possible, but it comes through prioritizing debt payments and making a financial plan of action that will allow higher monthly debt payments. By following this plan, a family can spend a short time of financial strictness to achieve the long term goal of financial stability and debt-free life.