- An emergency fund ? which you try to never, ever spend (only in case of severe emergencies).
- A ?for sure? savings ? for your occasional large expenses (e.g. repairs, Christmas, taxes, etc).
- A ?buy stuff? savings ? just to buy things that cost more than your monthly disposable income.
- An overdraft protection line of credit to protect you from returned check fees. Don't use it for anything other than to avoid bouncing checks.
- An ?empty? credit card (one that you rarely if ever use ? keep it only for emergencies ? zero balance, zero interest).
Get into the habit of paying off your credit cards each month to avoid interest charges.
The greater the rate, the higher the risk. Get a safe return on at least part of your savings. Don't co-sign on others? loans. They may intend to pay, but you may actually pay. Too often, co-signers end up paying off loans they are unprepared for, and financial hardships follow. Numerous co-signors now have negative credit ratings because a primary borrower paid late. Many lenders do not notify the co-signor before reporting delinquencies or repossessions to the credit bureau.
Nothing is risk-free. If anyone claims a risk-free use of your money, they are lying, or they just don't understand that there is always risk involved ? if only opportunity risk.
Remember, when you borrow you are still spending future earnings, and eliminating future options. When you borrow, even at low rates you are still paying to use someone else's money.
The tax advantage of keeping a mortgage loan: You pay me $10,000 this year, and I'll get my Uncle Sam to let you deduct $2,000 from your taxes next year (if you are in the average tax bracket of 20%)
The biggest concern to those who want to stay out of debt is spending money. After all, it's hard to get into debt without spending more money that one is currently making each month. This gives cause to make a monthly budget of what a consumer makes in income, unavoidable expenses, and of course throwing in some entertainment expenses to help escape the frustration of debt.
A proper budget is hard to stick to- it requires much motivation. It's tough to stay at home when friends are out having a good time. But when one is on the verge of being in debt, alternative forms of entertainment can be found. Simply telling friends that you don't have the money to go out and have fun may also yield good results, as they may seek to do other less expensive things so as to include anyone with money troubles.
Being defensive about everything in life is another good way to keep debt at bay. A perfect example is the automotive industry, where being a defensive driver can both save on maintenance and repair bills. In addition, driving slow and obeying speed limit laws saves much more on gas than driving faster or more offensively does.
Another big source of expense is food. Food remains to be one of the biggest sources of expense very simply because food prices have risen quite a bit over the years. In addition, there may be thrifty foods to obtain- but there is much less selection on average than what more expensive foods might have. Where possible, try to by off-brand food items that cater to low income families. These food items are often the same as branded items, but don't have innovative packaging or brand names stamped onto the package the food comes in.
Overall, there are many places to help cut back in expenses. Reviewing one's budget more carefully will allow them to see which areas need work in cutting expenses, and which areas can receive a little slack. Also important to keep in mind is that entertainment isn't always a bad thing- humans need it to stay healthy and sane. Just try to limit entertainment sources that are costly, or at least keep frequency of such entertainment sources to a minimum.
Final Thoughts
With all the examples of cutting expenses mentioned above, it should be easy for the average consumer to save money and try to pull themselves out of debt. The process may take months to years to accomplish in some cases, but with persistence and the will to get out of debt, it's only a matter of time before the process is completed. If necessary, seek professional help among financial moguls, or make use of cutting edge technologies so as to better plan one's budget.
Both Lar & Todd Stevens are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.