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Experts say there are clear steps to take to pull you and your family out of debt. The one thing to remember is: focus on one goal at a time. Many Americans have lost control of their finances, under an avalanche of expenses, family obligations, bills, and mounting debts. It can all be overwhelming, and lead to doing nothing, because it is hard to know where to start first. Here is a step by step plan to eliminate debt.
The trick to moving forward on eliminating debt is to focus on one task at a time. It's easier to keep one financial goal in mind, and stay with it until completion. Then, you will have a feeling of success, and can move on to the next financial goal.
That's what Dave Ramsey, the author of Total Money Makeover , stresses about setting financial priorities. "Aiming at the goal and nothing else is the only way to win."
Here's a step by step plan to master your debts:
1. Start a bank money-market account or a money-market mutual fund, and deposit by deposit, build a small reserve fund, say $1000. Maybe cut down on expensive dinners, and deposit the savings. Or sell something on ebay that you don't need anymore. This fund is for surprise expenses, so you won't use your credit card.
2. One by one, pay off all your debts. Ramsey suggests paying off your smallest debts first, so you feel accomplishment right away. This could take some time, so just stick to it, until all your debts are paid.
3. Now you can take the next step to insure your financial future. We all know that no job is guaranteed. Plan for that unexpected job loss, downtime between jobs, medical emergency, or expensive car repair. Start saving a larger amount than that initial fund to stay afloat for six months while looking for your next job. Take every opportunity to add to the fund, knowing you are safer and safer from financial emergencies.
4. If you've completed 1-3, it's time to think about your retirement. You can't do this until 1-3 are done. Now start saving 15% of your gross income for retirement. If 15% is too much, start small, and keep adding the percentages, as you can over time.
5. Don't forget the kids. Once your retirement savings are in place, see if you can put aside some support for college.
6. Lastly, pay off that morgage. Try to do this before you retire. Look at different refinance plans, or take advantage of possible windfalls or inheritances to knock out that morgage.
Now you made it! You made the moves, step by step, and are debt-free in your retirement days. Have fun! Travel or buy some crazy thing you have always wanted! Don't forget to support causes that are meaningful to you.
So start today, focus on your first goal, and create your own financial future, one step at a time.
Written by SFF staff |
Wealth 