Make your mailbox and inbox pleasant places to visit and stop cringing when the bills come. If your debt is roaring like a hungry tiger in the jungle, and it’s causing you stress or anxiety, it’s time to tame the money beast and gain control of your personal finances.
Tame Those Paper Tigers
Stop piling up the bills in a dark corner and start tackling them. Open bills right away, and file them in a bill-paying folder organized by day or month. Move e-bills into monthly folders, too. Recycle envelopes and extra paper when they come in.
Know What You Owe
Before you can make a move toward saving and getting out of debt, you need to know exactly, not approximately, how much money you owe.
Make a list of all regular bills. This is your outgoing money. You can plug this information into a budget worksheet. Include due dates and amounts in a calendar. Use a wall calendar or set up alerts with a computer or smart phone calendar to keep track and stay on budget.
These numbers represent the absolute minimum amount of money you need to spend each month. Is it too much? Reduce it by cutting back on unnecessary bills.
There are some monthly bills that can be reduced, with diligence. Cell phone bills and cable bills are the two best places to reduce spending. Other possibilities include private parking spots or internet. Call your cable company and ask about any specials.
Take Control of Your Monthly Budget
Start saving a small percentage of your paycheck by having it directly deposited into a savings account. Take advantage of any pre-tax retirement plans offered by your company. You will feel better about paying out money knowing that you paid yourself first.
Try Budget Billing
You can gain better control of your monthly expenses by making them consistent. Set up budget billing with your utility companies. If $700 oil bills are slamming you in the winter months or $300 electric bills are hurting you in the summer, it’s time to look into budget billing. Budget billing will not reduce your annual expenses, but it will make it easier to manage your money on a monthly basis, as your bill will be the same from month to month. Without painful surprises and a last-minute scramble to pay a big utility bill, you will be in better control of your money.
Categorize Your Debt
There are certain types of debt which you will carry for an extended period of time. The biggest one is a mortgage or a home equity loan. The next largest debts you will carry will be car loans and college loans. Pay down each one faster by paying more than the minimum due. Early on this will help you reduce the interest you are paying.
Steer Clear of Avoidable Debt
Avoidable debt can be summed up in two words: credit cards. Credit cards make it easy to buy the things we want and don’t need and to spend beyond our means. Having a credit card for emergency purposes including a car repair or appliance replacement is a good idea, but saving money in an emergency fund is a better one.
Debt Jigsaw Puzzles
Pay Down Your Credit Card Debt
Put away the credit cards, curb spending and start paying more than the minimum balance due on your credit cards. You can’t start saving and growing wealth until you are out of the credit card debt cycle. Use a debt payoff calculator to set a realistic payoff goal.
Should You Refinance?
House Refinance – Maybe
Before refinancing a home, consider the long-term costs that will be built back into your payments before jumping at an offer for a lower interest rate.
Car Loan Refinance – Yes
If you can refinance a car loan at a lower interest rate, go for it. There needs to be a minimal amount of principal left to pay left on the loan, so shop around for a car refinancing institution that will work with you. You could end up with a lower monthly payment and pay less overall on your car.