It cannot be said too often that the way people get into financial hot water is because they have over spent. Too easy access to credit, failing to budget, not knowing how much they are really earning-or spending, has kept too many people in the red for far too long. So, here it is again, the Number One Rule to get your life back in the black. Print it out in big bold black letters and stick it to your fridge.
Stop spending. That's pretty much it. If you stop spending, eventually you'll get your life back on track. When you do spend, make sure you always spend less than you earn. The only way you can be sure of that is to follow Rule Number Two.
Make a budget. Again, this rule simply cannot be overstated. Without a budget to guide your spending, it's far too easy to drop $100, $200, or even more, without thinking. Don't agree? When was the last time you went to the mall, got your hair cut & colored on a whim, bought new jeans, two CDs, and ate lunch out? Make a budget.
This can be as simple as writing down your income each month, from every single source (including cash sources) and then your expenses. If you find that your expenses exceed your income (which, if you're in the red, is certainly the case) then you have to cut back on your spending. That means looking for places in the spending part of your budget to cut back on. The easiest way to do that is to create two lists regarding your budget, one that has fixed costs, and one that has discretionary costs.
Discretionary costs are the things you pay for that you could do without, or at least reduce, such as groceries, cable, internet, DVDs, and even utilities like water and electricity. Even fixed costs that you think you have to pay, such as rent, can almost always be lowered-sometimes dramatically. It's just a matter of choice. And many other costs, like insurance or credit card rates, can also be negotiated. It's a matter of determination, and the willingness to spend the time on the telephone negotiating a lower fee or rate.
Begin paying back. Whatever debts you have incurred, if you haven't declared bankruptcy, can be paid back at a rate that you can afford. Again, it's a matter of contacting your creditors, and negotiating a repayment scheme. Sometimes your lines of credit or cards may be shut down, but that's a small price to pay to get your financial life back in the black. And credit cards can always be re-issued.
Start saving something. If you have already begun a repayment scheme, now add a savings plan to your budget. Make it an automatic deduction from your bank each month into an account that your debit card cannot access. Don't worry if it's only $10 or $20-the action is more important than the amount, at this point. Eventually shoot for 10% of your gross income.
Every time you stop spending, make a budget, save a little money, or pay a debt down or off, you've discovered another way to say "stop spending." Language like that will soon get you out of debt and living in the black. And that feels fantastic.
Author Resource:
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