Drowning In Debt? Seven Tips to Get Out From Under

Carrying a pile of debt can undermine the quality of life for you and your family. It can mean that you have fewer options for discretionary spending, i.e. fewer, shorter vacations. If you don’t have money set aside for emergencies, you may have to borrow, adding to your debt load. And the future for you and the kids isn’t as bright when money is always tight.

So what can you do to get out from under that mountain of monthly bills? Eliminating debt does require some sacrifice, but it is possible to pay off debt so you can enjoy life and be prepared for unforeseen emergencies.

Here are some ideas on how to get yourself debt-free faster.

1. Create a budget and stick to it

Use your check register to prepare a monthly budget. Because expenses change from month to month, go back three months and make a list of all the money that was earned by members of your household, and a list of where the money went.

Fixed expenses, like the mortgage or rent payment, the car payment, utilities, insurance and other “must-haves” typically comprise most of your spending. Place fixed expenses in one column. Discretionary spending, like dinners at your favorite restaurant, or a night at the movies, go in a second column. Now you have an idea of what you actually need to pay the bills, and how much you spend on discretionary items. Cut discretionary spending wherever possible to lessen your monthly debt load and enjoy greater peace of mind.

2. Use your credit cards wisely

Don’t carry a credit card every time you go out. The temptation to “put it on plastic” is too great. Use cash or a debit card to make routine purchases to avoid creating a financial crunch in your home.  However, it’s a good idea to have a credit card for emergencies or for security when traveling.  Shop around for credit cards that offer something in return for their use – a rewards program. There are rewards programs that offer cash savings – a smart move. Or, if you’re a traveler, look for a credit card that offers frequent flyer miles for each charge, discounts on gasoline, or other special rewards.

Talk to your bank representative to find the right credit card to suit your needs and your lifestyle. A credit card can be a valuable tool when used properly so, be smart and get a card that gives back each time you use it.

3. Pay yourself first

When it comes time to pay the bills, pay yourself first. It may only be $25 or $50 each month, but over time you’ll build up a cushion to handle the financial circumstances of daily life.  Simplify payments to yourself with automated bank transfers that move cash from your checking to your savings account so you don’t even have to think about paying yourself first.  Talk to your bank representative to set up regular cash transfers to your savings account to make paying yourself convenient.

4. Avoid consolidation loans

Many credit “advisors” offer consolidation loans that enable you to make one payment to the advisor each month. However, these credit advisors take a percentage of the money you owe, so you pay for the service of managing your finances – something you could do on your own.  Further, if you have poor spending habits, it won’t take long to build up a high credit balance again.

5. You can’t borrow your way out of debt

Borrowing more money to pay off current debt just puts you deeper in the hole. Again, the best way to lower your debt is to pay cash or use your debit card and minimize discretionary spending, at least until your indebtedness is under control.

6. Make your money work for you

Setting aside money in the cookie jar is fine for day-to-day emergencies, but that cash doesn’t work for you. Talk to your bank representative to find out about interest-bearing accounts like money market accounts and Certificates of Deposit.  Keep enough money available for immediate needs, but also start saving for the future.

7. Pay off the most expensive debt first

Not all debt costs the same. A car loan may be available for 4.5% interest, while credit card debt may be as high as 29.9%.  Take a look at the debts you owe, and pay off the ones with the highest rates first.

Paying down debt is a process, but it’s a process that can improve the quality of life for all family members, and create a brighter future for all.  So, take control of your personal finances. Know where the money comes from and where it goes each month. When your debt load shrinks, your credit report looks better, and life can be a whole lot more fun.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC