The following tips will get you there. I have personally tried them, and they work. But you’re going to have to put in a little effort.
Start by committing to the following two actions:
1) Build a cash fund for emergencies
2) Stop overspending!
Without an emergency stash,
you will just keep on adding to your debt. Your cash reserve should ideally cover three to four times your monthly living expenses. This money should be used if an appliance or car breaks down, if you have an unexpected medical emergency, or if you suffer a temporary loss of income. To make sure you continue to beef up your emergency fund, make it part of your budget and treat it as an expense. Even if you live paycheck to paycheck and you feel there is no room for savings, you can’t afford not to have an emergency fund.
Stop overspending. If your expenses exceed your monthly take home pay, don’t cover the hole with your credit card. That is self-destructive behavior. Stop it. If you don’t know how to stop, pick one expense each month that you are willing to live without until you are not overspending.
Find an accountability partner. Unless you have the mental toughness of a drill sergeant, you simply can’t do this alone. Find a partner who will hold you accountable to your commitment: a friend, co-worker, dog (I wish). Find someone you can trust.
Write down all the debts you want to erase. You may be surprised by this exercise. I was paying down a big medical bill in small monthly bites, and I recently found out that I only had a couple hundred bucks left. Yes! I checked the last one off my list.
Put together a realistic and measurable plan — one you can stick to. For example paying down the balance of your Visa card from $2,000 to $1,500 by April 30 is specific enough.
Post a list of your goals in a prominent spot (like the fridge). As you meet your targets, cross them off your list and reward yourself. Yes, you heard correctly. Treat yourself each time you meet a milestone – just don’t go on another shopping spree.
Set your finances on auto-pilot wherever you can. Sign up for an automatic savings program to build up your emergency cash reserve and your retirement nest egg; start small and gradually increase your contributions. Schedule your bills to be paid automatically from your online bank account.
To keep your new plan in motion, set aside a convenient time to quickly update your budget and make sure you are on track. This should take you no more than 15 to 20 minutes per month, and it should be such an easy task that your fifth-grader could do it.
If you feel like I’m not telling you anything new, you’re right. But these actions will change your financial future — if you actually do them! Are you ready to get rid of that financial hangover for good?
