There are people who live a wonderful quality of life making five figures and those who struggle with a six-figure income. The difference is the way they handle their money. If you are careless with money, you will live a stressful life caused by outstanding debt. Thankfully, you can change the way you handle money and end the in-debt way of life. Below are a few tips to help you achieve success.
Debt has a snowball effect. It starts out innocent; you take on a mortgage, buy a car and apply for a few credit cards. The problem lies in wanting to have more credit at your disposal.
For some people, it’s a symbol of status, the more credit cards you have the more opportunity to do things you otherwise couldn’t afford. Unfortunately, it’s only a matter of time before these poor spending habits catch up to you.
Drowning in debt is not pleasant. It makes it difficult to focus at the office and take care of your family. Every time you check the mail there are more bills. It’s a seemingly endless cycle. The good news is you can get a fresh start. Refinancing your mortgage or borrowing from a 401(k) are two ways to gain money to pay off your outstanding debt quickly. But be aware that refinancing your home to pay your debts should only be used as a last resort.
If you don’t own a home or have equity, there are several other ways to reduce your debt. A loan company that specializes in consolidating credit card debt will afford you a single and lower monthly payment. Or, if you prefer, you can use the method of paying off one credit card at a time.
Changing Your View of Money
Unfortunately, unless you change the way you handle money, you will fall back into debt. The reason many succeed regardless of their annual salary, is they live within their means. If you increase your debt every time you get a raise, you won’t get ahead financially. Instead of looking for ways to spend money, keep it. Adopting a frugal mindset doesn’t mean a lifetime of doing without, it causes the opposite, a lifetime of living well.
Putting items on credit doesn’t give you a realistic view of what everything costs. Having to pay with cash does. In order to break free from debt, you need to stop accumulating it. Give yourself a set amount of money to spend weekly. When the money’s gone, so are your purchases. In the first few weeks making it to the next pay period will be challenging. Once you learn how to budget your money, you’ll have weeks with a surplus.
Importance of Savings
Things will happen in life that require money. It’s also true that most times these events occur at the worst time possible. You’re scraping together money to go on a well-deserved vacation. You have the funds and out of nowhere a pipe bursts in your home. Now, your plans to relax are on hold. This is quite common when you don’t have money set aside. With a savings account, you hire a plumber and head off on your vacation as planned. Initially, you can make small deposits of twenty dollars a week. Once you pay off a credit card, put a portion of the money previously allocated into your savings.
You can improve your current financial status. Changing your view of money, borrowing only when necessary, and establishing savings will help you live life within your means. Once you gain an understanding of budgeting your money, you’ll have some left over to enjoy a better quality of life.