From Penniless To Positive: Improving Your Financial Situation
Mortgages, student loans, and credit card debt are just three of the most common sources of financial woes in the United States. These problems are compounded by a weak economy, cutthroat job market, and lack of access to health coverage. Faced with similar problems, many people feel that bankruptcy or payday loans are the only possible solution. Fortunately, there are more constructive ways to improve your financial situation. Read on.
If you have high-interest credit card accounts, this is an excellent place to begin addressing your financial situation. Begin by closing down any existing accounts, and take care to avoid opening new accounts while you pay down your current obligations. Doing so ensures that you do not incur even more hefty interest expenses, which can easily add up to hundreds or even thousands of dollars per year. Failure to do so often turns into a case of "one step forward, two steps back." You can then focus on paying off these accounts first.
Next, sit down and work out a household budget. If you live alone, this is easier than if your household includes more than one person. Nonetheless, each individual must be made aware of the budget, the reason for the budget, and what he or she can do to keep expenses to a minimum. Start by determining which household expenses are absolutely necessary: fuel, groceries, utilities, and the like. After doing so, you (and your fellow head of household, if applicable) are able to allocate funds for non-necessary expenses, such as clothing and entertainment.
The next step to getting back on track financially is to choose your payment methods wisely. This means reducing or ceasing the use of credit cards to make purchases. Focus instead on using checks, cash, or debit cards to pay for gas, groceries, and other daily expenses. Credit cards should be used only for emergencies, and you must never use them to buy things that are not absolutely necessary.
Finally, understand the importance of contributing money to an emergency fund. When you have no money set aside, even a minor unforeseen event has the potential to wreak havoc on your finances. Car repairs, illnesses, and home repairs can derail your entire budget, making you more likely to take out an emergency loan or rack up the balance on your high-interest credit card. Grow your emergency reserves by making monthly deposits into a savings account, choosing one with a higher yield to maximize interest. One option is to set up direct deposit, ensuring that a portion of each check is immediately deposited into the emergency savings account. Over time, you find that you don't even miss the money when payday rolls around.
Whether you have moderate or mountainous debt, take comfort knowing that there are many things you can do to improve your finances. While it is true that you are not likely to see results overnight, there is nothing to stop you from making that first change today. Only three things are certain in life: death, taxes, and your ability to make positive changes by taking action.
