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14 Important Steps You Should Take To Free Yourself From Debt

14 Important Steps You Should Take To Free Yourself From Debt

Whether your current debt is large or small, the challenge of getting out from under bills and “I owe yous” can feel insurmountable.

Free yourself from the quicksand by doing the following.

1. Acknowledge that Houston, we do have a problem.

If you are in debt, you have a problem. The degree to which the problem is manageable depends on whether you are in planned, deliberate debt, such as student loans or the purchase of a specific type of vehicle for work; or in chaotic debt, such as the kind that results from taking too many pretty dates out for expensive drinks you can’t afford. You must accept that debt is a problem before you can fix it. So throw your hand in the air, state your name, affirm that you have a challenge before you, and commit to meeting that challenge and free yourself from debt.

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2. Take stock of the situation.

Why are you in debt? What are you spending money on? How much money are you making? Has your debt increased, or are you having trouble climbing out from under hefty interest payments? Are your expenses driving you further into debt, or is it the costs associated with caring for a family member? Don’t worry about finding solutions just yet—first, identify the problem areas.

3. Step back from your emotions.

Spending habits are deeply personal, because they reflect our priorities. There are often added layers of shame, guilt, and regret when discussing debt.  Recognize that none of those emotions will help you solve your current debt problem, and step away from them.  Focus on the fact that you are taking control, you are asserting yourself, and you are disciplined and focused enough to make this happen, all of which are positive emotions.

4. Break out your pen.

Dedicate a notebook or binder to your “get out of debt” plan. Write down anything you identified as a problem area. Be sure to list all debts, who or what you owe money to, and your current payment schedule.

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5. Stop flailing.

While you are evaluating your spending habits and developing a course of action to correct your debt, stop spending. It is much easier to evaluate how and why the boat is leaking without more water pouring in. When you make purchases again, you will be able to do so with deliberate intention.

6. Record all expenditures.

Create a section in your notebook, or an online spreadsheet, to evaluate all expenditures over the course of the last six months. Print credit card statements, online bank records, and dig those receipts out of your purse, car, and gym bag. You must gain an accurate picture of where your money is going, and if debt is a problem, you likely don’t have this picture as in focus as you would like.

7. Identify patterns.

Can you identify patterns in your spending? Do you, for instance, always break the bank when you visit certain stores, or the day you get your paycheck? Do you spend a great deal of money on certain activities?

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8. Categorize spending, and prioritize.

Food, water, basic shelter, simple transportation, and functional clothing are needs.  Everything else is a “want.”  Break your spending into categories, starting with “needs” and “wants.”  Cut out all unnecessary items, and realize this might mean your cable subscription, smart phone, high speed internet, and a slew of other high-tag luxuries modern man is accustomed to having at his fingertips.

9. Be willing to make big changes.

Is rent eating you alive, or are you spending high dollars in gas each month to commute? You may have to move, locally or to another state, to lower your cost of living. You may have to drastically downsize. You may have to put that hobby on hold for a while. Commit to doing whatever it takes to get out of debt.

10. Seek expert help.

You are not the only person to stagger under debt, nor will you be the last. Talk to a financial planner at your bank, or attend a debt management class. There are numerous resources available.

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11. Do your own research.

Anytime the subject is money, be sure to actively engage your brain, scrutinizing all information you receive to confirm or reject its application to your financial situation. Get a library card, and spend some quality time there getting smart on financial management basics, as well as any unique considerations you may have. Bonus: libraries often offer basic financial management classes

12. Get creative in boosting income.

An extra dollar earned is an extra dollar to pay off that debt.  No opportunity is too menial, too demanding, or too low-paying for your time; if you’re in debt, you literally cannot afford to pass up income opportunities. Take a formal second job, or babysit, walk dogs, shovel manure at a community barn, scrub dishes, freelance online—aggressively seek opportunities for additional income and seize them.

13. Pay the maximum monthly amount possible.

Does your lender have penalties for paying off your debt early? Pay the maximum monthly amount possible without penalty, on time, every month.

14. Stay the course.

It took you a while to accumulate debt, and it is going to take you a while to get out from under it. Remain patient, keep chipping away at it, and soon you will be debt free and relaxed.

Featured photo credit: LendingMemo.com via flickr.com

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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