The following is a guest post by DebtKid, who writes about his journey to get out of debt, and achieve financial stability. He runs a small software development company in Seattle and just launched a new coupons section on his blog.
For consumers who are barely getting by, the concept of building wealth in the current economy may be low on the list of priorities. After all, if you are struggling to keep the bill collectors at bay or prevent your credit rating from dropping like a stone, it gets a bit tough to see the “big picture”.
Unfortunately this tunnel vision needed for survival during tough times, does nothing for your long term financial security. These simple tips can help you not only make it through the recession with which we are currently dealing, but also prosper in the future.
- Review your budget. The importance of having a well thought out household budget cannot be stressed enough. It is neither new or innovative advice, however it is vital to your current and long term financial stability. After the recent changes in the credit card industry and other areas of personal finance, what worked twelve months ago may not work today. For this reason you must sit down and revamp your budget to reflect your current position. Once you have made the necessary adjustments to income and expense requirements you can then determine if you have to consider a new strategy for long term financial growth.
- Adjust your lifestyle to reflect your income. You can not maintain certain standards of living when your income is reduced or eliminated. Unfortunately prior to the recession many consumers tried to live beyond their means and used credit cards to achieve a higher of standard of living than they could realistically afford. This practice will not result in financial security or contribute to building wealth for your future. For this reason you must avoid the temptation to keep up with the Joneses (who are probably also burdened with debt) and learn how to live within or below your means. This is one of the challenges many people face but ultimately one of the best ways to maintain good credit and save for the future.
- Stop wasting your money. Recent months have reminded us that money does not grow on trees. Unemployment levels continue to grow and many people are trying to keep their credit card payments current. Carrying high levels of debt will almost certainly prevent you from reaching financial goals. To put it simply, every month that you carry a balance and pay high interest charges you are throwing money away that could have been invested or saved elsewhere. Getting out of debt should be a top priority and there are many strategies available to achieve this goal. If you are unable to maintain your minimum payments each month consider professional advice on how to tackle your debt. On the other hand, if you are able to afford your payments, aggressively attack your debt and get it paid off. Once you are debt free you can then use your income to better your own future rather than that of the financial institutions that profit off of your burden.
- Understand investing and savings. Most people do not invest or save money for one of two reasons. The first is they are limited in the amount of money they have available to cover all bases. If you can barely cover living expenses and debt repayments, finding extra money to put away each month is challenging. For people who do have a little extra each month, lack of education or knowledge about investments or savings strategies often hold people back from pursuing these options. If you do not currently have an emergency fund, retirement savings or other investments to grow your money, you must take the time to understand the role they play in your life and eventual financial stability. Once you have a basic understanding you can then begin to put money aside (even if only a small amount) today. Getting started is often the hardest step.
To truly achieve wealth you will have to develop these and other skills that will help you reach your goals. Unless you receive an inheritance, win the lottery or some other financial windfall you are the only person who can determine your financial success and there is no better time than the present to get started.
So what’s your excuse?