Nearly 40% of all households carry some sort of credit card debt. That’s nearly half! Staying out of debt should be everyone’s goal, but this is not always the case. Using a few practical tips, you can stay out of debt and have more control over your money.
I want to share with you three tips I’ve learned about how to manage money to stay out of debt, have good credit, and build my savings. I was able to completely pay off all of my student loans by the time I graduated college, and was able to pay 70% of our new-to-us car in cash when we bought it. I understand that everyone’s situation is different, and not everyone is in the same place that I am.
All of these tips can work for anybody in any financial situation. Whether you have $100 or $100,000 of debt, these tips will help you have better control over managing your money to help you get out of debt and stay there.
Budget your money
If your money has nowhere to go, it tends to get spent. For months, we believed we could loosely follow our budget without tracking our spending and everything would work out at the end of the month. Don’t make the same mistake I did! There were so many months where I sat on the couch crying because there wasn’t even enough money left in our budget for groceries.
Keep a close eye on your spending for about two months, and keep a log of where your money is going. Using the data you’ve collected, categorize your spending into expense categories. Once you have this information, you will have a crystal clear picture of where your money is going. Look at your spending habits and see if there are any areas where you can reduce your spending. Maybe you’re eating out too much or shopping too much.
Look at your spending habits and see if there are any areas where you can reduce your spending. Maybe you’re eating out too much or shopping too much. Knowing where your money is going will keep you from overspending, which will keep you out of debt!
Make extra money
If you are in debt, it’s because you spent money you didn’t have. Family emergencies happen, cars break down, and unexpected situations come up. Regardless of how you got here, making extra money can help you get out. If you have a loan or credit card debt, every month you carry a balance you will be paying interest!
The BF and I realized less than a month before we were about to move that our new place did not have and washer and dryer. We found the place last minute, so there was no way of knowing until we had decided on the place. We ended up buying our own set, and charging it to our credit card. We knew my tax refund was coming, and we could use the money to pay it off. My tax return arrived less than a month later, and we were able to completely pay off our washer and dryer before we could accumulate any interest.
Now I realize that not all of you will be able to depend on a tax refund. That’s ok! Chances are you have a hobby that could be producing extra money to put toward your debt. We still haven’t fully paid off our car yet, so I took on a job as a staff writer. I get to write even more wonderful money saving articles for a whole new set of readers, and I can put the money I make toward our debt.
Use credit cards to your advantage
If you have debt, it’s probably because of that little plastic card sitting in your wallet or purse. I’m not saying you should continue to build debt, in fact, I highly discourage it. If you are in debt with a credit card company, this tip is not for you. If you are paying off a car loan or a mortgage, the right credit card could work in your favor.
I’m sure you’ve heard of cash back. Most credit card commercials mention __% cash back on this, that, and everything else. If you are able to pay off your balance every month, a credit card can easily earn you money on purchases you’d normally make anyway. You can use credit card rewards towards your balance, reducing your overall bill, and put your leftover money toward your debt.
Put all extra money into savings
One of the hardest temptations to turn down is extra money. Birthday checks, bonuses, even leftover money at the end of the month are hard to resist. You can never have too much money in your savings account, and now is the perfect time to build it. If you are starting from scratch, check out my post on how to build your savings. $50 a month might not seem like much, but over the course of a year you will have saved $600!
Debt repayment is a journey. Even though your focus should be on paying off your debt, you need to be working on your savings as well. My grandma fell ill this year, and we needed to take a last minute flight from North Carolina to New York in less than three days. With little notice, and not a whole lot of flexibility, we were in New York. That trip cost us nearly $2,000 after airfare, food, and parking at the airport. We were able to pull from our emergency savings fund to cover the trip without going into debt. You never know when situations like this will happen, and you need to be prepared for them.
Being able to manage our money keeps us out of debt month after month. We still indulge every now and then and get ice cream on a hot day, or visit friends a few cities away. You don’t have to be rich to stay out of debt; the secret isn’t making tons of money (though it helps). The secret is to be the one in control of your money and stop the debt cycle.