It’s time to get your finances straight once and for all! Here’s how to fix 2 common money problems. This advice comes from financial expert Dave Ramsey. And Good Housekeeping Magazine.
- The first money problem: Your finances feel out of control. Your bank account is empty, but you have no idea where your paycheck is going. Well, unless you want to retire broke, Ramsey says you have to start paying attention to what you spend. How do you do this? Grab a notepad and write down all your monthly expenses – including rent or mortgage, utilities, car payments, credit card payments, groceries, restaurant bills, and anything else you can think of. Then, write down your household’s monthly income after taxes, and compare the two numbers. If you’re spending more than you’re earning, it’s time to make cuts. Maybe you decide to eat out less often, or cut back on movie nights. In other words, do whatever you need to do to ensure you don’t spend more than you earn.
- And the second money problem: You’re drowning in debt. The average household is more than 18 thousand dollars in the hole. But Ramsey says you can dig yourself out of that hole. What’s the first step? Cut up your credit cards and make all your purchases with cash – this is the first step toward living within your means. Then, throw as much money as possible at your current debt – maybe you can get a part time job on the weekends, or have a garage sale. The sooner you pay it off, the less interest you’ll pay. And although most experts recommend paying off the credit card with the highest interest rate first, Ramsey suggests paying off the card with the smallest balance instead, and working your way up to the bigger ones. This ‘snowball strategy’ should boost your morale – since you’ll feel accomplished once you pay off one card. If you’d like to go further, check out Dave Ramsey’s book The Total Money Makeover.