Can you imagine having no debt? What kinds of decisions come with each paycheck when you owe nothing? Your savings account is bursting at the seams, so you can add some more to the world travel budget. But wait, that budget is set for two years of travel already.
Your time volunteering and visiting the orphanage you helped fund in Haiti will happen when the kids are on school break, so maybe it’s time to put a paycheck or two into the business you’ve always wanted to start. That could even add money to your money and set up the family for when you’re gone. No worries.
This kind of dreaming doesn’t have to be a dream. Whether you’re in a stage of life where college planning is central, retirement is imminent, or marriage and joint accounts are calendar days away, being debt-free is possible.
Instead of dreams of running away from it all and cracking coconuts on a deserted beach, take a few minutes to think about how you really want to live — maybe with electricity and some great vacations — and see how you can get started today.
Knowing your debt and your spending can free finances and prevent draining them in the future.
With some knowledge of your buying “triggers,” changing habits may be necessary. If you spend Saturday mornings shopping on the Internet or you can’t pass that antique shop down the road without popping in for a look, take a fast from the Internet and a different route around the shop. Flee temptation by physically separating yourself from it.
Financial planning tips in books, on Web sites, and from friends and family can help us get rid of debt. Some suggest paying off the highest-interest bills first and when done, applying payments to the next debt, plus the amount you had been paying on the first. Payments increase in size with each pay-down, and debts clear faster. Others propose clearing the smallest balances first because it is motivating to eliminate a payment or two up front. Those smaller debt monthly payments then go right back into paying other bills. Still others suggest consolidating all debt and paying it off in a larger monthly payment.
There are different camps of coupon users and bulk buyers. Some clip, file and track for the maximum in savings. Others dabble in buy-one-get-one here and there with trips to the warehouse club for stock loads of diapers or toilet paper. Others toss the savings circulars and shop in frequent trips looking for what’s on sale at the moment.
Working toward a purchase can build the anticipation of owning it at once, once and for all. Anticipating a needed purchase can soften the blow of having to come up with the money for a big ticket item without the dread of the debt and financing that come after. With some cash in hand for a down payment, even negotiating a lower total price is possible.
If you save more than 6 percent of your income, you are in the minority. Few households have enough savings to cover the costs of an emergency or even a planned event such as a wedding, so financing covers the immediate needs. Taxes and funerals are inevitable, but cash at hand is typically not enough to cover the costs. In each of these instances, a bill and interest have to be paid.
Saving and planning allows your money to earn interest and builds an interest-free method of payment: cash. Having money taken out of your paycheck is a great way to get your hands on your own money before others do. You can pay your savings account and earn money in interest.
Bill yourself each month, and pay that bill first. Try allocating R200 – R300 off the top of any earnings and see if you miss it. If the amount creates too much of a pinch on your cost of living, try a smaller amount and build by taking another look at your spending. If you don’t feel a thing, think about adding more to your bill.
A new designer movement is afoot. High-end department stores and chic boutiques still have a share of the market on name brand clothing, but the marketplace is expanding. Used clothing stores, consignment shops and general thrift stores carry impressive designer fashions at very affordable prices. Even some staples of the thrift business such as the Salvation Army have added designer sections for clothes shoppers.
Cash is, in a sense, real-time. Paying with cash happens on the spot, with no further steps or future charges. Cash is also real time in the sense that when it’s gone, it is gone. Withdrawing a set amount gives you something to work with when it comes to making buying decisions, and cash limiting each week or each month can keep your spending down.
So many people desire a simpler life that marketers have caught on and created more opportunities for buying stuff. In simple terms: Buying into the idea of simplicity sometimes leads to buying more stuff to organize what we have. Even wanting less is a marketing target, so that “simple living” is an outward style rather than a true lifestyle.
If you are anything like millions of other people who make money, you may have a vision of those people who keep budgets as a different breed than yourself. There is an aura, and frankly, even something boring associated with talk of budgets and success at keeping them.
Fortunately, living on a budget can be second-nature and even enjoyable once you’re set up to track your spending. Seeing what you have and what you pay out is a reality check, but closing your eyes to your debt doesn’t make it go away: A budget can.
Numerous free budget outlines are on the Internet and in libraries. From simple one-page itemizations to multi-page bells-and-whistle spreadsheets, the options are innumerable. Spend some time finding a budget sheet or package that looks fun to you.
Guidelines from the experts can help in getting started; however, make adjustments up or down to fit your stage of life and personal goals. Recommendations aren’t written in stone, but your budget should be.
Plan for extras within the budget rather than outside of it, and once you have a budget, stay accountable to what you set for yourself. Make adjustments only for growing closer to a debt-free life.