There are many people who like to write their list of resolutions and end up failing dreadfully within the first week or month (Be resolute with 2012 New Year’s Resolutions). However, the best remedy is not to create expectations that are too hard to live up to.
For example, many people who develop New Year’s Resolutions choose as one of their options, “save money” or “get out of debt.” Putting this resolution down on paper might look good but to implement it into action will take time and work and effort . . . and above all, self control.
When I say self control I am saying that anyone who wants to save money or get out of debt has to cut down on their “wants” and concentrate on their “needs.”
For example, acquiring the most new and trendy cell phone might seem like a need but think over the pros and cons. Do you need the cell phone for business reasons? Does this cell phone have necessary options that your current cell phone might not have and you can continue using for the time being? Or do you want this new and trendy cell phone for the sake of envious eyes turned toward you?
What about clothes? Do you really need brand clothes or do you just want brand clothes? Why would you need $200 tennis shoes or a $100 shirt? Do you realize that you are actually paying more money to market a brand for the company? Instead, you should be getting commission . . . and most especially, if the brand name is blazoned across your back or chest!
What about restaurants? Do you really need to eat at the most expensive, trendy restaurants? Is it really a need that you be seen there? Their food might be better than home-cooked pasta and a burger but do you really need to go out . . . or at least, that often?
Think hard: Are you not really becoming a victim to the marketer of an object which tries to create a need, or to be more accurate, an envy to have this item or go to this place? Perhaps what you are really feeling is a lack security in yourself as you are.
Make a list
After establishing how many items might be needs and how many wants, the next thing to do is consider your overall income vs. expenditures. Sit down and write down carefully everything . . . and I mean, everything. Mortgages, car loans, school loans, public utilities, cell phones, internet, cable, and accessories such as standard grocers and gas for transportation . . . but first and foremost, do not forget the worst loan sharks in the business . . . credit card debt!
How much income and expenses do you have on a monthly basis? I suggest planning a monthly schedule because bills are often calculated on a monthly timetable. Make two columns, one for income and another for expenses.
Do not be surprised when you make this accounting of your money and debt. If you have not added it up before you might find yourself in pretty deep dodo! According to the American Debt Advisor website, if you are like most Americans, you are at least 80 percent of the population. However, it is understandable if you are not too happy to be part of the crowd. None of us are taking bows.
Make a plan
So here is where we start to separate the wants and needs in a big way.
There are two things that you have to have in order to really survive: a home and car.
No matter who you are, you need a home and car in order to survive and continue to somehow bring in some income. However, that does not mean you need the best home and the best car. Frankly, depending on how much debt you have incurred, you should really consider downsizing. That is, of course, a major decision and can be put on hold while you thoroughly examine other parts of your budget.
Next thing you need to consider for survival is food. You and your family have to eat but not expensively. Advice given by the financial strategist, Dave Ramsey, was to eat as inexpensively as possible while paying off the credit cards and, most especially, the high interest rate credit cards first. His financial advisory CDs have suggested that individuals live on a diet of tuna until paying off all their credit card debt.
Maybe that would seem pretty extreme to you but it all depends on your priorities. How soon and do you want to pay off your debt? At any rate, cut down on eating out and consider grocery shopping at the numerous inexpensive stores that are available. You will be surprised at how varied and the quality of the food at these stores which cost a lot less.
When I referred to stop eating out I would like to emphasize, especially fast foods! Besides being high in salt and calories, the expense is a vital factor. What used to be cheap fast food is now rather expensive in itself.
Consider: a sandwich, drink and side item now sometimes costs in the neighborhood of $6 to $7. If you are buying for more than one person, you could easily kill a $20 bill. A $20 bill is one-fifth of a $100. It adds up faster that you might think. Plus, it is only one meal. Fast food does not really “fill you up” and you and your family will be hungry again shortly.
On the other hand, with $6 or $7 you can buy a bag of chicken strips at a grocery store, add salt and flour (and other accoutrements if you so desire) and make a platter full of home-cooked fried chicken that could be an accessory to your meals for several days. Chopped on top of a salad, served with honey mustard or ranch dressing or even as a stand-alone course can be very tasty and inexpensive.
So let’s look at the other bills you might have: school loans, public utilities, cell phones, internet, and cable.
School loans: They are important to pay off, however, consider talking with an advisor to help consolidate the loans or temporarily lowering the monthly payment until you have other bills paid off.
Public utilities: This also can be considered a necessity but are, in some regards, controllable. For example, instead of buying 60-watt bulbs for your home, consider buying 40-watt bulbs. Ask for and read any information your local public utilities company has on the cost to run certain items in your home. Did you know that to leave your computer monitor on costs as much as a refrigerator burns? Have you ever heard of phantom charge? Do you leave things plugged in even though you will not have to use for several days or weeks? There are a lot of ways to investigate on how to control this bill, and remember, every few cents can count.
Phones, cell and home: Examine carefully all the bills that come in for these expenses. Ensure you know exactly what you are paying for. Do you use all the gizmos and gadgets for which you are being charged? On long distance, check the numbers carefully. Find ways that you can decrease expenses like cutting down on long distance calls. Examine your contract very seriously with the cell phone company. Perhaps switch to a less expensive phone system that you “buy minutes” to use.
Internet: Internet is becoming a way of life for many American homes. However, consideration might be given to what service you use and what you need it for. If you seriously need to cut expenses, you might consider cutting your internet off for a few months and using that money for another bill. What would you do without your daily e-mails? Local libraries are available complete with computer labs and internet service.
This is just a suggestion but it is understandable if it might be your last resort.
Cable: However, cable is another story altogether. This is another area where you need to consider the pros and cons of keeping. Do you need all those movie stations? How much time do you really have to spend on watching cable channels? Are they all that educational and necessary? Perhaps you can cut down to basic cable for several months while getting your finances in order. Or no cable at all. It might have unexpected benefits. Furthermore, could removing cable might help you to prioritize time with communicating with the family.
Credit Card Debt
According to research from CNNMoney.com and CardWeb.com, “The average American household with at least one credit card has nearly $10,700 in credit-card debt and the average interest rate runs in the mid- to high teens at any given time.”
According to Hoffman, Brinker and Roberts report, “In 2010, the US census bureau is reporting that U.S. citizens have over $886 billion in credit card debt.”
The history of credit cards goes back further than one might think but the numerous increases in using cards to pay for things has almost quadrupled within a few years. Is it the sign of the economy on the slump that makes individuals fall back on this? Is it necessary to have a credit card to build “credit”?
There are many factors involved but the main thing to remember is that if you cannot buy it in cash, you do not need it right now.
Understandably, that is hard to balance. Your bills are high. Your income is short (especially if you are in the 8 to 9 percent out of work), your interest rates are astronomical, you need gas for the drive to work, your family needs items of one sort or another, and you do not have ready cash to pay for the groceries. With all that pressure, you are going to reach for the nearest object to put your troubles aside for another day, and that usually can end up as a credit card.
However, how easy you might feel right now about it, you are going to be paying on that rash expenditure for possibly years to come.
“I pay my credit cards off every month!” Well, if you have that luxury and, when I say luxury I mean money, that is fine. Nevertheless, almost 80 percent of us do not have that luxury.
With a plan, however, it can get easier in time.
While you are cutting the other bills down to the bone, consider what you can do with your credit cards.
First, obtain copies of your credit report. This will help you understand your long-term problem and solution. This will give you information on where you stand and will stand for years to come and how other companies, including credit card companies, perceive you.
Second, do you have any department store cards? These are usually the worst because of their outlandish interest rates. Suggestion, get these paid off first or consolidate onto your lower interest rate cards. Be sure to slice these department store cards in pieces and never use again. Notify the store you are closing your account and insist on a returned letter confirming this.
Third, while saving a small portion of any extra money you have available from your abovementioned plans and cuts, throw all available cash on the lowest credit card or the credit card with the highest interest rate. Be sure to always check over each statement when you start this because some companies, when they see what you are doing, will try to trick you or add on charges you knew nothing about. Stand firm when approaching them about anything unusual on your credit card statement.
Fourth, sacrifice and paying on a card will be worth nothing unless you destroy the cards as soon as possible. This will diminish the temptation to use “just once more” when something comes up.
Fifth, even though you are paying everything out to end debt, you should always try to save some money, even if it is $10 once in a while. Little things add up and $10 can quickly add up to $100.
Sixth, remember the saying, “It is better to give than to receive.” Everyone should always try their best to give something back to the community. Religious people tithe to the church at least 10 percent that organizes many different ministries and charities. If you are not religious, consider “tithing” to community groups that are in desperate need. If you are lucky to be able to do both, count your plentiful blessings.
Remember, wherever you are in life, you could be worse. Giving back to the community helps remind you of this and will give you encouragement.
Seventh, do not get discouraged if this takes a long time to get out of debt. It took a long time to get in debt, you might be in a rut for years but then again, all the tuna sandwiches, all the lack of cable stations, everything you had to do to get out of debt will have been worth it.
“The rich rules over the poor, and the borrower is servant to the lender.” Proverbs 22:7
Good luck on your resolutions and remember that all of us are in this thing called life together.
I would like to hear from you. Be sure to comment in the area below on how you plan to implement this New Year’s Resolution. Bettse
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