The following post is by Kevin Fullerton. Enjoy!
America is a country in debt. More than 160 million Americans have credit cards, and the average cardholder is $15,000 in debt. Fortunately, it’s never too late to turn around and start making wise financial decisions. Follow these five tips to start getting out of debt, find ways to save for the future, and get on the path to financial success.
Start With Small Changes
You don’t have to completely give up your way of life in order achieve financial stability. Set a goal to save $100 a month on groceries or stay in one night a week instead of going out. You really only need to save $20-$25 per grocery trip to reach $100, and staying in instead of eating out or going to the bar will save at least $10-20 per instance.
Time crunched the numbers found that bringing lunch to work at least one day a week instead of buying can save you $500 annually, and bringing food three days a week instead of buying saves $2,500. The same financial gains come with replacing a Starbucks latte with home-brewed or office coffee. Start small by bringing your own coffee and lunch once a week, and then challenge yourself to do it twice a week next month. Soon the savings will add up.
Cut Unnecessary Spending
Track your spending to get a clear picture of where your money is going. You would be surprised how many hidden charges and “convenience fees,” are added to Internet purchases and other bills. There are plenty of ways to cut back on these unnecessary fees. You could consider switching banks to one with better locations if you’re hit with ATM fees.
Spenders looking to cut back on their budgets might also need to make some tough cuts in order to save in the short run. Consider breaking up with your cable provider if you already subscribe to Hulu, Netflix, and Amazon Prime. Also, cutting just one of those streaming services can save you $100 annually, so end your service with the one you use the least often.
Start Paying With Cash
Psychologists have identified an occurrence called “coupling,” where consumers feel both happiness and loss when they make a purchase. The brain feels happy about the new item, but it also feels bad about losing money. Unfortunately, “de-coupling” occurs when we pay with credit cards, meaning the brain experiences the pleasure of a purchase without any of the pain. De-coupling also occurs with one-click and in-app purchases, where people buy items online without having to think about it.
To avoid credit card debt, pay in cash as often as possible. This way you only buy what you can afford at the moment, and you experience the pain and pleasure that comes with coupling.
Save to Make Purchases in Full
It may be tempting to buy a new car or finance furniture to redecorate your new home, especially when stores and car lots offer seemingly cheap deals. They may say you won’t pay interest for the first couple of years, but you’ll make up for it after the interest kicks in. Buying upfront will keep you out of debt and save you hundreds, or even thousands, in the long run when you don’t have to pay interest. Yes, it means you’re not driving a nice car for a while, but your credit and bank accounts will thank you.
Saving is a Marathon, Not a Sprint
One thing to remember as you start out on this journey to financial stability is that saving and climbing out of debt is a process. Bringing your lunch once a week adds up over time, not overnight. Saving to avoid financing your furniture will take months, and you might not see the results for years. Instead of following a couple quick tips to save, change your spending habits to make better decisions in the long run.
Different saving tips work for different people. Some can’t live without their lattes, while others need Netflix. Find what works for you and get on the path to financial stability today.
***Image via Flickr by 401(K) 2013
