How to Get Out of Debt and Save

Even when you are living paycheck to paycheck, you may start to change the way you live, you may even have money to save and invest.

Bills and credit cards payments are eating up most of your income. You know you need to start saving extra cash for emergencies. You know is hard because you already have a lot of debts and the ones that will show up, but relax, there is a way you just need to know where to start. Whith a little bit of confidence in yourself and a lot of discipline you could change your financial situation in six months.

Paying Debt and Save

What should you do first? Paying debts or save. First you need to know what you owe and what are you spending.

Tracking Spending

The steps outlined in the box below will help you determine how much cash you have to pay off your debt.
Next, you'll want to keep track of your typical expenses for one month or so, to find out where your money is going. Also figure your unexpected expenses for a year's time -- auto and home repairs, gifts, vacations, etc. -- and divide that number by 12. You may want to use one of the personal finance software programs available to track your spending. Once you have a record of your spending, compare your monthly outlay to your monthly income. If you have a surplus, this is the amount you can apply each month to paying down debt and building savings. If you have a shortfall, you'll need to cut expenses.

HOW MUCH TO PAY OFF YOUR DEBT

Step #1: Create a personal balance sheet and list your debts in order of interest rate, from highest to lowest.

Step #2: Add up your liquid assets, including savings and investment accounts, if any.

Step #3: List any major purchases needed in the next year. Subtract this amount from your liquid assets. What remains is the amount you may have to pay your debts.

How To Build Save

A key to stablish good saving is to make it easier than spending. Here are some good tips:

• Set up 3 savings accounts: One for emergency cash; the other for unexpected bills and the last one for investments. And stick to it don´t use them for any other purpose.



• Whenever you been paid put only the money you really need into your checking account, because if put it all you will be most likely to spend it all.



• If you have extra money put it in the unexpected bills so when you have to change the tires of your car you will be most likely not to use your credit card to pay for that.



• Beging building your emergency account, by depositing a portion of your paycheck, like 10 or 15% every month.



• Put whatever is left in your investment account, all extra cash that you may receive, a birthday present, etc.
  

How to Reduce Debt

• Pay your highest interest credit card first. Avoid paying just the minimum, paying just a little bit more make a big difference.



• Consolidate your debt by transferring to a low rate credit card.



• Setup a realistic payment timetable and stick to it.

Being out of debt get time it not occur overnight, but you be debt free if you stick to a plan and reduce your spending. I hope soon enough you will be feeling pretty good about yourself and will start investing your money.

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