Many people wish to save more money, contribute more to retirement, and build a larger emergency fund, but they may be operating with limited resources or have little financial discipline, in addition to other saving challenges.
Know You’re Not Alone
In 2019, about two in five American adults carried revolving credit card debt, according to an NFCC survey.
Revolving credit card debt does not refer to using your favorite plastic to buy something and then going home to pay the bill in full. Many people carry a balance month after month and continuously pay interest on that balance.
According to the Fed, the average interest rate on credit card debt in May 2021 was 16.3%. If you are among those who carry a balance and pay high interest, just remember that you are not alone.
Create a Plan
Don’t just make the minimum payments and hope your debt will disappear like magic. Create some sort of plan that allows you to pay down your debts. You can either tackle the credit card with the smallest balance first, or you can pay down the balance on the card with the highest interest rate.
Cut Back
Put yourself on a cash-only diet so that no additional debt accumulates. Cut back on any non-essential items like clothing, shoes, furniture, dining out, alcohol, cigarettes, snacks, soda, potato chips, and cable television – anything that is not absolutely necessary.
Rethink Necessities
Now that you’ve cut back on discretionary items, think a little about whether the remaining expenses, which you consider necessities, are truly required.
Do you need to spend that amount on gas, or can you walk or bike or take the bus more often? Do you need to continue living in your beautiful home, or can you downsize to an apartment and rent out your current residence?
Look for Ways to Earn More Money
If you wish to tackle your debt by increasing your income, sell some old items on sites like eBay or Craigslist. Look for freelance or consulting work to generate side income.
If you are a parent, take on some childcare jobs, especially ones where you can bring your kids along while you watch someone else’s children. You’ll earn money for the hours you spend doing what you do anyway.
Monitor Your Credit
Review your credit report to ensure there are no signs of fraud or unauthorized charges. If you see anything, contact your credit card issuer to cancel your card and dispute the charges. Sign up for a free credit monitoring service on a site like Credit Karma or Credit Sesame.
Start Saving for Annual Expenses
You already know you will need to spend once a year on holidays, vacations, higher heating or cooling bills that occur seasonally, and so on.
Start saving money throughout the year so you’re ready when those expenses occur. How can you figure out how much to save? Calculate what you spend on each specific annual event and divide that by 12.
For example, if you spend about $800 each holiday season on airfare to visit your family plus some gifts, divide that $800 by 12. You’ll come up with a total of $66 a month: the amount you’ll need to save to be ready for that annual expense. Saving throughout the year helps avoid the surprise when you have to pay those bills all at once.
Track
Your Income and Expenses
One of the best ways to get yourself back on track is to carefully track your spending. Once you have more flexibility in your budget and are debt-free, you may not need to be as precise. However, you should monitor all your income and expenses closely so you know where your money is going. You can also manage your large financial leaks.
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Sources:
NFCC. “2019 Consumer Financial Literacy Survey.”
The Federal Reserve. “Consumer Credit – G.19.”
Source: https://www.thebalancemoney.com/money-saving-strategies-3862954
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