What a way to have to greet a new year; facing a mountain of credit card statements within weeks of Christmas. Ach mei zeit (oh how awful), an Amish expression, is the certain lament of more than a few consumers who went overboard with gifts and entertaining who now find themselves all charged up.
Help! Now what do I do?
First things first, rein in the spending by make it
harder for you to spend. There are ten initial steps
one
may take immediately to begin the turn around. Remember,
everyday spending decisions,
especially the credit based
ones, will do far more harm to one's financial future
than any investment
decision one is likely to ever make.
1. Freeze credit cards and ATM cards in a glass of water
in your refrigerator freezer.
2. Get spending on a cash basis and make notes/keep
receipts on all purchases to help raise your
awareness
of where your money is going, day in and day out.
3. Freeze your credit files. This is now available in
all 50 states. Freezing credit files will make it more
time consuming to open new credit accounts or make large
credit-based purchases. In the process
you will be sent
a copy of your credit files.
4. Take some financial pictures of yourself. The big
picture is your net worth, listing the things you own
versus the things you owe. But don't stop there,
determine how many years you have been working
full-time
and how much money you have earned during that time.
Now, what percentage of your lifetime
income (to date)
is reflected in your net worth? 10%? 20%? 50%? 150%?
The close-up picture is your cash-flow, how money moves
in and out of your life on a monthly basis.
It is a list
of all income received in a month and also a list of all
expenses during the same month. The difference in the
two amounts equals your cash flow, be it positive (more
income than expenses), or be it negative (more expenses
than income), or be it zero (monthly income and expenses
are equal). The
close-up picture will help in
prioritizing monthly spending. The cash-flow will also
help identify spending
that may be hurtful to getting
out of debt. Try to get as much extra cash going to debt
pay-down as possible.
5. Create a written spending-plan and implement it with
the next paycheck or the first of the month,
whichever
comes first. The cash-flow exercise is the basis for the
spending-plan; all the leg-work is
done. The monthly
spending-plans then become your financial roadmap. The
key is to follow it closely,
because within that
spending plan will be the Christmas debt reduction and,
eventually overall debt
elimination. Printable one page
spending plans are on icfe.info.
6. Look for ways to get a better value for your dollar.
It may mean doing things for yourself that you may
have
paid others to do for you, such as lawn care, car
washes, laundry, and so forth. Comparison
shopping is
another way to save money and get more value. Coupons
and rebates add value to your
dollar, especially at the
grocery store where the average American family spends
30 cents of every
take-home dollar.
7. Make it a family affair. Everyone can contribute to
energy savings, avoiding food waste, clipping
coupons
and watching out for sales on things regularly
purchased. Everyone can become a comparison shopper and
look for better values. An over-spender is not just
someone who spends more than they
earn, an over-spender
is also someone who pays too much for things and the
latter group is the majority.
8. Add to your income at the same time you are spending
smarter. This can be done by taking part-time
employment, selling things on the internet with eBay,
for instance, perhaps generating additional income
from
a hobby, craft, music or language instruction, and
tutoring, to mention a few.
9. Get some visual reminders around your home and office
about improving spending. If ATM and some
credit cards
must be unfrozen, place "ICFE Credit Card Warning
Stickers" on the front. There are four different
versions, the most popular is: "WARNING! Overuse Can Be
Dangerous." Also keep those cards protected in an
"ICFE
Credit Card Sleeves.". View them here on ICFE.info.
10. Take the inter-active spending quiz here on ICFE.info.
There are two; one for looking at your spender's profile
and the other is an over-spenders quiz. They both will
help anyone gain some insight to their spending
practices and habits.
Good luck and Happy 2008.
PR