5 Ways To Get Finances Where They Should Be - The Plan

Well, it has been a while since I've written on here, but as we all know life gets in the way and other priorities have taken much of my freelance time.  It hit me the other day while I was budgeting out my paycheck that I am spending way too much on merely borrowing money.  This is money from credit card companies, auto loans, student loans, and even relatives, and paying monthly leaves little to nothing left to work with, except further use of the cards.  On the other side of things, not having a deep enough savings for emergencies has led to more borrowing and more debt, and as I researched online, I've noticed many folks out there are in the same situation.  If there's one class I wish they offered in High School or College at this point, it would cover personal finances.  I've learned the hard way after years of paying others for my own money that it doesn't have to be that way, and that the spending of money I don't have, whether an emergency or not, has to stop.  Below is a list of things I've found most helpful on the web to get me in the right direction and get out of debt, and hopefully I open some other eyes out there as well.  Feel free to leave comments if you have any recommendations or further tips!

1.) Start Saving Money - I spent the past week searching for a good place to get started with savings, so I have money set aside as a "cushion", to replace credit cards as I pay them off.  After tons of hours on Google, I found that ING Direct has a decent interest rate and is all online, so it is very easy to manage.  I am also able to link it to my checking account at my local bank so I can transfer funds each paycheck.  It also adds separation so I'm less likely to touch the money as it grows interest, and would only be accessed for actual emergencies.  If you would like to help me build my new savings as well, I can send you a referral link and for each sign-up it would add $10 to my savings (which you can also do with others if you create an account).  Just leave your email in a comment below or send directly to my jdillio12@aol.com contact.

2.) Stop Borrowing/Using Credit - The great country that I live in, though chock full of intelligent people, is still driven by material possessions and retail.  This combined with the ease of opening a credit card and the false hope of paying the balance each month, as well as the lack of education on how to effectively use credit has led endless numbers of people into a deep hole of debt.  I have finally put down my shovel and stopped digging but it seems like it is going to be a long way out. That has kept me from paying everything off in the past, but at this point I am finally motivated enough to climb out of this hole of debt and out into the sunlight. Okay, that may have been a bit cheesy, but you get the idea.  No more using plastic, no more borrowing, and living within my means should accomplish this.

3.) Pay off Credit Cards, but Don't Close Them - I am always worried how my credit rating is affected by these unpaid revolving debts, but I also want to eliminate them from my everyday life.  I know that in order to build credit, you need to use credit, and use it responsibly.  So I plan to pay off my cards, starting with the lowest balance first and working my way up, as Dave Ramsey suggests.  However, I also have found that closing cards is bad for credit, and that you should use them occasionally but pay off the balance by the end of that month.  This reflects responsible spending, and is exactly what my goal is in the long run anyways.  I do eventually want to buy a house, and get a much better rate on a mortgage, so building credit while reducing debt seems to be the best way to go.

4.) Stop Buying Things That Aren't Essential to Everyday Life Without First Having the Money Saved Up to Do So - I use my debit card at least 2-3 times a day.  This adds up to lots of charges, lots of unknown balances and potential overdraft fees.  For this reason, I'm converting my "Leisure" funds into physical cash-only purchases which are set aside each paycheck.  This way, I will know exactly how much I have left to spend before the next check.  Also, stopping impulse buying and shopping around will make this more effective.  Before every purchase I'm going to ask "Do I really need that right now?"

5.) Save Everything Left Over - Every ounce of change and leftover gift money or bonuses is going to be applied to savings and paying down debt.  Once I have enough emergency money set aside, the rest is going to go to paying at least 2-3x the minimum payment on my lowest balance credit card, then to savings for other things like medical funds and yearly charges, such as a taxes, car registration, insurance, etc.  These unexpected bills always hit me when I'm at my weakest financially it seems, so I won't have to worry about unknowns with the extra funds set aside.  I have created separate savings accounts through ING Direct to manage these different funds, and they are all easily accessible from the same account.  Eventually, I plan to start a Roth IRA or other retirement fund once my main debts are settled, as it is never too early to start.

Like I said at the beginning of the post, these are things I am going to implement starting today.  I have seen tons of success stories trying various things, and this set of changes fits my situation the best from what I've researched.  Hopefully there are other college students (or recent grads) that see this and at least start thinking about how they're going to finance the rest of their lives, because I know if I could go back 10 years and start saving and never open more than one credit card, I would be much more at ease about my finances at this point.  There is hope for us all and its never too late to turn things around, but its going to be a long tough road to get there.  As time goes on I may come back to this theme for future posts and updates for all of the readers out there, but feel free to comment if you have tried, or are trying for the first time, any of the changes I've listed above and your experience with them.  Have a great Sunday and rest of the week!