The next 5 steps won't be hard. They only need a promise. You can do it. When you don't have to worry about paying your bills, you'll feel free and successful. This will all have been worth it.
Are you ready to start? Let's go.
First, figure out where you are right now.
You might not have thought about your money in a while. Maybe that's why you're struggling with so much debt right now. But you need to figure out where you stand financially right now. It's hard to figure out how to fix things if you don't know where you are right now.
Just get a pen and paper and all of your credit card bills and look at the situation honestly. Write down all of your debts, their interest rates, and how much you have to pay back each month at least.
Don't stress out about what you owe. People say that anyone can pay off all of their debt, including their mortgage, in 5 to 7 years. That includes you.
Step 2: RIGHT NOW, stop spending more than you earn.
This is the first thing you need to do to get your plan for financial success going. Most likely, this is why you need to act right away. Look at how much it costs you to live and stop spending money on things you can't afford.
Also, cut up all but one of your credit cards and promise to only spend what you can pay for with your own money.
Step 3: Get some money to pay off your debts.
Once you've figured out Step 2, the next step is to figure out how to set aside some money every week or month so you can start paying off your debts, preferably faster than the minimum monthly payment. Pay whatever you can. Paying off these debts is better than putting the money in the bank. This is because the interest on a credit card is much higher than what you can get from a bank for money on deposit. The goal is to get rid of debts with the highest interest rates first.
If the interest rates on two of your credit cards are the same, pay off the one with the smallest balance first. That will give you a lift and make you more determined to keep going.
Step 4: Start a savings account
Once you've gotten your credit cards under control, it's time to start thinking about putting some money away to start saving. You'll be surprised at how quickly your money grows if you add to it every week and don't touch it. If you really need to buy something expensive, like a car or piece of furniture, it is better to save up for it than to borrow money.
Step #5: Make payments on your mortgage.
Since the interest rate on a mortgage is usually much lower than that on credit card and store debt, you can put this last. Also, its value goes up over time, while the value of your car, TV, VCR, furniture, and boat stays the same or goes down. You'll be surprised at how many years you can cut off your mortgage payments if you just pay a few dollars more each month.
These are just a few basic rules that will help you get your finances back on track. The main idea here is that you should try to pay down your credit card debt. Once that's done, you can use the money you saved to save for retirement and pay off your mortgage. That's the right plan.
Now pull out those papers, do the math, and get started on the path to financial freedom.
