Debt is an established part of life in the 21st century, and today’s American families have total debts that run into the trillions of dollars. With mortgages, credit cards, car finance and student loans, that is hardly surprising, and a degree of debt is no problem. However, for a growing number, debt is spiralling out of control, leading to worry and potential disaster.
If your financial situation is keeping you awake at night, the worst thing you can do is ignore it. Here, we take a look at three steps towards financial security.
1) Look at your cash flow
You can do nothing unless you understand what is coming in and what is going out. One of Charles Dickens most memorable characters was Mr Macawber, David Copperfield’s hapless friend and landlord, and he could not have put it better. "Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and sixpence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and sixpence, result misery."
So keep a record of every dollar you spend, down to the last cup of coffee, by joining the 30 percent of American householdsthat maintain a simple monthly budget. This in itself will reduce your spending, but it will also present you with a clear picture of how your income compares with your expenditure.
If you are on the “misery” side of Micawber’s equation, identify which of those expenditures can be cut back.
2) Look at your debt payments
Credit cards, car loans, store cards - the average family has numerous debt repayments going out every month, all with variable interest rates. In many cases, you are paying well over the odds, and could make enormous savings by consolidating your debts. If you are really struggling to make the minimum monthly repayments, some debt management companies can even cut a deal to reduce the principal amount.
3) Monitor and manage
With your spending under control and your debts in one place and being managed effectively, you are in a far safer financial position. The trick then is to stay there. Keep the family budget alive as part of your day to day routine, and think carefully before extending further lines of credit.
Managing credit smartly
Credit is an essential part of modern day living, for both homes and businesses. But both need to manage it smartly and with eyes wide open to enjoy happiness and success. Act now, and enjoy peace, success and prosperity.