A Word on Spending and Debt

| January 9, 2009 | Reply

Are you experiencing financial difficulties during the economic downturn?  If so, you are definitely not alone.  Even with the recent decrease in gas prices, the economy continues to create problems for millions of Americans.


During these tough times, there are some ways to keep above water.  One way is to practice smart cash flow management.  This means curbing your spending—avoiding the temptation to buy luxuries like high-end designer suits, a big screen television, or remodeling your basement.  This requires willpower, and none of us want to deprive ourselves of having nice things.  However, good cash flow management requires us to sacrifice these luxuries at certain times.  There are many ways to curb spending.  Here a few ideas to that can help:


  • Pay cash for purchases; use a credit card only for emergencies
  • Switch to less expensive brands of everything from shampoo to cars
  • Be patient and wait for a sale
  • Shop at wholesale clubs and discount department stores
  • Don’t take a vacation until you have the money to pay for it
  • Cut back on meals out
  • Curb your cell phone use
  • Winterize your house to save on energy costs

 When you curb spending, you will soon find yourself keeping more of your income.  You may be thinking, “cut back on using my cell phone and save $2 by switching to generic brand names?  That’s not going to save much.”  However, these savings add up quickly over time.  For example, downgrading your cell phone plan from $100 to $50 adds up to $600 per year in savings!  By budgeting wisely and keeping more of your income, you can apply this extra money towards more productive goals, such as investing or paying debt.


As for managing debt, if you find yourself trapped you might want to consider creating a plan to stay in control.  First, you should be aware of the type of debt that you have.  There are two types of debt: secured and unsecured.  Secured debt is that which is backed by collateral, such as a car loan or home mortgage.  Unsecured debt, usually the most expensive, is debt that has no collateral behind it.  This typically includes your credit cards or student loans.  The reason this debt is more expensive to you is because the lender has nothing to take from you if you fail to make the payments.  Most unsecured debt is unnecessary and should be avoided if possible.  


Most experts will recommend paying off your unsecured debt first.  Because unsecured debt is more expensive, it will take more dollars over time to payoff.  One strategy with credit cards is to redirect the monthly payment on a paid-off card to the balance on the next card.  For example, let’s assume you have two credit cards.  If you payoff your first card that has a minimum payment of $112, you could take this additional amount and apply it towards your second card.  At the same time, you would continue paying the second card’s required minimum payment.  Using this strategy is one of the quickest ways to payoff your unsecured debt.  Once your unsecured debt is paid-off, you can then start to eliminate secured debt.


Managing your finances is a daunting task and it requires focus and patience.  If you find yourself getting frustrated, don’t give up.  Managing your cash flow is the true beginning of financial stability.  Once you put in the work, you will be in control and on your way to true financial freedom.  


Category: Business, Entreprenuer, Foreclosure, Interest Rates, Investing, Money, Motivation, Personal Finance, Politics, Real Estate, Success

About the Author ()

Rob Myrick is a entrepreneur, web designer, and blogger who resides in Phoenix, Arizona. He works with entrepreneurs who have the need to take their product to the Internet, or who simply need marketing skills as a supporting strategy to their existing business. Rob has worked for several well-known entrepreneurs such as top blogger Katie Freiling, and also businesses such as The Startup Garage located in San Diego, CA.

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