Personal Finance Advice

A man sits on the couch with his spouse, lamenting about how they can’t possibly make more than the minimum payments on their credit cards this month.  They are both incredibly frustrated because they can’t seem to get ahead financially.  They both agree that this entire situation is unfair, and soon they’ll both sit down and figure out a way to tackle this debt problem once and for all.

Then they turn on the television to browse all the premium channels they pay for while eating the pizza they ordered in.

What is wrong with this picture? The most glaringly obvious thing is that people who do not have the money to pay more than their minimum credit card payments probably shouldn’t be enjoying expensive cable and delivered pizza.  The less obvious thing - and the thing that needs the most attention - is the absence of a comprehensive budget.  These folks don’t have any idea where their money is going, but if they sat down and made the effort to figure it out they would probably take a hard look at their finances and cancel the cable and stop ordering in when they could cook at home for a fraction of the cost.

Getting your personal finances straight involves much more than just not spending money on frivolous things.  You have to be committed to budgeting your money and figuring out where you funds should be going every month.  Sometimes folks don’t really make the connection - like figuring out that the cable bill would probably cover much more than the minimum payment on a credit card - until they write everything down and have a look at it on paper.  It can be an unsettling discovery, but an important one nonetheless.

 If you feel as though you aren’t making the financial progress you should be, start writing down how much money you spend on things you don’t really need.  The picture will become clearer when you start to realize that the money you pay for a mocha latte every morning might cover the cost of a couple of bills you thought you were having trouble paying.

It’s time to get your financial priorities in order.

We learn a lot from our parents: what type of food to eat, how to behave in social settings, and what values are important are just a few. Sometimes parents don’t even realize what an impact they have on kids, but nonetheless, kids are always watching and always learning.

You probably learned a lot from your parents about personal finances. If you take a look at the way your parents handled their finances you may come to realize that it has great bearing on how you handle your personal finances as an adult. You might discover that your parents intentionally taught you very valuable lessons about handling money, or you might realize that the way your parents handled money really set you up to fail.

Here are some things to consider about how your parents handled their finances:

Did they use credit wisely, or did they use it with reckless abandon?

Were finances never really a problem, or were your parents constantly scrambling for money to pay the bills?

Did your parents intentionally teach you about personal finance, or did you enter adulthood with no idea about how to navigate personal finances?

If your parents prepared you for adulthood by giving you a comprehensive education in personal financial matters - while also leading by example and handling their own finances efficiently - then be sure to give mom an extra Mother’s Day hug.

If your parents didn’t handle finances well, or didn’t bother to teach you about the proper ways to manage your finances, then it’s time to realize that you don’t need to follow their example. It may not be easy to take on the task of getting your finances in order despite the ideas you have in your mind about how money should be handled. After all, coming to the realization that your parents may not have taught you something properly can sometimes be a rude awakening.

If you are in this position, realize that you’re a grown-up now. Break the cycle of living paycheck-to-paycheck and hiding from creditors. Now is the time to get your personal finances in order despite the bad example your parents may have exhibited.

Paying down your debt can take a great deal of stick-to-itiveness, especially if you have a lot of debt and not much income to throw at it.  When you do finally make the decision to pay off your debt once and for all you might wonder what the best plan of attack is.  Do you aggressively pay down one debt while only paying the minimum payments on other debt, or do you spread the extra payments out toward all your debt?

First and foremost, you should use whatever method you are most comfortable with.  The utmost mathematically sound method may not be the method you decide to use, but as long as you are comfortable with the method you choose and you are actually making some progress in paying down the debt, then you’re doing it right.

Here are some of the more popular methods for paying down debt:

1.  Pay your accounts down one at a time, concentrating on one account while paying the minimum payment on all the others.  Which account do you concentrate on first? Choose either the account with the highest interest rate or instead choose the account with the smallest balance so you experience small victories quicker, potentially motivating you further.

2.  Consolidate all your debt into one account, such as an equity line of credit, a personal loan, or a credit card with a very low introductory interest rate that will not expire until after your debt is paid off.  Once the debt is combined into one account, make large payments until it is paid off. 

3.  Aggressively attack all your debt at once, spreading the extra payments out to your various bills.  As accounts are paid off, put the extra money toward the other accounts.

You want to choose a method for paying down your debt that keeps you motivated while also allowing you to eliminate debt more quickly than if you didn’t have a plan in place. 

For many people, the hardest decision about paying down debt is actually deciding that it’s time to get serious.  It is all too easy to simply send in minimum payments and not dwell on the interest charges and fees you’re paying each month, so actually acknowledging that something needs to change is a huge step. Pat yourself on the back for making a smart decision, and then get to work paying off your debt using whatever method works best for you.