Debt isn’t easy to ignore. It’s like a painful and angrily red pimple on the end of your nose that crushes your confidence and constantly plagues your every waking moment. Sadly, debt is also quite difficult to avoid. Having just come out of the Festive Season, it’s like waking up from a shopping induce coma. Not only are our eyes continually assaulted with Christmas specials, but credit companies lure us in with promises of savings. We’re seduced by the notion that even though we’re spending money, we’re somehow saving it too. And when the first of January arrives, reality hits us. Lying in a bed made up of receipts, surrounded by impulsive buys and tinsel, we all realize – perhaps too late – that while a New Year has begun, our debt problems are still the same, if not worse.
In an effort to help you avoid this harsh reality check (which really can make a bad New Year’s morning hangover, a LOT worse), we’re going to give you a few simple steps that will not only help you launch in 2014 stress free, but also help you take the initial steps towards a debt free existence. Here are some resolutions for a stress free and debt free 2014:
- Make a Budget
As one of the most over-looked, yet simple tools for getting your finances back under your control, making a budget is the best resolution you can make for 2014. You wouldn’t drive a car without a gage to tell you how full the fuel tank is, would you? The same principle applies here. Write up a budget and use it is the foundation for all of your financial decisions. And since you only need a pen and a piece of paper to get started, you can start this New Year’s money resolution now.
2. Stick to Using Cash
Studies show that people who use credit cards and debit cards to pay for things, end up paying more. This is because you physically cannot see the money leaving your account, and have no real-time results of spending it. By using cash, you turn the money in your account into a physical thing – with its own real limits. If you can’t trust yourself not to turn to the cards when your money is gone, then treat it like a habit and cut yourself off by leaving the cards at home. In a safe. Watched over by vicious blood-hungry guard dogs. Alright, not necessarily to that extreme, but you get the idea.
3. Keep a ‘Just In Case’ Fund Handy
Try as we might to prepare for every eventuality, life happens. Car’s break down, children get sick, root canals pop up painfully, and – in the worst of cases – jobs get lost. Something always seems to come up to throw you off your monthly budget (remember? The one you made five minutes ago?). To keep these incidents from deepening your debt, keep an emergency stash in an easily accessible account (preferably a money market account so that it earns interest). If you want a rough idea of how much to save, multiply your budget by three. While that three-month operating budget number is big (and scary!), it’s also a realistic goal of what you should have on hand for when things go wrong. And don’t worry if you can’t gather this number up immediately. Like most things, this kind of investment takes time. However, it is a priority and as such, dedicating money into it should take preference over a new pair of high heels for your favourite LBD.
4. Set Financial Goals
Just because you’re trying to rid of your debt (and the stress that comes with it), it doesn’t mean that you can’t plan for a future. By setting financial goals for yourself, you make it easier to save because you can see what the money you aren’t spending right now, will get you in the future. Some financial goals include paying off your credit cards, starting a college fund, saving for a down payment on a house, and going overseas on holiday with your loved ones. By further separating these goals into two categories (short term and long term) you will be able to prioritize more easily and even set deadlines for yourself.
5. Reward Yourself – Within Reason
While we can’t condone buying a new wardrobe or investing in the newest (and more expensive) pamper treatments on the market, we can recommend that you reward yourself. Just like dieting, if you starve yourself completely of spending the result will most likely be a binge. So, remember to reward yourself whenever you meet each of your financial goals. Whether you choose to go out for dinner or get your nails done, you can reward yourself safe in the knowledge that you deserve it – and can afford it too.
Robyn Porteous is the staff writer for Debt Reverse. She writes articles and information for their customers on managing debt. Her Google+ profile contains relevant information on her other writing.