America has an addiction to spending. CNN has recently reported that the "average American household" accrues almost "$10,700 in credit-card debt". With the exorbitant interest rates (average 16.75%) on credit cards and median minimum payment of about $260, your household will spend 29 years paying it all off, and more than $14,600+ interest for a total of $25,300. If you are interested in calculating your specific numbers, visit here. We need to make the necessary changes now before things get any worse.
The Solution: Education and Some Free Tools
Though you may have never taken business classes for budgeting basics, you have probably learned those who have money tend to live a more comfortable life. But why do they have more money? Because they follow a some positive financial planning rules, and the most basic outline to a good budget is :
Make more money than you spend.
But who spends your money? It is a simple question that is difficult for most people to face. The core of the issue can be broken down to the decisions that you make. The most powerful solution (and easiest) is to educate yourself about money.
Three things you can do right now:
Know and understand your current situation.
Most people don't fully understand their debt, expenses, and how much they make. So take a few minutes (how about now?) and write down a few numbers:
Hint - The last number should be lower than the first number, if not, invest more time calculating 'how much is necessary'. If you still have problems, you need to seek out a community financial counselor.
Increase your financial vocabulary.
What is the difference between good debt and bad debt? What are the three financial credit reporting institutions? What builds up credit? You should know some answers to these questions. There is a number of people who get into the worst financial situations because they dont understand the process or terminology of financial planning. The best way to increase your knowledge is to read more about it.
There are people that are paid to help you out. Financial advisors at banks, credit counseling services, even the customer service at credit card companies can provide a cavalcade of useful information that you can use to get out of debt. Ask why you pay what you do. Find out how to lower payments, interest rates, total debt.
Tools to Use
You situation is not unique. There are others that have studied and hundreds of books that have been written that can help you tearing down that mountain of debt. Several books that I suggest are the following:
Each one echoes upon the importantance of financial planning for the future. How to realize where money is being wasted, and even investing money while your are in debt. You can save money while still in debt and you should focusing on paying off your most toxic debt first, then worrying about the others.
An amazing tool that will offer clarity with your finances and offer customizable budgeting tools for free is Mint.com. Add your login information to your credit cards and bank accounts, and Mint.com can organize your expenditures and income to help you better understand your spending habits. Typically, Mint.com will make several suggestions on how to save money, whether it be a credit card balance transfer to a low / no interest card (which i would highly suggest, if you can be approved) or just saving a few dollars a month on car insurance. Take a minute and see what you can gain.
If you have a mortgage or credit card, the viable tools available for free on this site change significantly help in your financial planning process. With a few calculations, you can see how much money save by changing how you spend money, or even how you pay if off.
The key is to understand your current debt, follow proper financial guidelines that others have already created, and stick to the plan.