TIP: Living Debt-Free

Tip of the Month

October 2005

TIP: Living Debt-Free

If itâs time to get serious about saving for retirement and curbing spending, here are a few tips to help you lessen your debt:

Find Out Where Your Money Really Goes
Nearly all of us have a blind spot - or two - when it comes to how much we spend on a regular basis on frivolities. Whether it is weekly manicure appointments or buying all the high dollar options on the satellite TV package, we all have items we could trim awayâ¦and not really miss them.
Solution: Track your spending for a month or so. Jot down everything---yes everythingâ¦you purchase with cash (even the newspapers or gum from the local convenience store) during the month, and retain every credit/debit card receipt - with a note of what the item(s) were. Take a realistic look at your monthly expenses. Determine where you could cut back without feeling deprived - and do it.

Downsize To Fit Your Lifestyle
Look at where you are now and determine if the large expenses in your life âhome, transportation, second home or country club expenses still fit your lifestyle.
Solution: Depending upon where you are in your life and career, it may be time to downsize. If you are an empty nester maintaining a large home, consider whether it makes sense to move to a smaller place without major housekeeping and yard maintenance costs. Perhaps your work now involves much less commuting, or highway travel. If so, could you happily trade in your gas guzzling luxury vehicle for a smaller, more economical car?

Get A Handle On Credit Card Debt
Credit card debt - and the interest on credit card debt - is the single biggest self-created financial problem consumers face. If you are shackled with significant credit card debt and are paying minimum balances on your cards each month, you may be in a downward spiral that only determined financial discipline can cure.
Solution: Do whatever you need to do to free up money to pay down your debt (see #1 and #2 above), and limit yourself to one credit card - for emergencies only. You can make significant headway in a year or so, but it will take determined action:
- Check out sites like www.bankrate.com to find the best credit card offer available. Switch to a lower-interest card if you find one that works for you. Read the small print carefully to make sure you are not jumping from the frying pan into the fire.
- Destroy your cache of credit cards (bank-issued, store-issued) - all of them with no exceptions.
- Pay cash as much as possible and use your credit card for only those purchases that require one.

You didnât get into debt overnight and you wonât get debt-free that way either. However, you can make a change for the better and see a pay-off in as little as a year. Get back on track by assessing your spending habits, reviewing your current "needs" versus your "wants," by curbing discretionary spending, and halting credit card spending.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.