4. Save Rather Than Spend
One of the ways that
retailers convince people to make large purchases is to entice consumers with
low monthly payments on financing. If you know that you can easily make a
monthly payment on a financed item, then you should also be able to save the
money needed to buy that item in cash.
For example, if you are not in a hurry to get
a new television, then you should do some research and find out how much the
television you want will cost. Then you can develop a savings plan that will
help you to save the money you will need to purchase the item. Look at it as
making payments on a finance account for an item you do not own yet. Once you reach
your goal, you can purchase the item outright without having to pay interest
and finance charges.
Saving money for purchases is always
preferable to opening a finance account for the practical consumer. You may
have to wait a few extra months for the item but, if the item is not a critical
need, then saving for it will allow you to have the things you want without
putting yourself into debt.
Step 2: Create a written budget. This is an essential step. You need to know where your
money is going, and you need to have a sense of control with your money. A
written budget will give you control and tell you where your money is going
before you spend it.
Step 5: Save a Big Emergency Fund. Once you are out of debt, you need to make sure that you
STAY out of debt. Read the post I referenced about putting together a large
emergency fund that will cover your expenses up to 3 to 6
months. If you lose weight, you can’t go back to your old ways of eating fast
food and never working out. The only way you’ll keep off the weight is to keep
eating healthy and continuing to exercise. Staying out of debt has the same
principles. Once you change your behavior to get out of debt, you must keep
doing those things to stay out of debt.
