RISMEDIA, April 9, 2009-The news headlines paint a grim picture. Record job losses. Stagnant incomes. Rising debt. Stalled savings. One in four consumers say they are worried about making their monthly payments over the next six months, a four percent increase from last year, according to a recent Gallup poll. To help consumers climb out of the debt trap, Clarky Davis, The Debt Diva, offers tips for living life for less with a self-help approach to debt management. “Our relationship with money has become fractured,” says Davis. “Since April is Financial Literacy Month, now is a great time to reconsider how you’re managing your finances. Every consumer can and should know how to manage their money and live within their means.”
As a certified personal finance and debt expert, Davis uses her hard-won personal experience with debt to help consumers regain their financial footing.
Take Charge of Your Money and Start Saving
On average, Americans spend $1.22 for every dollar earned according to a recent Federal Reserve study. “Budgets provide the financial boundary for us to live within our means,” Davis says. “Establishing a household budget to track your monthly spending is the first step in taking charge of your money. It’s empowering to be in charge of your spending instead of sliding further into debt.”
Find a system that works for you. There are many tools and techniques to track expenses. A simple worksheet with sections to track monthly income and expenses is all you need to take charge of your money.
Track it. Write down everything you spend, so you know where your money is going. Then, you can make smart decisions about what you really need to spend money on and where you can save.
Start a savings cushion. Start small with a goal of saving five percent of your paycheck in a traditional savings account and another 10% of your paycheck in an emergency fund for unexpected expenses. If you’re getting a federal tax return this tax season, consider using the money to start an emergency fund.
Get the Most Out of Your Money
“Creating a lifestyle that fits your budget is easier once you know where your hard-earned dollars are going every month,” Davis says. “Find ways to cut back where you can by reducing everyday expenses and get the most out of your money.”
Slash your electric bill by running major appliances like the dishwasher and washing machine during off peak hours.
Save on groceries by planning meals and making a shopping list before you hit the store. Purchase foods that are in season to take advantage of lower prices. Visit discount grocers and try store brands to save even more.
Dine and divide. Seek out less expensive eateries that are more in line with your budget. Split over-sized portions, and the cost of the meal, with a friend. Cut back on dining out and prepare more meals at home.
Downsize Debt
A recent Gallup poll reports that 50% of consumers intend to reduce their total debt over the next six months. Last year, Americans reached a record of $951 billion in credit card debt with the average household carrying $9,000 in debt.
Eliminating a substantial amount of debt takes time and discipline, but it can be done with the right strategy in place.
Create a debt domino. Focus on the credit card with the highest interest rate and pay as much as you can on that card first, while making at least the minimum payment on your other debts. When one card is paid off, add that amount to the next highest credit card and so on and so on. You’ll pay off your debts faster because you’re applying larger and larger payments. You’ll save on interest, too. Always make more than the minimum monthly payment and make your payments on time to avoid late payment penalties.
Recognize when you need help. Many people ignore the signs of financial distress, not wanting to admit when they need help. Look out for red flags that signal you may have a problem. Paying bills late; transferring balances from one credit card account to another to obtain lower interest rates; depending on overtime at work to cover minimum monthly bills; borrowing from friends and relatives to cover basic living expenses; writing checks and hoping they don’t clear the bank before payday are all signs that you may need to evaluate your financial situation.
“There are many options for consumers dealing with debt,” Davis says. “The most important thing is to do something about it. If you don’t feel you can tackle the process yourself, there are professional services available to get you back on track.”
Seeking Professional Help
More and more consumers are reaching out to credit counseling professionals to help with their financial woes. Consumers have several options when considering professional credit counseling services, but they should check their providers against certain criteria before seeking their help.
Reputation – Check with the Better Business Bureau to verify that the provider you plan to work with is accredited by the bureau. Also make sure your provider is licensed or authorized to do business in your state.
Open book – Your provider should clearly state the services you will receive.
Informative – Provides free budget analysis, as well as financial and money education.
At your service – Offers one-on-one customer service available with multiple contact methods to meet your needs (online, phone, email).
Affordable – Charges limited fees for debt management services, no more than $50 per month, with a minimal upfront fee of no more than $50.
“We’re learning from our financial missteps,” Davis says. “We’ve lived beyond our means for too long, content to charge a life we couldn’t otherwise afford. While frugality may be this season’s hot color, it’s important that consumers adopt it as an everyday addition to our financial wardrobe.”
