Did you know that an estimated 38 million households in the U.S. live hand to mouth, meaning they spend every penny of their paychecks. Surprisingly, two-thirds of them earn a median income of $41,000, which puts them well above the federal poverty level.
Why is that? My guess is that between paying off debts and failure to budget, people think they are destined to go through life paycheck to paycheck.
Want to get rid of your debt or help someone who’s in debt but don’t know where to start? The steps here are not optional; they are a MUST for getting out of debt. Here we go!
1. Start with a budget. Tell your money where to go. Again, not optional. You can’t expect to pay off your debt if you don’t know what’s coming and going. If you need more guidance on starting a budget, check this out.
2. List your debts from smallest to largest. List everything. The $50 you owe your parents, the past due $150 insurance bill, up to the largest. Disregard the interest rates and only look at what’s still owed.
3. Begin attacking the smallest debt. Just like you are prone to quit a diet if you don’t lose weight the first week, you need the emotional and psychological help that comes from paying off that smallest debt. You need to know that you can do this (because you absolutely can!).
4. Make minimum payments on all other debts while you are throwing every spare dollar at the smallest debt.
If you’re like many other indebted Americans, you may have some homework to do now. Don’t forget to make sure your budget is in current, working order. We will pick up with Part 2 next week. Until then!