You Just Realized You’re Spending More Than You Earn: 4 Things To Do Today

My financial turnaround began when I realized I was spending more than I earned each and every month. That’s pretty much the only way you can pile up more than $25,000 of credit card debt in a year (that’s about the rate I was going). For me, it came down to stupidity and lack of attention really.

If that sounds like you right now, here are four things you can do TODAY to stop the bleeding and begin to gain control of your financial life.

Stop using credit cards – Those little plastic jerks are ruining your life and you know it. Chop ’em up! They aren’t cool, you don’t NEED them, and what good have they done for you so far? Life is possible without credit cards. I haven’t had one for more than a year now and I never miss them.

Make a budget – Honestly, making a budget is like getting a raise. It’s amazing what a little detail work can do for your finances. It’s hard work though. It takes time and practice to successfully budget. Don’t give up after your first try and don’t expect to get it right in the beginning. Just trust that it will work and give it a chance. This step alone will dramatically change your financial life.

Sell some of the stuff you bought that you knew couldn’t afford anyway – Video games, DVDs, golf clubs, whatever unnecessary junk you bought that you don’t need. Face it, almost nothing that we buy is truly a NEED. Be ruthless. Start listing some stuff on Craigslist or Ebay. It can be a pain, but consider the hassle to be part of your therapy. This will put some cash in your pocket quickly and give you some small victories on the road to turning your cash flow positive again.

Create more income – This could be overtime at your current job, finding a part-time job, or my personal favorite- finding some freelance work of some kind. Anything that allows you to use your existing skills to provide a valuable service for someone is your best bet for some quick side money. This is the best choice because you’ll start to get a taste of how to create your own path to income in your life.

These are just a few tips and there is more you can do, but you have to start somewhere and this is as good a start as any. You need to dedicate extra time to working right now, but don’t neglect education. Read some blogs, and read some books. Start talking to your friends and see if any of them are trying to change their financial lives too (you might be surprised, this is more common than you probably think). Try listening to the free Dave Ramsey Show podcast (or his radio show if it’s on in your area). The podcast is only 40 minutes long, it’s free, and it’s a great way to get a daily boost of inspiration and keep fighting the battle with debt.

Even if you can only do one thing today, it’s a start (if I had to pick one, I’d start with budgeting). The most important part is realizing there is a problem and starting to take action as soon as possible. Once you get the ball rolling, this will get easier. Good luck!

Simple Steps for a Cash Only Christmas

Christmas 2007 was my first cash-only Christmas. That was a great experience and I would never dream of using credit cards to pay for Christmas again. However, this year I’ve made the cash-only Christmas even better by starting a ‘Christmas Fund’ back in January of this year. My Christmas Fund is a savings account at ING Direct with a monthly auto-transfer to cover this year’s Christmas spending.

It’s a great feeling to know that not only will Christmas shopping not put a dent in my normal monthly budget, but thanks to the spirit of frugality this year, I’ll actually have a fair amount of money left over that I can save or pay down debt with. Nothing makes personal finance easier than a little planning and proper execution.

If this wasn’t your experience this year, I’m sorry and, believe me, I can relate. Everything I’ve just talked about would have sounded rather nutty to me up until about a year ago. It’s not too late to prepare for next year though. If you start now, you’ll be ready for Christmas in 2009.

How to prepare for Christmas 2009:

  1. Plan how much you will spend in 2009
  2. Divide that number by 11 (assuming you will save from Jan – Nov)
  3. Open a savings account and call it your Christmas Fund
  4. Set up a monthly auto transfer
  5. Your work is done until next December!

This is a great way to cut down on stress during the Holiday season and it makes it easy to keep your budget under control.