1. Start a short term Emergency Fund:
This is a habit that I wished I’d been taught as a young adult. I lived by the “spend every dime you earn and let tomorrow worry about itself” mentality. When I began to experience the results of this financial game plan I had to take some drastic steps to change my habits. My husband I began by gradually adjusting our lifestyle to match just his income. Once we no longer depended on my income it was easy for us to make the transition to a one-income family. Now, most of what I make freelancing goes towards our short-term savings.
Having this savings parachute in place has helped us to move to a lifestyle free of dependency on credit cards as a financial back-up plan.
2. Start a long term Emergency Fund:
With all of the money you are saving or will begin saving as a result of couponing and cooking at home, you will need to work in a plan to save for the long-term. Once your short-term emergency account is fully funded, begin to use that allotment to begin an emergency fund.
Our goal as a family is that once we have reached our designated long-term cushion we will reduce the deposits by half. One half of the long term fund deposits will go toward paying off our home. We currently send in a small extra payment but plan to increase that substantially once our two emergency accounts are funded.
3. Reduce your financial obligations:
Think about the products and services you consume. Are there any that you could live without such as cable or premium cell phone perks? If not see if you can live with reducing them in some form or fashion.
Review your cell phone service to see if you could be paying for services that you do not need.
Do you have a bank account that charges you fees for not maintaining a certain balance? Consider switching to a reputable bank that does not charge minimum balance fees.
Do you have an outstanding debt? Now is the time to start calling up your creditors to work out a repayment offer. Many companies are accepting as little as 30% off the original balance if you are able to pay in full.
Do what you can around the house to reduce energy cost.
4. Don’t accumulate any more DEBT:
This can be easier said than done. There are some things that we simply cannot avoid. You can’t do a thing about the motor going out on your only car, in the very same month that your refrigerator and washing machine decide to hit the dust.
On the journey to being debt free, these challenges will come as a testament to your determination. When this happens and you choose take out a small loan to take care of this emergency, will you give up on being debt free?
Try your best to do without instead of replacing some things. However, before you are financially secure things outside of your control may take place. Simply deal with them and get back on track.
If at all possible err on the side of doing without non-essential items such as a television or dishwasher, before charging your credit card in order to replace them.
Finally, make a commitment to subscribe to becoming debt free. Make it a priority in every financial decison you make. Each choice, concerning your finances, should move you closer and closer to financial freedom.