Increasing savings and reducing debt are noble endeavors for many citizens, but procrastination may take over when it's time to make a commitment. The usual excuses are "you have to be rich and have a large take home pay to really start saving" or "I'm too old to start saving now." But it's never too late to start building wealth and reducing your debt to improve your financial health.
With the arrival of another year, taking steps to improve your financial health is a great way to kick off the New Year. With a little planning, discipline, patience, and maybe some outside help, almost anyone can reduce their debt and start building wealth.
Too much debt can be costly for families and individuals in many ways. For example, credit card interest and fees cost individuals and families over $75 billion a year on average. Families with revolving credit cards pay an average of $1500 a year on interest and fees. If a family saved that same $1500 with a five percent yield, in 20 years they would have nearly $20,000.
Taking on too much debt can also lower your credit score and you can end up paying higher interest rates on your consumer or mortgage loans. Low credit scores can even prevent you from getting a job, renting an apartment, or getting utility services.
The first step to get out of debt is to stop borrowing. Spending more than you earn is not a good policy. Making a budget is not only good for institutions but it's the tool we need to manage the funds that are in our control. Prioritize your budget by looking at your necessary expenses and eliminating those you can live without. This will call for some serious lifestyle changes, but discipline, planning, and patience will pay off in the long run.
When establishing a budget to reduce debt, determine if you can pay more than the minimum amount due, then consistently make payments on time. Once you have one debt paid off, don't yield to temptation by making a new debt. Instead take the money you were paying and save it. Setting a "savings" goal for your family such as putting money away for a home, car, or a new computer can build interest among family members to start a family savings plan. When the whole family participates in cutting back on expenses then it will not seem impossible to save because a goal is set that your family can achieve together.
Finding money to save is not as hard you think. Cutting soda consumption by one liter a week can result in a six-dollar saving in a month. Bringing lunch to work instead of spending three dollars for a sandwich per day can save sixty dollars a month. Saving and investing plans are available at many financial institutions. The U.S. Securities and Exchange Commission, Office of Investor Education and Assistance, offers the publication Get the Facts on Saving and Investing (Get the Facts: The SEC's Roadmap to Saving and Investing) that is road map to financial security. The Urban Center in Mobile County serves both Baldwin and Mobile Counties and has a limited supply of money management calendars that can be picked up at the Mobile Extension Office. Money management calendars are also available in Baldwin County's Extension Office and at local libraries.
References Consumer Federation of America. (Winter 2005). America saver. Retrieved January 5, 2005.
United States Securities and Exchange Commission. (October 8, 2004). Get the facts: The SEC's roadmap to saving and investing. Retrieved January 5, 2005.
Waddell, Frank. (Winter 1997). Money matters. Alabama Cooperative Extension System.