Thursday, October 13, 2011

Where to begin???

I'm sure you have heard all the debt and finance buzzwords: Snowball, Avalanche, Dave Ramsey, Suze Orman, Oprah?!

But before considering any of that you have to figure out where you are exactly.

Step 1:  Gather all those dusty envelopes and jump on in
     Make a list of all your loans, interest rates and minimum payments.

Step 2:  Download or Create a Debt Calculator Spreadsheet.  
     I am working on templates of my own, but in the interest of time and saving you money here is one available for free.  Click here to download
     This spreadsheet is great because it outlines two popular ways to tackle your debt.
  • Snowball - Paying off your loan with the smallest balance first.  You may pay more interest, but this can help if you are interested in reducing the number of individual loans you have.
  • Avalanche - Paying off your loan with the highest interest first.  This results in paying the least amount of interest, but can be a little disheartening if that loan has one of the biggest balances.
     Personally, I am doing a combination of the two.  My lowest balance has the second highest interest rate and for me I just want to see that loan G-O-N-E!

 Step 3:  Create a Budget
     Itemize your spending by Monthly Bills, Needs, Wants and Savings. 

     Here is my budget breakdown.
  • Monthly Bill Payments: Car, Insurance, Rent, Phone, and Student Loans
  • Needs:  Food, Household Goods, Gas and Doctor
  • Wants:  Netflix, Shopping, Hobby Supplies...
  • Savings:  Anything that is leftover, hopefully
     After deducting my monthly payments from my take-home pay, I outlined a budget for my monthly spending.  

Step 4: Track Your Spending
     I have two methods and they seem to compliment my lifestyle very well.
  • Good old pencil and paper - I carry a pocket notebook everywhere!
  • -  a free, easy and secure way of tracking all of your financial accounts in one location.
    • Monitor accounts, set budgets, track goals, bill reminders, shop for car insurance and so much more. 
     Pencil and paper is great because you are constantly paying attention to your finances, every purchase is immediately reflected in your balance and it's instantly available at your fingertips.  I use this to track my daily spending of items like food, gas and shopping.  Though sometimes life just gets ahead of me and I end up losing track of everything.  That's where Mint comes in.  Mint is always on top of it, constantly tracking my spending even when I'm not.  I love the tools and visual charts this website has to offer.  When you view your finances in different ways you might see a few shocking and unexpected surprises.  I, for one, was in disbelief to learn that my car expenses for the year rivaled my housing expenses.  Ay yi yi!

Happy Budgeting,

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