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91 Comments
- praisethelard, on 06/06/2008, -1/+45Basically, don't buy what you can't afford.
- rkingucla, on 10/11/2007, -2/+35not easy to read, but....
1. Don’t get into debt. Use cash for all your purchases and don’t take on any debt except home and auto.
2. Spend less than you earn.
3. When debt is closed out, put 60% in savings and enjoy the remain 40%.
4. Take stock of all your liabilities, so you know exactly how much you owe to the world. Put them in a spreadsheet, with monthly payments, interest amounts, balances, and a running grand total of all your balances. Update it monthly as you pay off debt, and watch the overall amount go down slowly. It’s very motivational.
5. Have only one credit card with a low limit, and only one loan with monthly payment not exceeding 25% of income.
6. Build up an emergency fund first. If you come into extra money (tax returns, etc.), use it to build an emergency fund and pay off debt after that.
7. Cut up your credit cards.
8. Speak to a credit counseling service to help work out a plan: your “must pay” outgoings, arrange with creditors to freeze interest and accept a revised monthly payment.
9. Stop using credit cards to make it to the next paycheck. Stop getting further into debt.
10. Don’t overpay your debts — leave enough so you have enough for regular expenses too.
11. Avoid eating out. Cook your own meals, except on very special occasions.
12. For entertainment, visit friends and be creative on how to entertain yourselves and your family without spending a dime.
13. Don’t pay off your credit card balance from the emergency account. Don’t touch the emergency account at all — it doesn’t exist!
14. Look for expenses coming up in the future and plan for them, so you don’t have to go into debt when they come up.
15. Make a budget - Purpose every dollar (including some buffer).
16. Snowball the debt - Pay minimums on everything, attack the smallest balance with all the extra cash you can assemble, then move on to the next one.
17. Be on the same page as your spouse or partner. Competing interests are suicide.
18. Recognize your spending tendencies (and your family’s) and place limits on them. Develop good habits instead.
19. Read Dave Ramsey. Read “Your Money or Your Life”.
20. Keep trying and don’t give up. Make a commitment, and if you aren’t getting out of debt slowly but surely, revisit that commitment. Change is difficult and it takes drastic change in mindset and behaviors to get out of debt. Anyone can do it - as long as you really want to do it.
21. Stop spending! You have to really, truly want to do this. Otherwise, you’ll put yourself on a financial diet and then crash and burn and find yourself justifying why you deserve to spend so much money on a new iPhone when you have a perfectly good phone and $20,000 in debt.
22. Praise yourself for every small accomplishment. But, don’t praise yourself by spending frivolously.
23. Find the tools that work for you and stick to them. If the tools aren’t working, find new tools. There are plenty of tools and ideas out there - for free.
24. Change yourself. If you have a spouse or partner that is contributing to the debt, it can be a big challenge to get them to change. Focus first on changing your behaviors and attitude.
25. Be realistic. If you started accumulating debt three or four years ago, realize that it will probably take you more then three or four years to get out of debt and stay out of debt.
26. Create a realistic budget. Put as much money as you can towards paying down debt and having an emergency fund, but allow for a little bit of. Only the truly dedicated can live with no social/recreational activities for the amount of time it takes to become debt-free.
27. Eliminate. Take a hard look at what’s truly necessary, and be willing to make compromises. Cable TV, satellite radio, and lunches in the office cafeteria are not necessities. If you have a hard time letting go of these things, run your numbers through a debt calculator twice - once with your current budget, and once with additional money currently paying for niceties. You’ll be amazed at how much of a difference those few extra dollars make.
28. Get creative. If there’s something you think you don’t have time to do more frugally, find a way around it. For example, cooking at home is much cheaper than eating out. If you don’t have time to cook, try investing in a crock pot.
29. Be patient. Debt reduction is a long, slow process. Depending on the method you use, you may see no significant progress at first, but it will happen.
30. Stop borrowing money - no matter what! This means no more credit cards, no more car loans, no more cash advances, no more home equity lines, etc. If you can’t afford to buy something with CASH you have now, then YOU CAN’T AFFORD TO BUY IT.
31. Save up the money and buy it with cash. By the time you’ve saved up the money, it’s very likely you will have realized you don’t even need the item you were thinking about buying anyway. This happens all the time.
32. Track your expenses in a software program like Quicken. Categorize your expenses and report out how much you spent in each category so you can easily spot your problem areas (eating out, clothes, gas), then target those for reduction. Always know exactly how much money you have in your checking account.
33. Maximize your 401K contribution. Every time you get a raise, increase your contribution by 1-2% because you won’t miss the extra money if you don’t ever see it.
34. Pay yourself 10% first. Put this into an account that is hard to touch. A money market account can earn good interest. Make sure it is a chore to get the money out (you have to drive to the bank), so you will only tap it consciously and for major expenses.
35. Make a plan … ANY plan. You’re better off with a mediocre plan than no plan at all. When in doubt, the “snowball method” is simple and works well.
36. Leave yourself some “wiggle” room. Life throws some unexpected expenses your way, so include some slack in your plan for these little setbacks.
37. Have a long range vision. Keep your eyes focused on where you will be five (or ten, or fifteen) years from now, because getting out of debt takes time.
38. Turn off your television, and discard catalogs and other advertisements immediately (but not coupons!). Do this, and your urge to buy stuff you don’t need will plummet.
39. Move into a smaller place. Forcing you to get rid of a lot of stuff that you’re probably still in debt for will show you just how little any of it matters.
40. Find your purpose. Is it your children, to start your art business, work from home, free money so that you can give? Finding motivation beyond the money drives our passion. Otherwise our drive is limited. This passion will lead us find out the ‘right’ things to do like stop borrowing, creating budget, etc. Take a look at the things you value deeply and view that framework to judge your actions buy.
41. Examine your expenses and eliminate the unnecessary. Thing about gym memberships you’re not using, cable TV, Netflix, other types of subscriptions and see which are least necessary.
42. Got a raise coming up? Bookmark it. Pretend it didn’t even happen, and funnel all of the new money into the debt relief.
43. Focus on the debt and getting out of it. Not focusing and humming along on credit is what gets people in trouble every time.
44. Change how you think of money. Calculate how much money you make (net) per hour. Do this regardless of whether you are a business owner, salaried or hourly employee. Now apply the time factor to any purchase you make. For example, is that 32″ flat screen television you’re thinking of purchasing worth 10, 20 or 30 hours of your time. Once the dollar amount was removed from the equation and the time factor applied, spending habits can change overnight.
45. High interest. Pay off the cards with the highest interest first.
46. Balance transfers. By transferring balances on credit cards, you can consistently pay an average of 4%. One thing to look out for is transfer fees: make sure that the fee isn’t greater than the interest you would save.
47. Optimize small long-term advantages instead of large short-term payments — for example, go for the difference between 8% and 6% on a note, or cancel satellite TV and save/invest/pay debt with the difference.
48. Educate yourself on your alternatives. Sometimes we spend a lot on things because we assume there are no alternatives. Is cooking at home as bad as you think? What about ten-year-old cars? Roommates? Cheaper parts of town? Thrift stores? Libraries? Bicycling? Wearing a sweater and fuzzy slippers inside in the winter so you can turn down the heat? Ask questions, do some experimenting, do some research. Find your biggest expenditures and do some brainstorming and some googling.
49. Think about your goals. The author of The Tightwad Gazette was willing to work harder to save on food, clothing, and entertainment so she could spend more on housing, have more kids, and let one parent stay home with the kids. Quit spending money on stuff you don’t care about.
50. Pay attention to whether you’re buying stuff just because of societal norms or parental expectations or keeping up with the Joneses. Hang around people who are the way you want to be so that peer pressure can be used for good instead of evil!
51. Pay more than the minimum.
52. Make it a habit. You’ll be very happy when you have some extra spending/saving money after your payments stop.
53. Think about wealth rather than debt. If you think “I’m going to get out of debt” you will keep thinking about debt. If you think “My financial situation will contribute to my overall wealth,” that thought can keep you going.
54. Extra cash. When you make extra money from overtime or bonuses, use it to pay debt.
55. Debt slavery. Realize that (almost any) debt = slavery. If you don’t mind debt, why get out of it?
56. Read personal finance books, publications, blogs. Self-development blogs like this Zen Habits are also great.
57. Think positive. Telling yourself “no” stinks, choosing to not go on vacation stinks, looking around and feeling like everyone else has more money than you stinks, even if you make a good chunk’o’change. Instead think about how each month you owe $1 less is a good month.
58. Pay off your smallest debt first to get the momentum going. Some people go by the rule to pay the highest interest ones off first, but others like the rush from paying a card off completely and closing it. It’s a great motivation to continue.
59. Be willing to make sacrifices. Remember, you own things. They do not own you. We had to sell one of our cars and get a “beater” but this was the best move we could have made. It was so empowering not to have a car note hanging over our heads.
60. Put a note in your wallet with this text: “DO I REALLY REALLY NEED THIS?”
61. See yourself as completely debt free. FREEDOM! What is that gonna feel like. Imagine it.
62. Use supermarket fliers and plan menus for the week, clip coupons, and put the amount of money you save from coupons each week into a savings account.
63. When you make your budget, be honest. Make sure you budget for gifts, entertainment and whatever other things we all spend too much money on and don’t like admitting.
64. Find free or low cost entertainment. Check the local newspaper, or look online and see what upcoming events are going on. Many towns have free concerts in local parks, the local libraries often have fee arts and crafts classes, get a state tourist guide and see what’s going on in your area, and be a tourist in your own town.
65. Be creative. Learn to paint or refinish hand me down furniture, or sew curtains and pillows. I have been reading DIY blogs and gotten some really great ideas for my home.
66. Start a garden. Grow tomatoes, peas, beans, and herbs in pots if you don’t have a yard.
67. Make more money. Sometimes you can only stretch your current income so far. But how can you start an online business, without spending a lot of money? And without your own product? By selling other people’s products - as an affiliate.
68. Educate. Above all else, teach your children early so they don’t make the same mistakes as us!
69. Create a balance sheet and update it every month. List your assets on one side and your liabilities on the other. Assets should only include things you can easily sell and there approximate value. Liabilities should include all of the money you owe others. If your starting value is negative your goal should be to make that number smaller every month. If your number is positive your goal should be to make that number larger every month. The real value of this exercise though is it puts you in the habit of checking your financial situation every month which will reinforce habits that are increasing your wealth and hopefully allow you to catch and stop habits that are decreasing your wealth.
70. Credit documentary. Watch the PBS documentary about credit card companies. Get mad, really mad and start hating the credit industry. They are enabling you to do some terrible things to yourself. Cut up your cards and pledge to never use them again. It is a form of slavery.
71. And another. Another movie that looks critically about credit cards is MaxedOut.
72. Oprah. Great advice on Oprah’s Debt Diet along with great forms to help you find out where you are and plot a course out.
73. Read the book: How to Get Out of Debt, Stay out of Debt and Live Prosperously by Jerrold Mundis. Once you’ve read it, read it again. - justelite, on 10/11/2007, -0/+15I like 68 "Educate. Above all else, teach your children early so they don’t make the same mistakes as us!"
- vikingcoder, on 10/11/2007, -4/+18That includes server hosting that can withstand being dugg.
- McGrude, on 10/11/2007, -1/+14#74 Don't write a useful article that is submitted to Digg if your web hosting site charges per bytes transferred.
- j4son, on 10/11/2007, -2/+12What about people who have student loans?
- stronglikedan, on 10/11/2007, -3/+1174) Don't throw your money away on cheap hosting.
- JimXugle, on 10/11/2007, -1/+9Debit cards work just like credit cards at every website and retailer that I've encountered, except that you have to have the money beforehand. There's no reason to have the temptation of a credit card in your wallet.
- MrSketch, on 10/11/2007, -0/+6@j4son: "What about people who have student loans?"
Student loans are considered 'good debt' like a house mortgage. Student loans are an investment in yourself, meaning that you would not have the skills/knowledges you have today without the debt. The assumption is that you will be able to apply those skills/knowledge into income to pay off your loans. Typically 'debt' refers to 'bad debt' like credit cards and car loans, so don't let student loans stress you out. - madgamer, on 10/11/2007, -3/+8#74: add a bandwidth quota to your hosting plan so you don't get charged by the balls when you get dugg.
- elebrio, on 10/11/2007, -1/+6You should always pay off high interest debt first regardless of the size of the liability. It's the fastest way to start saving money. (amortization period aside)
- harksaw, on 10/11/2007, -0/+5"don't take any debt besides home and auto"
This is terrible advice if it advises anyone to take out a car loan. Generally it's a bad idea to borrow money to spend on anything that will depreciate, and cars depreciate FAST. - houndeyex, on 10/11/2007, -0/+5Dugg for saying not to get an iPhone in the example.
- andy3109, on 10/11/2007, -0/+4"10. Don’t overpay your debts — leave enough so you have enough for regular expenses too."
Kind of disagree. The faster you pay that debt off, the faster the stress will disappear. Try instead to eat less, shower less, etc. It's the little things that add up. - Wargalas, on 10/11/2007, -2/+6Pay off your smallest monthly payment first. Take that payment and put it towards your next smallest payment. Once that's paid off, take those two previous payments and put it towards the next smallest payment. It snowballs until you're debt free. It requires a bit of discipline, but it can be done and it does work. It worked for me.
- Barbarino, on 10/11/2007, -4/+8The best tip not on that list
www.daveramsey.com
The guy knows what he's talking about. - falstaff, on 10/11/2007, -0/+4I'm not a big fan of #16 (pay off small balances first). It might work better on the psychological side (seeing your number of bills decrease), but you'll be better off in the long run if you start by getting rid of the highest interest rate debts.
- elebrio, on 10/11/2007, -2/+68. Speak to a credit counseling service to help work out a plan: your “must pay” outgoings, arrange with creditors to freeze interest and accept a revised monthly payment.
Credit counseling is a SCAM. Anyone that tells you otherwise is selling you something. Namely Credit counseling. - TheKricket, on 10/11/2007, -1/+5it sounds like a LOT of these tips are VERY sound - however, you want to make sure your credit doesnt take a nosedive:
"5. Have only one credit card with a low limit, and only one loan with monthly payment not exceeding 25% of income."
"7. Cut up your credit cards."
credit cards are not the devil - you just have to make sure you use them wisely - in fact, if you have a bunch of credit cards with very HIGH limits, that can be a VERY good thing, provided that you don't go using them every chance you get (dont max out your damn cards)
imo, having just ONE card with a LOW limit means theres a very slim chance youll get yourself a good home/auto loan rate - sure, paying off a house or car in full would be fantastic but, lets face it, there are VERY few people in this world who can afford to do that
being in debt is not a good thing - but in this day and age, how many people can go through life without any debt (that is, if you ever plan on owning your own car or your own home)? unfortunately, at least here in the states, your credit is a HUGE part of your life - its all about the debt to income ratio - keep that under control and everything else falls into place... - MatthewTheRaven, on 10/11/2007, -1/+4There's really no such thing as "good debt". There is bad debt and what might be considered acceptable debt. I think these would include a home loan and possibly student loans.
Car debt is strongly in the category of bad debt. There's basically no larger investment that most people will make that loses value so quickly. And there's nothing worse in that category than buying a completely new car. By the time you get it off the lot, it's worth 2/3 of what you paid for it. Leasing is generally a ripoff too. - nitsuj, on 10/11/2007, -0/+3"You might think that, but no. Pay off the smallest balance first, then you have one less payment per month."
Do the numbers. It might make you feel better because the debt seems to be vanishing but over time you'll pay more in interest on the larger amounts of debt. Throughout the time you're paying off the smaller debt, the larger debt is costing you.
Unless that is, your debt is held on interest free. - PillowFight, on 10/11/2007, -0/+3http://www.salon.com/ent/video_dog/comedy/2006/02/06/debt/index.html
Ha! - MatthewTheRaven, on 10/11/2007, -1/+4The problem with paying off debts with the highest rate first rather than the smallest debts first is human nature.
If the debts are similar, of course it makes sense to pay off the highest rate first. But if it will take a lot longer to pay off the higher rate, then you're in a position where it takes a lot longer to get a 'win'.
On the other hand, it feels REALLY good to actually pay something off and the faster you can do it, the better. This gives you motivation to keep moving.
The same way people rarely have the willpower to lose weight, they also don't have the willpower to pay off debt. So the mathematically correct way isn't going to work as well as the 'human nature' method for 90% of the people out there.
Oh, and I paid off $20k worth of debt this way during two years when I made under $30k/year and while not living at home or anything. - SQUIDwarrior, on 10/11/2007, -0/+316. Snowball the debt - Pay minimums on everything, attack the smallest balance with all the extra cash you can assemble, then move on to the next one.
51. Pay more than the minimum.
These seem contradictory. I agree with #16 wholeheartedly. Getting a whole card paid off quickly by attacking you smallest balance is a huge confidence booster. Plus it simplifies things because now you have one less payment to juggle. Also, I think you should add one:
74. Set up all your debt payments to happen automatically via electronic transfers and structure one payment to pay off your smallest balance first. Then don't think about it until it's paid off. Then start again. - speedeep, on 10/11/2007, -1/+4The Dave Ramsey method works and "feels good", but how about paying the debt with the highest amount of payment going to interest first, to minimize your bleeding while paying off your debts? You won't get the immediate gratification of paying off a small debt quickly, but you'll minimize the amount of money you waste on interest and you will (mathematically) pay off your debt sooner. If you're going to be disciplined about paying off your debts, might as well take the shortest route.
MS Money, Quicken, or Gnucash can help you optimize your payments to pay off bills in the most efficient manner, taking into account your balance, the interest rate, etc. You can setup to plan out $xxx per month, then adjust when you've got an extra $yyy and these programs will help you allocate your money towards your bills to pay them off in the shortest amount of time. - thcobbs, on 10/11/2007, -0/+31.) Spend less than your get in income
- DynamiteMonkey, on 10/11/2007, -0/+21. Stop buying ***** you don't need.
Amazes me how few people understand this concept. - gametavern, on 10/11/2007, -1/+3that didn't take long. bandwidth= dead.
- elebrio, on 10/11/2007, -2/+4Some of these are just BAD. Like this one...
Have only one credit card with a low limit, and only one loan with monthly payment not exceeding 25% of income.
You NEED three good trade lines. If you don't have them good luck getting a house financed. - ronmexico, on 10/11/2007, -0/+2I couldn't agree more, ignore the rest of this list, read Dave Ramsey or if he's on the radio in your market tune in.
- xmkatx, on 10/11/2007, -0/+2I really need to do this.
I'm about 50K in debt T_T - mkrygeri, on 10/11/2007, -0/+2A lot of these tips contradict themselves. Payoff the smallest dept 1st and pay off the highest 1st were most obvious to me.
If I owe 15K@30% and 3K @8%, I pay on the 15K.
also, having strong credit can help. DO NOT close credit accounts once they're paid off. it could hurt your score - mailman-zero, on 10/11/2007, -0/+2His site looks like crap in firefox, though.
- MatthewTheRaven, on 10/11/2007, -1/+3Go out and get a secondhand copy of Dave Ramsey's "Financial Peace" or "The Total Money Makeover". Ignore any religious mention if that's not your thing and take to heart what he says about finances. You could have that 50k paid off in a few years, easily, if you're willing to work extra and cut your lifestyle.
- swankboy, on 10/11/2007, -0/+274. Stop wasting your time reading 73 item lists that could have 10 item lists. Use extra time to make more money and buy the things you want and enjoy your life.
- rowlodge, on 10/11/2007, -0/+2thats for schizophrenics...just forgot the medication to take for it. ...antidepressants?
- Barbarino, on 10/11/2007, -2/+4You don't need debt to have good credit or to get financing, it's a myth that sucked you in. FICO=SCAM!
Take your FICO score and throw it out the window, it's meaningless. You can have any loan manually underwritten which all banks do. CRA and banks have the FICO to dupe you into spending more money.
Rent the movie Maxed Out or just listen to Dave Ramsey and you'll see you've been suckered. - Streyeder, on 10/11/2007, -1/+31. Listen to Dave Ramsay on AM Radio.
2. Listen to Clark Howard on AM Radio.
3. Do what they say.
4. Become rich. - KenOh, on 10/11/2007, -0/+2This stuff like like dieting/weight loss advice. It can all be boiled down to one sentence: Don't spend/eat so (%*&ing much.
- MatthewTheRaven, on 10/11/2007, -0/+1You should probably go the money market route (~5%), but the idea of having the $1k first is so you don't run into situations that get you MORE into debt.
If you can pay for the new tires you need outright, rather than financing them on that same 29% card, you just saved a LOT more money. It's well worth it to take the time to have that initial emergency fund. - jmz668, on 10/11/2007, -0/+1Ramsey is a simpleton, really. Listen to his show.
- thumperings, on 10/11/2007, -1/+2basically "don't get yourself into *****' debt!"
Gee..
why didn't i think of that!? This guy is a genius. - kingyubba, on 10/11/2007, -0/+11. start a group of space monkeys with your split personality.
2. plot to destroy the headquarters of the various credit companies.
3. boom.
4. profit. - bdbr, on 10/11/2007, -0/+1Well, he did mention about getting a 10-year-old car to save money. I think the point he was missing was to put your money where it grows, and conversely, avoid (as much as possible) putting it where it disappears the fastest. That means paying off the high-interest stuff, and spending as little as possible on the things that depreciate quickly.
Probably the best move with a car is to keep it as long as reasonably possible. You lose money every time you sell one and buy another. - viviwanu, on 10/11/2007, -1/+21. Get rid of the Federal Reserve!
- ronmexico, on 10/11/2007, -0/+1Anyone who listens to Dave Ramsey doesn't have to worry about this list. He's the man.
- ronmexico, on 10/11/2007, -0/+1He's #19 on this list. That's the only one you need to know!
- MatthewTheRaven, on 10/11/2007, -1/+2Credit counseling is definitely a scam. Go to them and for purposes of getting a house loan, you will be treated as though you had a bankruptcy.
And you do NOT need any credit lines whatsoever to get a house loan with competitive rates. Pay your bills on time and look for manual underwriting and you can absolutely get a house loan. - inactive, on 09/05/2008, -0/+1Die. My buddy in college had like five credit cards maxed out when he got in a boating accident.
- elebrio, on 10/11/2007, -1/+2Ya you can use what are known as alternative trade lines, but it's a hell of a lot harder to get it through, and unless everything else in your file looks absolutely perfect (as in huge liquid assets and ridiculously low debt to income ratio) you aren't going to get the same interest rate as someone with 740+ credit and great tradelines.. I've done tons of them. So sure you can still typically get a loan but should you do it like that? NO!
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