How To Get Back On Track When You’re Broke
It can be hard to stay afloat in the month of December. Your outflow always seems to exceed your inflow of cash this time of year. There are presents to buy, travel costs like airline or hotel stays, office parties that require Secret Santa gifts. All of which can cause you to go broke.
If you went a little overboard this holiday season and are now broke and in debt, here are some ways you can bounce back quickly.
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To avoid immediate disaster prioritize your bills. Make a list of everything that must be paid first. Put your rent or mortgage payment at the top of your priority list. Work your way down in descending order. Put the bills at the top that most affect your way of life; rent, utility bills, car payment. Put bills like cable and phone bill towards the bottom as the least important. You can live without cable, you can’t live without a place to stay.
If you’re worried about not being able to pay all of your bills call the companies and ask for extensions. These requests are often granted. Ask the companies you call how much you need to pay now to keep your service running. Explain to them you are catching up on your holiday bills and going on a stricter budget. Set up a payment schedule with them based on your pay days.
Every time a bill arrives in the mail or your inbox open it immediately. Mark when the bill is due and for how much on a calendar placed in a high traffic area of your home like the kitchen. Doing this will help you stay on top of your bills and avoid costly late fees. It has the added bonus of showing you how much spending money you have each week.
If you’re low on cash the best thing you can do is cut expenses. Start by cutting things that won’t impact your daily life as much. Finally get around to calling a number of car insurance companies to get quotes. Switch your insurance to the cheapest one or cut down on the amount of coverage you currently have. You can increase it again once you are back on your feet.
If you get premium channels like HBO or Showtime cut them off for the next couple of months. Or cut the number of rooms you have cable boxes in. Take them out of the guest bedroom and other rooms, limit TV to just the family room.
Adjust your thermostat to 68 degrees during the day and 55 degrees at night this winter. According to consumerenergycenter.com for every degree you lower your heat you’ll save up to 5 % on heating costs.
A lot of people don’t believe this will result in any real savings. A common misconception is that your furnace has to work harder than normal to warm your house back up after the temperature has been lowered, resulting in little to no savings. While in fact, as soon as your house drops below its normal temperature it will lose energy much slower. The longer your house remains at the lower than normal temperature, the more energy you save, because you lose less energy than you would have at the higher temperature.
Another way to get back on track is to make reviewing your credit card statements each month a priority. Do it as soon as they arrive. Depending on your cash flow you might only be making minimum credit card payments in December and January till you’re totally caught up. You are flirting with disaster if you do this. For example suppose your credit card balance has reached $1,000 and your minimum payment is $40. If you miss the payment altogether you get charged a late fee of $35 and your interest rate ratchets up to somewhere around 25%. Even if you make your minimum payment your interest rate on future purchases goes up.
Neither of these scenarios is good. If you have good credit, call your credit card companies and ask for a reduction on your interest rate. These companies want you to keep using their cards so they can be somewhat flexible. These companies aren’t going to reduce your rates on their own so don’t be afraid to call ask.
Another tactic you might try is to separate your money into two accounts. Make one for your basic living expenses like rent, groceries and utilities. And make the other account for your spending money. You’ll never overspend when you use this strategy. Figure out how much money you need to cover your monthly fixed costs and when payday comes take that amount out of your check and put it into your basic living expenses account. Depending on where you work your HR department might be able to split your check into the two accounts for you.
If you’re loathe to go this far, you can simply use business envelopes to separate your money. Use your current bank account for the basic living expenses and take out only what you know you can spend. Place that amount in an envelope. Divide whatever amount you put in the envelope by four and that equals your weekly allowance. Don’t go spending it all in one place, because when you run out of money in the envelope you are done going out and spending till your next payday.
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If these cuts and tactics aren’t enough your only other alternative is to increase your income. Everyone who has climbed their way out of debt will tell you they did it by not only reducing spending but increasing their income as well. I strongly encourage you to read this Friday’s League of Power article. Mark Charles writes the Weekend Business Blueprint and illustrates a new income strategy each week. Every opportunity is 100% legitimate. The letters are designed to give you actionable advice so you can start making money that very weekend.
Good luck and happy holidays.
Keeping Money In Your Pocket,