Content provided courtesy of USAA
Just because you can borrow money doesn't mean you should.
"That's not what our consumption-oriented society wants to hear," says JJ Montanaro, a certified financial planner at USAA. To make matters worse, a growing number of households are getting deeper into debt.
However, with the right plan, it's possible to become financially fit and ready to meet life's challenges. These five tips may help you lower your reliance on credit and put you on a path toward financial freedom.
Make a plan — and stick to it.
Make a budget, and don't spend money unless it's in the budget. Get a plan together to assess, avoid, and attack any debt you have.
Know what you owe.
Review all your statements and highlight current balances, interest rates and minimum payments due. Decide on a plan of attack by focusing on the highest interest rate debts first. Communicate with creditors if you are past due or are close to being past due on any bills.
Establish an emergency fund.
If you're working hard to get out of debt, you don't want to let something beyond your control mess it up. Start by setting a goal to save $1,000 before starting to pay off debt. Your ultimate goal should be to have three to six months' worth of living expenses available in savings in case of an emergency.
Find extra cash.
Until your debt is paid down, consider what services you can cancel or items you can sell. A penny earned can be a penny that fights debt. Put any extra cash toward your shrinking credit card bills or loans.
Digging out of debt can be a major undertaking and that may mean you need to enlist the help of others. Financial counselors at your military installation or organizations affiliated with the National Foundation for Credit Counseling may be able to help you get out of debt and stay on track. You might also consider sharing your plans with a friend or family member and ask them to hold you accountable.