Finances Raising Your Blood Pressure?

So every day you turn on the television and hear more bad news about the economy… the stock market is at record lows, the rate of unemployment is rising, large companies are going out of business and mortgage foreclosures are steadily climbing. In this time of economic crisis we are all asking ourselves “Will I lose my job? How will I pay my mortgage? What should I do?”

Girlfriends – the answer is simple, you should work on paying off as much debt as possible while simultaneously saving as much money as possible. I invite you to join me in this debt free, cash saving journey that we can call “Project Get out of Debt.”

The goal is to reduce the amount of required monthly cash outflow while simultaneously saving extra cash, so that if (God forbid) you were to lose your job, you will have a lower monthly outflow and enough cash on hand to pay that outflow.

Step 1 - Stop 95% of All Your Discretionary Spending.
While it may be painful at first, you will quickly learn that you can do without that new pair of shoes. With all the money you are saving by reducing your discretionary spend, save 50% of it and make an extra payment on a credit card, your car, school loans or second mortgage (whatever has the highest interest rate). Note that we have still allotted 5% of discretionary spending so that you can go to the movies or out to dinner.

Step 2 - Cut Services You Don’t Need.
Do you really need that lawn care service? Do you watch all the premium cable channels? Do you use all 3000 cell phone minutes? If not, then cut them. This simple task of getting rid of excess you are not using is a good way to save a few extra bucks while not really feeling a loss.

Step 3 - Review Your 401(k) and Other Long Term Savings Contributions.
Generally, if you think you are in jeopardy of losing your job or you need more cash to pay off debt quicker, you may want to think about reducing or temporarily stopping your contributions to your 401(k) plan or other long term savings plans. Whether this is or is not the right decision for you may depend on, among other things, your salary and age. I would encourage you to visit with your financial planner before taking this step.

Step 4 - Create a Budget.
If you have a budget it is easier to stick to the plan.

Step 5 - Pay off Debt and Save Cash.
I can’t say this enough – pay off your debt and save some emergency cash. Just think when it is all said and done with you could be debt free with a nice nest egg.

Girlfriends, these are scary times, but we will all get through this – hang in there. Remember, control your finances, don’t let your finances control you!