Apr
Seriously, I make $50K a year (far from being a millionaire but more than most people in my, and many other, communities). I know it's me, but I simply canNOT manage to have my bills paid and ever have money for anything. I have two grown kids, never had a lot of stuff. We always lived in crappy apts. I am over 50,000 in debt to collection agencies for everything but we have nothing to show for it, no nice furniture, no great clothes, rarely eat out, never vacation, etc etc. Why am I like this? It's terribly depressing. My sister and BIL support twice the people on 30K/year and never owe. I haven't paid my taxes in 3 years 'cause I've just become overwhelmed. Anyone out there had this problem and been able to fix it?
Answer:
If you can't live within your means, you need to FORCE yourself to live within your means. There's a few tricks and strategies you can use that I find useful.
First of all, you're working. Go get another bank account. In your case, I recommend a Christmas Club account or some other variety of account where the money is tied up and you can't access it easily. If you can't get a Christmas Club account, get a passbook account at another bank that is really hard to access. One that is across town and closes before you finish work would be good. Do not set up phone or internet banking on this account. This is for savings.
Next, get your employer to put at least 15% of your income into that account. That's $7500 a year. If it's earning interest, it'll get a bit more. The important thing is that you've now reduced your available income by 15%. After a few weeks/ months something bizarre will happen. If that's the only money you've got available (no credit cards etc) then that's all you'll spend. Your spending will adjust. It takes a few pays to get used to it, but it works.
That money isn't 'savings' yet. That is to clear your debts and back taxes. That's why it's 15% of your income. If possible, set up direct debits from that savings account to your debts, so that they get paid.
You need to treat money as a tool. Learning to manage money is like learning to get dressed before you go out to the mailbox. Most people wouldn't think of going to the mailbox naked. So treat your spending like a behaviour you can change.
Cut up all your credit cards. You don't need them. Admit to yourself that you cannot manage debt, and then reject debt. You don't need it in your life. Misuse of credit is the cause of your suffering, so reject that cause. Make a commitment never to use credit cards or loans again. The ONLY exception to this would be a homeloan, but that's probably a way off in the future from your present position. However, if you want to buy a home, it IS possible. You just need to kill off your debt and start saving.
Now, to pay off the debt, work out all the interest rates of all the debts you have. Then, pay the minimums on all the debts, except the debt with the highest rate. Pay extra on that one. Do this until the highest interest rate debt is clear, and then attack the second highest interest rate debt in this way. This is the most efficient way to clear debt. You pay the least amount of interest doing it this way, and it's faster.
My guess is that you've used debt to buy lifestyle — take away food, entertainment, stuff you didn't really need — and that's why it's hurting you. Your debt burden is eating up your income. You need to attack the debt burden and get it under control in order to get more disposable income, which you should commit to saving and investing. A rule of thumb is that you save at least 10% of your income. I save more than that by tipping extra into my homeloan and other savings. I earn half what you do and I'll have my home paid off in 5 years.
You can clear this debt without consolidation or any other help. By putting some away, you'll get used to living on less. I recommend you bank any pay rises with the rest of your 15% savings. That way, you'll get used to the same income, and you' be maximising your savings.
Go to your local library and check out the books on personal finance. They're full of strategies for getting in control of debt and spending.
Best wishes
Answer:
speak to a credit counselor (CCCS) to check into consolidating some of your debt. Cut back on some other expenses too. Combined my husband and I make about what you do plus we are going to school. We have both had a rough patch but we cut back on phone, cable, and some of the other luxories. Groceries also… there were a couple of months that we had to eat only Ramen noodles everyday, and one good meal every third day.