5 Super Tips That Will Keep You Out of the Red

Debt has got an ugly habit of snowballing into crisis proportions, leaving many consumers indebted beyond their means and more importantly with no clear sign of how to dig themselves out of the debt trap. Contrary to common belief you can live within your means, without feeling like a martyr or having to sacrifice the “joys of life.” Here are 5 tips that will keep you out of the red effortlessly.

1. Use a Debit or a Cash Card Instead of Credit Cards

The first and the most important tip to stick to is to stop using credit cards unless you can pay the balance owed immediately when the bill is due. Carrying a balance on credit cards, month to month, means you will pay much more in the long run. At times, this increase can add as much as 39% per year to your balance, which also accrues compound interest. Shocking, isn’t it?

The reality is that many purchases made using credit are wants and not needs. With today’s financial issues still rearing its ugly head, it is important to watch where your money is being spent. Eliminate wasteful spending like interest paid on credit purchases. Instead, move a predetermined budget amount onto a debit card that will be used to pay expenses. Many consumers find it much more difficult to spend money when they see their balances dwindling before their eyes. With that being said- keep careful track of your spending and eliminate unnecessary spending like eating out and unnecessary shopping.

2. Pay Yourself First

Ideally, you should save about 25-35% of your take home salary for that “rainy day” or for emergencies. Unfortunately, most consumers are not able to save that much or simply do not want to allocate so much of their salaries to savings; and then there are those who will save just a little something once they have paid all the bills and had their entertainment funded. The result is that they may never really see a significant amount of savings.

In order to correct this financial blunder, have your financial institution or your employer divert funds for savings before the money actually reaches your hands. Pretend that money does not exist. Learn to live off of the remainder of the money. Be resourceful and learn ways to live more frugally, in order to live fruitfully in the future. It is a small sacrifice today for a gratifying reward in the future.

3. Have an Alternative Source of Income

It really does not matter what your current profession, job, source of income etc., is today; everyone needs to have an alternative or second source of income. It really goes back to that saying “don’t place all your eggs in one basket.” As we have witnessed with the current recession, job sectors that once were regarded as having continued job security have seen countless layoffs and downsizing. There is no longer a guarantee that the job you have held for years will still be there in the future. Businesses have closed or downsized, companies have moved overseas to maximize their profits and employees are facing a much more difficult job market, with much more competition from equally qualified applicants. Having a second source of income allows you to supplement your primary income or even create a savings account that can be used for emergency purposes.

Use the internet to research possible streams of income. Use keywords such as “passive income;” “work- from- home; “second income” and so on. Be cautious when signing up for “work- from- home” programs. Read all the fine print and be realistic with what you are capable of doing. Do not fall for pressure tactics and spend the least amount of money possible until you can determine if this will generate a profit for your time and effort.

Unless you have a steady stream of people willing to buy things from you constantly- steer clear of MLM (multi- level marketing) and get rich quick schemes. Also, always remember if it sounds too good to be true- it probably is. It is much easier to create a second stream of income by selling home- made goods or cleaning homes, for example, than it is to get people to buy things they cannot afford or actually need like selling make-up or time- shares. Be bold but be smart, as well, when it comes to generating money.

4. Plan Ahead On Retirement Plans

When it comes to saving for retirement there is no such thing as “being too young” or “starting too soon.” Start as early as possible. Teach your children to begin saving their money for retirement from the time they get their first job. This is one of the most valuable tools you can instill in your children. Just imagine how much money you could have saved by now if you had begun saving for retirement when you got your first job.

Calculating at a modest rate of 3% inflation, the cost of living would be about double in 24 years of what it is today. Hence, the longer your money grows in a savings account or investment plan, the better your financial outlook will be in the future. Just $5 per day can become $100,000 in 20 years with a return of just 9% per year; in 35 years this would snowball to $440,000, and in 43 years this modest $5 per day, at 9% return, would flower into a $1 million jackpot.

5. Seek Financial Advice for Real Changes

In order to take full advantage of the financial advice you receive you must want to stick with the goals you have set. The above tips can only work if they are used. The best financial advice is only useful when implemented.

Having financial discipline is as much about the journey as it the destination. Saving for retirement may seem difficult at first but just as with most things in life- the longer you do it the easier it becomes. Saving money does not mean that you will be depriving yourself now or in the future. When you think of savings the equation is simple – plan, save, and invest over as long a period of time you can for the best financial returns possible.

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