I'm going to refer to the cycle of revolving debt and moving into the wonderful world of financial freedom to preparing a sandwich. The two are markedly different. But, using this association should make these steps easier to remember.
Materials Needed : receipts; notebook; checkbook or bank statement; your imagination.
1. STACK
Stack up all your debts starting with the smallest debts with the highest interest and moving to the largest debts with highest interests. You can add them up for fun too.
2. CUT
Become an overspending detective, fond of deals, and angry with advertisers. Take your receipts and checkbook or bank statement from the previous three months and separate your spending into two distinct categories of necessary and unnecessary expenses. Cut your unnecessary spending and use it to pay down your debt faster.
3. SHARE
Now, when you cut a sandwich you can share it, right? Now it's time to share the wealth. And, you can do this on your way to paying off your debts. Invest.
ADDITIONAL TIPS:
* The reason you start with the smallest debts is to build your confidence as you go along. After you have paid off a small debt, you feel a lot more empowered and motivated to knock out the next one. I can not stress enough how having the right attitude towards your debt changes everything. You can not afford to be nonchalant about your debt when it is the single enemy standing between you and your financial freedom.
* Unnecessary spending can be anything that you do not need to buy from month to month. This includes gifts, fast food, car washes, clothing ... Take up a new hobby of looking for ways to save on things that you buy and do regularly. Keep that notebook, the one that you're using to track your monthly or weekly progress in, with you where you go, and demand your brain to come with creative ways for you to save even more. Write them down immediately.
* Cut up the cards. If you have more than one credit card, chances are you spend more than you make and have more debt than assets. Do this step ONLY If you are serious about becoming debt free.
* Many people are afraid to invest because they do not know what they are doing. Here's a simple answer: find an investment club or investor in your area or online. Learn from someone good at it. It's okay to make mistakes, that was Warren Buffets route to investing greatness. Interest can be your new friend.
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