Get Out of Debt! Book Two

Finding Money to Reduce Expenses

David Rye, Marcia Rye

• Publisher: Adams Media
• Year: 2011
• ISBN:
  9781440535871
• Topic: Desarrollo personal
• Subtopic: Finanzas personales

As tens of millions of people have discovered, debt can be a crushing burden. It can tear down dreams and destroy lives. But debt can be avoided. With fiscal discipline and a clear plan, anyone can get out of debt and live debt-free.
In the easy-to-read, accessible style of the Get Out of Debt! series, authors David and Marcia Rye explain how to:

• Assess debt problems
• Use home equity to get rid of debt
• Cut college expenses
• Live within a budget
• Understand bankruptcy law
• Stay out of debt

No one has to live in the shadow of financial insecurity any longer. When the economy takes a turn for the worse, it's essential to get out of debt. With this series at your side, you'll conquer debt and secure the financial future you deserve!Be sure to get all four books in the Get Out of Debt! series.

Chapter 1
PAYING YOURSELF FIRST

Now that you know more about your personal debt and how you can begin to manage it intelligently, you can begin to fine-tune your game plan. Getting rid of debt takes money. You should have identified several ways to come up with some of the money you’ll need from the previous chapters that also addressed the subject. Now, what are you going to do with that money? Pay yourself first before you run out and spend it on something you don’t need.

#1. What does “paying yourself first” mean?

When you get your paycheck, do you immediately deposit it so that you finally have some money in your pocket, and then pay off a bunch of bills to keep your creditors off your back? What you really need is a savings account that you can count on for emergency funds in between pay periods to meet those unexpected bills. You can only do this if you are willing to pay yourself first. Make up a savings “bill” in the form of a card or envelope labeled “savings bill” that you keep with your other monthly bills. When it comes time to pay the bills, make sure it’s the first bill that gets paid and deposit the check you make out to yourself into your savings account.

If you discover that after you pay off all your bills you have some money left over, then make another deposit into your savings account. Deposit any coupon refund money or rebate checks you get directly into your savings account. Find out if your employer’s payroll system allows you to make direct deposits into a savings account. If it does, sign up for a direct deposit tomorrow, and in a short time, you won’t even miss the money that’s deducted from your paycheck.

#2. Can I lower the amount of taxes that are withheld from my paycheck as a way of paying myself first?

If you get a tax refund every year, consider this option. Ask payroll to increase your personal deductions, which you are allowed to do (e.g., from one to two or three). The immediate result will be a lower income-withholding amount, resulting in a larger take-home paycheck for you. Instead of paying Uncle Sam first, you are now paying yourself first. But if you take this action, you may forfeit the tax return money you get at the end of the year.

#3. Where should I put the money that I pay myself?

You want that money someplace where you won’t be tempted to spend it on something you don’t need. You may decide to give it to your spouse or trusted friend because she has more self-control about spending money. Depositing it in an “out of the way” savings account (i.e., one that is not readily accessible) is another option. For example, you could elect to increase your payroll tax deductions, which will result in more of your income being withheld in state and federal taxes. That way you’ll get a tax refund at the end of the year on money that would be difficult for you to access. The disadvantage of this system is that you won’t earn any interest on the withheld money.

#4. Should I use the money I pay myself for savings or paying off debt first?

The question to save or repay first is one that people love to debate. The savers argue that the more cash you have on hand, the better you can survive a financial emergency without running up more debt. The payers will counterargue that most people are paying much higher interest on their debt than they’re able to make in savings accounts. Therefore, it makes financial sense to pay off debts first.

Who’s right? As you probably guessed, they’re both right. Saving money is a learned art that requires a lot of discipline to make happen. We would urge you to save first, and then use a portion of what you have saved—say, 50 percent—to pay off your high-interest debts.

#5. What is a simple way of paying myself first?

Every morning before you go to work, rummage through your wallet and see if you can find a $5 bill or at least some amount of cash. Pay yourself the first thing every morning with that. Remove the bill(s) from your wallet and hide them in an out-of-the-way place. At the end of the week, you should have $25 that you can deposit into your savings account.

#6. Okay, I got the concept that’s behind the paying-yourself-first idea. What are some things that I can do to make it a part of my daily plan?

These examples will help you get started:

Monday: Stop buying expensive mocha coffee and roll at Starbucks and pay yourself with the money you would have spent.

Tuesday: Turn the air conditioner up or the heat down five degrees before you leave for work and use the money you save on your utility bill to pay yourself.

Wednesday: Commute to work with one of your associates and use the money you save on gasoline to pay yourself.

Thursday: Stop buying expensive frozen foods and use the money you save to pay yourself.

Friday: Stop going out to lunch with buddies; take a sandwich to work instead, and pay yourself with the money saved.

#7. As soon as I pay myself, I spend the money.

What can I do?

Then stop paying yourself and pay someone else you trust with your money. That could be your spouse, relative, or trusted friend. Just make sure that whomever you select knows what you’re trying to accomplish. There are lots of books available at the local library that address overspending. Read them all.

#8. Why are you making a big deal out of the pay-yourself-first exercises?

If you can’t figure out a way to pay one of the most important people you know (i.e., yourself) first, then you will have difficulty resetting your debt priorities. If this were a weight loss plan, one of your first steps would be to figure out how much weight you want to lose and by when. Perhaps your answer is ten pounds over the next two months. That means you need to lose about a pound a week.

Think about your pay-yourself plan the same way. Let’s suppose you need to pay back $1,000 on your credit card. If you can figure out a way of paying yourself $100 a month, you can pay off the card in ten months. Once you settle on the debt diet that is right for you, do it!

Chapter 2
SEARCHING FOR
HIDDEN MONEY

Unfortunately, it takes money to get out of debt—and in many cases, it takes a lot of money. The previous chapter discussed several ways you could pay yourself first to come up with some extra cash for your savings account. Most of the money-saving options that were identified were relatively easy to implement. Now it is time to address some tougher areas for you to find the additional money you may need.

#9. Where do I start my search to find hidden money?

Figure out a way to spend less. Okay, you already knew that, but it is a basic philosophy that underlies the theme of this chapter and worth repeating. We spend money on things we need, like medical care. But we also spend money on things we want but don’t need, like that fancy SUV. You can’t do much about the “need” part of your spending plan, but there is a lot you can do to reduce the “want” part of your spending if you are willing to address it. Get rid of all your wants until you’re debt free. Then, buy your wants with cash rather than with credit.

#10. What are five sources of money that I should look at first?

Although you may not buy into all of the saving ideas covered in this chapter, if you implemented just a couple, you could save $100 or more per month. And these ideas should trigger thoughts about additional ways to save money. For every idea listed, you should be able to come up with at least two or more of your own. Do whatever it takes to come up with at least $100 and then hang onto the money. Here are five sources of money to consider:

1. Charge nothing for the next thirty days and add up the interest you save.
2. Buy generic brand foods whenever possible. Shop with a list and stick to it to help you avoid impulse buying. Buy generic drugs any chance you get. Purchase only sale items.
3. Make sure your car is running as efficiently as possible by getting a tune-up, properly inflating the tires, and using the least expensive gas with the proper octane rating.
4. Stop subscribing to magazines you don’t read. Rent a DVD instead of going to the movies. Look for cheap and often better entertainment options like museums, zoos, a walk in the park, or picnics with friends. Start using your local library, which is free.
5. Buy gifts that are on sale for major holidays like Christm...

Table of contents

• Cover Page
• Title Page
• Introduction
• 1. Paying Yourself First
• 2. Searching for Hidden Money
• 3. Using Home Equity
• 4. Paying College Expenses
• 5. Controlling Credit Cards
• 6. Avoiding Bad Loans
• 7. Paying Off Debt
• 8. Getting Tax Money Back
• 9. Creating a Savings Plan
• Copyright Page