Everyone has some debt but having too much is a major problem today. It is important to remember the first step to living debt-free is to maintain a strict budget no matter what income you receive. A good rule to follow is by learning the 50/30/20 budget plan in everyday expenditures. This is way to access where you stand financially so that you can start to achieve a debt-free life.
Four Steps for 50/30/20 Budget
Calculate after tax income
· This is easy if you work for a company or business, remember though that other deductions kike health care, retirement funds(IRA’s) or 401K’s need to be added back into the income.
· The after taxes from a paycheck include: state tax, federal tax, Social Security tax and Medicare tax.
· Self-employed tax income is different because it needs to equal gross income minus business expenses along with minus amount placed aside to pay taxes.
Limit all the Needs to 50 Percent
· Needs includes housing rent/mortgage, utilities (gas, electric, water and sewer), groceries, health/life/car insurance.
Limit all Wants to 30 percent
· Make sure you understand the difference between a need and a want. An example is wanting to upgrade to the internet or a new wardrobe is a want because it does not impact the quality of life
Spend at least 20 Percent by putting it into savings and debt repayments
· Emergency funds are a fund if the furnace quits working and needs to be replaced.
· Retirement IRA’s or funds to maintain a similar lifestyle that you were use to
· Repayment of debt especially credit cards.
When a person takes this step they will begin to achieve a debt-free life. A person will also look at four ways to increase their income to help make the necessary payments to achieve a debt-free life quicker.
· Traditional Way to Increase Income
o Look for a second or part-time job, the hospitality industry and food service usually has quick turn-a-rounds so finding a job there can earn the extra income needed to make payments on the debt that you are trying to get rid of.
o Handyman jobs are a great way to earn extra income if you have the skills like painting, yard work, housesit, and pet sit or housecleaning.
· Selling personal handmade products or collector able items on eBay. Many families collect things like DVD, electronics, dolls etc that they no longer want or use and eBay and other auction websites can help you sell them. The important thing here is to make sure that the advertising is creative, persuasive and the products being sold are in good shape to sell. People find this as a way to earn extra money and get rid of the tuff in their home that is no longer being used.
· Build an online store or market which specializes in homemade articles that people want. Create, design and sell cool t-shirts with unique sayings.
o Examples are; crafts like blankets, iron art, clothes for children, doll clothes and Afghans can be sold online site like Pinterest.
· Consolidating loans to have one small payment a month
· Get a job driving a bus for a assisted living community or local cab company
· Work seasonal jobs like toy stores during the Christmas holiday season, landscaping company unloading inventory at the beginning of the season, farm hands need help haying and cleaning stalls can help earn income to pay off debt even though it is not a whole lot of money.
· A loan from a bank can help with multiple debts by getting an unsecured one if the debt is under $10.000.00. This way a one low month payment can help achieve a debt-free life. If the debt is above the $10,000.00 amount then a secured loan in a homeowner’s equity or possible a second mortgage may be an alternative. Another possibility is to refinance the mortgage at a lower interest rate while the interest rates are still low which will save at least one hundred dollars or more on the mortgage payment each month.
· One of the ways to earn extra income is through writing informative pieces on a Blogging site. There are several writing sites that are looking for freelance writers, self-publishing work, proof reading, SEO reviews, movie reviews and trip advisors that pay the person very little put it does eventually adds up.
· There are some educational and websites that provide tutoring services for children in elementary subjects to the advance math/sciences used for college courses.
· Craigslist is a good way to advertise specialty skills; for example laying hard wood floors, cabinetry, and other trade that needs a person to do. They charge a flat rate around $25.00 an hour which adds up to around $200 per day for eight hours of work.
All of these ideas can help and diminish the debt that you have. That is of course if you are willing to put some extra time and effort into the situation of clearing away future financial problems.