Budgeting Tips to Get out of Debt and Build Wealth

If you are trying to be debt-free but are concerned about saving for college, join the club.  Saving for ANYTHING seems impossible when you’re making minimum payments on credit cards and you expect to pay them all off in maybe 40 years… that is IF you can stop charging on them.

Put on the brakes!  The first step to ever being able to save anything for your child’s college is to stop spending your money, and to quit racking up the consumer debt.  I know, it’s hard to let go of the great American way of charging everything you buy.  It’s so easy to buy now, pay later.   But you have to put  a freeze on credit card spending immediately in order to have any hope for your financial future, let alone be able to save for your kids college.

Once you stop charging, you need to wage an all-out war on your debt.  For almost everyone with credit card debt, this means you have to cut way back on your lifestyle.  You may not be clubbing every night or splurging on caviar or expensive champagne, but you’re might as well be for the money you spend on fast food, pizza, TV, movies, games, and vacations.  Am I right?

The only way to get a grip on your finances is to do a budget and stick to it.  Even if you think you’re good at keeping track of numbers in your head, don’t trust yourself, write it down.  It’s a lot like calorie counting.  If you don’t write it down, you’ll over eat.  Well, if you don’t write down your spending and follow a written budget, you will spend too much money.   This is where you will find the money you need to get rid of your debts so you can one day save for college.

As you create your budget, start by saving.  The first type of savings account you need is an emergency fund, with at least $1000-$2000 in it.  Eventually you will revisit this and build it up to 3-6 months worth of expenses, but for now just one or two grand is enough.  It’s more important after that, to start paying down your debt and canceling credit card accounts.

Only after you have gotten to the point of debt free are you going to be able to push all that money you’ve been able to squeeze out of your budget every month for debt payment, into savings instead.  Remember, you also need to save for retirement, so make a plan.  Depending on your age and when you want to retire, you may need to save more or less right now.

When determining how much to save for college, take into account how long it will be until your kids will be going to college, and how much their education is likely to cost.  Don’t feel like you need to save up to send the kid to an Ivy League school, when a perfectly good education and degree are available at your local or state university.  Also, don’t feel like you need to save for the total cost of tuition.  Your son or daughter will also be able to work as a teenager to save up for college, and while in college be able to pay some of his or her own expenses.  Ideally, they can get financial aid grants or work-study to help them as well.  What you want to avoid is allowing your child to wind up in debt from their education, even if you have to help them pay for it when they are in college.

So the long and short of it is… it’s good to have the goal of saving money for college tuition and expenses, but you cannot start saving for college until you get rid of your debts.  The sooner you start, the sooner you will achieve your goals.  Make today the day that everything changes in your financial life.

Posted By: Becoming Debt Free - Paying Debts, Saving and Investing by Darcy