Debt Relief - 3 Tips to Landing On Solid Financial Ground


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Life is not predictable. Especially not when it comes to your debt and your finances. It seems like every time you get ahead, something unexpected comes up that puts you right back where you started. So how do you get out of debt and stay out of debt?

In order to get out of debt, while also building a nice safety net so you can stay out of debt, you need to get a handle on the basics of money management. This is absolutely crucial to your debt relief. Unfortunately, none of this is taught in school, although it should be. It would be a big help to millions of people. Most of us don't learn anything about handling money until we already in debt.

* Using a Budget

I know, you've heard this one before. And, like trying to count calories, it's not something many people can stick to for any length of time. That's because most people go about it in a way that isn't conducive to long term success. I happen to agree with David Bach, author of The Automatic Millionaire. David says you shouldn't use a budget.

I know, I know, this subhead of this tip is Using A Budget. Maybe it should be using a budget with a twist. In this budgeting technique, we're not going to count every penny we spend. Instead, we are going to pay ourselves first, pay our bills, and then anything left over can be spent anyway you please and you don't have to track every last penny.

If you have a lot of debt, you'll want to focus on your debt relief before saving for longer term goals like retirement. This is because your debt, especially with higher interest credit cards, is going to cost more than you will make if you save that money.

Once you pay down your debt, begin paying yourself first by putting a certain percentage away in a retirement savings account, then pay your monthly bills such as mortgage, utilities, etc. The rest is for you to do with however you please.

As your financial situation improves, consider increasing the percentage of your income that you pay yourself. You may be only able to say 10% of your income when you start but you'll want to consider increasing that percentage as much as you can.

* Setting Financial Goals

To paraphase hockey legend Wayne Gretzky, you miss all the goals you don't set. You need to know where you are going in order to get there. And your financial goals will help determine how much you pay yourself first. If you want to retire at age 50, and live off the same income you currently make, you won't be able to do it by saving 10% of your income each year.

Set financial goals. Determine what you want your financial future to look like, and how much money you'll need to make that happen. This will help you figure out how much you need to save in the present.

* Building A Cash Reserve aka Your Safety Net

What's next after you've climbed out of debt? Build a cash safety net so you don't slip back into debt, the way dieters put back all the pounds they lose if they aren't careful. Building up a cash reserve will prevent you from piling up debt when unexpected emergency expenses occur. How much should you have in your cash reserve?

A good rule of thumb is 3 to 6 months of your expenses but ultimately it will be decided by what makes you comfortable. For some people, that may be a full year's worth of expenses. This could be true for a lot of people that were deep in debt and living paycheck to paycheck. They experienced the horrible stress of such a situation and never want it to happen again.

Learn more about how to debt management with Freddie Johnson's free articles on debt relief, debt consolidation and credit tips at


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