Watch out, because these can come back to bite you.
1. You have no emergency fund
You should be saving 15% of your paycheck every month. This should go towards funding a savings account that should be 6 months salary in case you get laid off.
2. You can’t pay off your debt
You are neglecting to pay off your student loans, home, car, and credit card. This is bad. As this debt accrues interest and grows, it becomes harder to pay down. Credit card debt piles on fast, pay the minimum or pay it all off monthly.
3. You spend more than 45% on ALL expenses
I won’t list them all but the big ones are rent/mortgage, credit card, student loans, and a car. All those dinners out, coffees, and snacks add up too! At the same time, have some fun, but in moderation! 15% can go to fun expenses!
4. Your Rent/Mortgage is more than 28% of your income
I used to spend 50% of my income on my condo (mortgage, condo fee, taxes), so I sold and got out of that scenario. Live within your budget or get a roommate!
5. Total Debt is more than 36% of income
Can you see these all tie together? This is everything from student loans, to
6. You can’t pay the utilities
You are unable to pay for the minor things like heat, hot water, electricity. I say minor in that they are much less than the mortgage, but they are essential for sure!
7. Debt collectors are knocking on your door
An unwanted outcome of all this is that the banks will foreclose on you and hospitals will outsource their unpaid bills. This is not something you want to deal with.
But there is hope!
1. Start a budget
This is simple and free. I even have one on my site to use! For a how to check out https://samthesaver.com/2018/08/24/lets-get-frank-about-budgeting/.
Not only will this help tell you where you can cut back, it will force you to reassess, do I really need to eat out tonight. Can I afford to go on vacation? Do I really need that new BMW?
2. Refinance those student loans
I have a huge amount of loans from Graduate school. $93,000 in debt with about $25,000 in interest I have to pay on top of this!
One way out, refinance! I did some simple math and found I can save big! I can cut my interest in half (~$13,000) if I refinance. Sign me up!
If this interests you, check out my “how to” on SoFi https://samthesaver.com/2018/08/25/tackle-those-loans/ or go to https://www.sofi.com/share/1611019?src=copy.
3. Start a side business
Is cutting down on bills proving to be hard? Keep chipping away slowly, but at the same time run that side business you keep thinking of! For me it’s this blog. For a how to check out https://samthesaver.com/2018/08/21/create-you-own-blog/ or go to https://www.bluehost.com/track/samthesaver/.
4. Use the debt avalanche
Using this method you will want to pay off the highest interest loans first. Put excess cash to this one while paying the minimum on the others. Pay it off and move to the next one. This is a fast way to get out of debt.
There is also the snowball effect. Pay off the small loans first, then move on to the next biggest. It gives a good motivation to get out of debt.
5. Reassess that debt
I moved from my condo and got a roommate and cut that expense by more than half! Only have one credit card
