Minimizing debt means getting to know yourself better, financially. The first thing you want to do is find your net worth. Knowing your net worth is a valuable tool for monitoring your financial progress from year to year, and ensures you're headed in the right direction. Calculating net worth is simple:
1) In one column list your assets including home equity, cars, valuables, bank accounts and retirement savings.
2) In another column list all of your liabilities including mortgage, car loans, credit card and all other debt.
3) Next, total the two columns and subtract your liabilities from your assets.
You now know your net worth. Regardless of the amount, or even it it's a negative number, you have a starting point. This process can be a powerful motivator for reducing debt - a personal budget is a great way to help you achieve your goals.
Know where your money goes
Surprisingly, many people never develop a budget. A budget is an essential part of managing your finances.
To see how important it is, take the first step. Carry a journal and pen with you at all times for one month to record your expenses. Methodically track everything, no cheating.
Seeing your expenses laid out before you provides you with a thorough understanding of how your cash flows in and out of your pocket. You'll also discover some bad habits you didn't know you had - and get on the road to changing them for the better.
Maximizing Strategies
Maximizing the benefits of credit
Credit Cards Used Wisely
A credit card can by your ally when it's managed correctly. It can help build a positive credit score, get you out of a pinch, and even earn you rewards. On the other hand, poorly managed credit can be detrimental to your credit score, and cost you more than you imagined. Keep these tips in mind:
Limit your number of cards. It is easier to keep track of expenses, and reduces the chance of a missed payment.
Transfer credit card debt. It's a good idea to always pay your credit cards in full each month. If you are carrying a balance, a personal line of credit offers a much better rate.
Don't spend what you don't have. Use the convenience of a credit card only knowing the money is in the bank.
Be diligent with payments. Never pay the minimum only. Your original purchase could end up costing you twice as much.
Paying the minimum payment on a $1,800 balance can take 31 years to pay off!
Avoid missed or late payments. You could incur additional fees and a black mark on your credit rating.
SMART CREDIT MANAGEMENT
ENSURES YOUR CASH REMAINS YOUR OWN.
