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My recommendation is that, whether or not you track your spending (and you should), at least do the following:
1. Stop the bleeding. Stop using your credit and debit cards immediately. Cut them up, or put them in the freezer in a ziploc bag filled with water, effectively freezing your cards. Also stop taking other loans, either from banks or finance companies or friends or family. Stop getting into more debt.
2. Start saving now! The next most important step you can take, in the beginning, is to start a small savings account if you haven’t already. Begin depositing into it regularly, at least $100 per paycheck but more if you can. If you can’t find $100 then see the next step for how. Make it an automatic deposit, the first bill you pay each payday, because it is the most important! A savings account will help you smooth out your finances — when an emergency comes up, like your car breaking down or someone having to go to the hospital, you won’t be thrown back into debtedness or brokedness. You will have some cash to pay for that emergency, and you can use your regular paycheck for regular expenses.
3. Look at discretionary spending. If you can’t find $100-200 to save per paycheck, then you need to cut some things from your spending. This is where tracking your spending comes in handy, but even if you don’t, you know some of the extras you spend on — cigarettes, coffee, snacks, candy, desserts, eating out, magazines, shopping for clothes or gadgets or toys or shoes, books, going out … these are just a few of the examples. I’m not saying you need to cut everything out, but if you can cut a few of them, or maybe just one at a time, that can add up. Then, take the money you didn’t spend on those discretionary items, and put that amount into savings each payday. Increase this over time. (See How I Save Money.)
4. Start a debt snowball to begin getting out of debt. If you haven’t read about debt snowballs, they’re simple. List out your debts and arrange them in order from smallest balance at the top to largest at the bottom. Then focus on the debt at the top, putting as much as you can into it, even if it’s just $40-50 extra (more would be better). When that amount is paid off, celebrate! Then take the total amount you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the minimum payment of the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debts. This could take several years, but it’s a very rewarding process, and very necessary.
Originally posted by silent thunder
I applaud the honesty of those in this thread. Usually on the Internet everyone has a 500-room mansion and a sub-basement full of gold bars...
It took me a long time from going to living paycheck-to-paycheck to actually having viable savings, but a big part of the reason it took so long is that I was young and stupid and overly optimistic. Then I got into a real financial pickle one year that opened my mind up and was like a slap in the face. Once I started living as cheaply as possible and saving as much as possible, it took me much sooner than expected to save up a year's worth of cash in the bank. To me that's the definintion of financial safety: not how many toys you have or how big your McMansion is, but how long you could survive without working. Most people can't survive more than a month or two, if that. So if you can save up six months to a year's worth of hard-money, raw cash savings, I'd say you are doing better than most. Make this your first goal and then take it from there. Of course its not easy to do, especially with debts and a family to take care of, but I think its a good goal to shoot for.