Take the 14-day challenge. Track all expenditures in a notebook for at least two weeks. This will help you gauge the amount and type of purchases you make. Once you identify waste, “Don’t go cold turkey,” warns Abercrombie, citing the tendency to splurge later. Instead, cut purchases gradually until you adjust to reduced spending in specific areas.
Create SMART goals. Make sure every financial goal is Specific, Measurable, Attainable, Relevant, and Time-bound, Abercrombie says. In other words, you want to know the exact amount and length of time you need to save and that your goals are realistic.
Mistake 4: Failing to manage credit
As the economy recovers, credit card issuers are offering sweeter deals, says Gerri Detweiler, personal finance expert with Credit.com. A recent First Data Corp. survey revealed that consumers are using charge cards for more purchases and that credit surpassed all payment types in June. The fact is using credit without a plan to pay it off is a recipe for disaster. “A lot of times minimum payments are so low they lull you into a false sense that you can handle it,” says Detweiler. If you find yourself in over your head:
Create an accelerated payment plan. Credit card statements now let you know how much you have to pay to retire a bill in three years. “If you can afford that amount, make it a do-it-yourself project,” says Detweiler.
Use technology to help you. Smartphone apps such as Matthew King Software’s Debt Snowball Pro ($2.99) and Parallel Focus’ Pay Off Debt ($2.99) can help you track your spending and consistently pay down your debts.
Consider credit counseling. The magic number for debt reduction is three years, says Detweiler. “After that it becomes difficult—either motivation dies or life intervenes.” If you’re in too deep to climb out on your own within that time frame, find a credit counselor through the National Foundation for Credit Counseling (www.nfcc.org).
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