Basic rules to manage debt

Usually by the time I speak with someone about helping them with their finances, its’ too late. So here are some simple signs that will help you determine if you’re headed for trouble BEFORE it catches up with you.


#1. Payment amount to your credit cards is shrinking. If you can only afford to make the minimum payments on your monthly credit cards there’s a problem!  Credit card debt will only make you a slave so it is imperative that you reduce that debt and keep it down forever. Often people need a shift in their personal compass to stop making purchases. Often people are addicted to just buying things, but they have little use for the item. A simple habit  to get into, if you really want financial freedom, would be to ask yourself “will this purchase benefit my life”? The problem is that most people get a “juiced affect” from the purchase, and that’s what they get addicted to. If life is not satisfying, then buying something will help. It’s just not true. Credit card debt is dangerous and accounts for most people’s fiscal disaster. Within a few months a $5,000 credit card tab can climb to $7,500. The solution? Use your card less (ideally, only for emergencies) and pay at least twice your minimum payment. That should keep you out of credit card trouble.


#2. You keep overdrawing your checking account. A bank checking account is like the proverbial canary in the coal mine when it comes to your personal financial picture. If you’re constantly overdrawing it — even once in a month is a serious sign if it happens repeatedly — you need to shift your compass and make a change. You’re likely spending too much money and possibly accumulating too much debt, or your income simply does not meet your expenses. Fix the problem by building a monthly budget with savings built in – even just $50 – as long as you don’t go over, and stick to it.


#3. Your emergency fund reads “zero.” If you don’t have an emergency fund, or the one you have is on life support, you’re steps away from financial trouble. Experts historically say you should have at least six months’ worth of income stashed away in a savings fund, but it’s better to aim even higher. Build a 12-month cushion in case you lose your job or suffer from a major illness or injury. Most bankruptcies occur after a job loss or a serious health issue, so a proper emergency fund can save the day.


#4. You have to choose which bills to pay. If two bills come in the mail and you can’t afford to pay both, you’re overstretched financially. If this happens once, no worries — it’s a tough economy, and most people have problems with a bill at one time or another. But if it’s a monthly occurrence, then you’re in red-flag territory and need to revisit that budget and see where you can cut some meat off the bone (or take a second job to earn more income).


360 Group has been helping people mitigate debt since 2006. Contact us if you have questions. We’re happy to help.


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