The Only Way Out Is Through – 3 Tips to Better Family Finance

Are you tired of the planning and counting every dollar and dime needed to get your family finances under control and make your way out of debt? Don’t be discouraged! The only way out of any amount of debt is going through what is needed to pay it off, and there is more you should know. Staying the course doesn’t have to be hard or painful.  You can actually have fun with it.

Most people don’t consider managing the family finances as something that can be fun. It is a serious matter to manage getting out of debt, whether a large or small amount. What science now proves is that it can happen more quickly and with less stress when you follow these 3 tips.

 

family-financeTip #1:    Make a Budget
There are pros and cons around family budgeting. The biggest issues are about the time it takes to complete a budget and then there is the harshness of sticking to it. There are a number of different ways to view budgeting, if you have family debt, the best view is of the way out.  With a family budget you can make it easier for everyone to participate in sticking to it when you include ways they can help save. If the children are small, parents can get creative with ways to save and lessen expenses. With school-age kids, it gets more creative to include the kids in fun ways to save expenses.

 

Tip #2:   Make a Debt Reduction Plan
Categorize your debt and evaluate how you can pay off items so you can see success.  Christina Tynan-Wood in her article “Snowball Your Debt” tells about how J.D. Roth at Get Rich Slowly (getrichslowly.org) dug himself out from under a mountain of debt and now has cash in the bank. Roth did what’s called a “debt snowball,” paying the minimum on every bill except the one with the lowest balance, which he quickly knocked out in full. Then he did the same thing again, eliminating another balance, and so on.

This can also be done quickly with retail credit card debt. This kind of success makes you feel like you’re accomplishing your goal. Christina also talks about how she did the same thing and added that monthly sum to the minimum payment on my next-smallest debt. Each time she hit another zero balance, the amount would be applied to the next debt in line gets bigger. As the snowball keeps growing, even large debts dwindle. You too must go through to get through and get out of debt. Won’t that be fun to see!

 

Tip #3:   Vision Your Success and Plan to Celebrate
What would it feel like to be debt free? Can you see it for yourself?  I’m not talking about the house and car being paid off, although that would definitely be the big win. House and car debt are considered “good debt”.  According to Dave Roos in his article Good Debt vs Bad Debt, good debt is an investment that will grow in value or generate long-term income, like a home, a car or a college education. Bad debt is debt incurred to purchase things that quickly lose their value, do not generate long-term income, and carries a high interest rate, like credit card debt. Vision your success in paying off bad debt and you’ll have more to celebrate as you create more cash to reduce good debt at a faster rate, if you chose.

 

Smart family finances (1) are managed with a budget, (2) include reducing debt with a snowball system, and (3) warrant celebrating a bit at a time as successes will allow. Remember to let the kids participate. Make it a game to have them keep an eye out for family savings opportunities. Don’t be stingy. Just be honest about the desire to spend wisely because the only way out of debt is going through getting out.

Finally, know this general rule to avoid bad debt: If you can’t afford it or you don’t need it, don’t buy it. Your family will love you for it.

Leave a comment below. Add anything that you’ve done getting through to get out of debt, especially ideas that include getting the kids involved.

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