Atlanta, known for being the Coca-Cola headquarters and home to Stone Mountain Park with its pristine lakes and forests, not to mention the world’s biggest mass of granite, is a remarkable city abound with trees. As a matter of fact, Atlanta acquired the title of “City in a Forest” as it is the largest urban area in the country covered with trees. Yet, the fascinating fact about Atlanta is the city’s symbol, the phoenix. Back in 1864, Atlanta was almost completely burnt to the ground, apart from the 400 buildings that withstood the fire and rose from the ashes like a phoenix. Nowadays, Atlanta, the capital of the Peach State, with its variation of “Peachtree” found in many streets scattered throughout the city, is an industrious and populated city with a plethora of sights to see, including museums, parks, and universities. Nevertheless, consumer debt is not one of them. Although Atlanta ranks better than the overall credit card debt in Georgia, it is still remarkably high. Compared to the rest of the states, Georgia ranks 11th in terms of severely delinquent credit card debt of 90 days or longer. Fortunately, there are numerous ways to lower credit card debt and, as a result, improve your credit score. Let’s dive into one of the most effective ways to help you save money and facilitate credit repair- budgeting.
First and foremost, creating a financial plan will help you manage your finances and ultimately repay your debt. With a budget in place, you know exactly where to allocate your funds without necessarily losing out on any fun. Take a look at your expenses each month and divide them into your needs and wants to obtain a clear picture of your finances. Below are several helpful strategies to create an effective budgeting plan.
Budgeting plans that works best for you.
Before a new month begins, consider the zero-based budget or the envelope system. With the zero-based budget, also known as the zero-sum budget, the goal is for your expenses when subtracted from your income to equal zero by the end of each month, which is basically what budgeting is about. With this method, you are motivated to distribute your funds to these three categories- expenses, savings, and debt payments. As for the envelope system, envelopes for different categories are used to allocate your funds. The idea behind this method is to use cash as the sole payment, which could be more effective as you are only allowed to use the money that is physically in your envelopes instead of in your bank account. You can try both methods to see which works best for you.
One invaluable way to budget is by following the 50/30/20 rule. The majority of your funds, or 50%, should go towards your basic necessities, which include housing, food, insurance, healthcare, and utility bills. Use 30% of your income towards fun- entertainment, dining out, travel, an out-of-the-blue shopping spree, etc. As for the remaining 20%, use this money to start repaying your debt to finally become debt-free and start saving for emergencies, retirement, and the future.
Prepare your budget ahead of time.
We get it. Birthdays, holidays, weekend getaways, and medical expenses can wreak havoc on your budgeting plan. Some months you may spend more, for instance in December, for Christmas presents and that’s ok, but make sure to be prepared for these types of special expenses ahead of time and adjust your budget accordingly. It might be beneficial to create a miscellaneous category to cover unexpected expenses. Sometimes, you may have money left over after covering all of your expenses. It would be a good idea to make additional payments to lower your total debt and save money on interest. This should be a top priority as this simple strategy will not only lower your debt but will also improve your credit score.
Get rid of your credit cards.
It is, of course, difficult to start thinking about budgeting and healthy spending habits if you are neck-deep in credit card debt. The only way to eliminate your debt is to start paying it off or getting rid of your credit cards altogether, so you are not tempted to go back to the dark side. For some people, it is easier said than done, but here is something that may open your eyes and motivate you to pay off your credit card debt as quickly as possible: the annual percentage rate on credit cards offered by the majority of US banks can reach a staggering 25%. This means that if you decide to make a $1000 purchase and only pay back $50 monthly, it will take you 27 long months to pay off your debt while coughing up over $300 on top of the money you borrow in interest! Eliminating your credit card debt in a timely manner will not only help you avoid giving away your hard-earned money to the bank. Lowering your credit card utilization will significantly improve your credit score in no time.
Stay the course!
Developing healthy spending habits and abiding by the rules you create to help you manage your finances better is like following a strict diet- every day, you make sacrifices and fight off temptations that lurk at every corner and behind every store window. As with every diet, the key to successfully manage your finances is being consistent; therefore it is crucial to have a goal in mind to help you stay focused. Whether it is the vacation you have been postponing for years, an emergency fund to help you be prepared for the unexpected, or escaping the paycheck-to-paycheck mentality so many people are stuck with, having something you pursue will help you stay on track.
Many people think having a better-paying job will solve all their financial issues, but at the end of the day, you set yourself up for failure with bad spending habits, debt, and a lack of consistency. There is a good reason why Robert Kiyosaki’s ideas and quotes have become so popular in recent years. According to the author, “it’s not how much money you make, but how much money you keep.”