Here are some facts about debt in America that just might surprise you. Reportedly, there are 46 percent of Americans who carry a monthly credit card balance. 70 percent of all car purchases involve an auto loan. And, the total amount of today’s mortgage home debt is about five times more than it was only 20 years ago. So, for these reasons (and so many more), it is vitally important that we all make a concerted effort to create a five-year financial plan. Here are five ways to do just that.
Write down a vision. Most of us know the saying that if we fail to plan, we plan to fail. So, to simply say “I want to be more financially stable”, while that might be a good overall resolve, that doesn’t really help you to accomplish any specific goals. That’s why you need to write out a vision. Do you want to pay off your house or student loans? Do you want to be free and independent of credit cards? Do you want to be able to purchase your next car? By stating specifically what it is that you want, you are well on your way towards making “free from debt” progress.
Start an emergency fund. Something that oftentimes gets us into debt is when emergencies happen in our lives and we don’t have the money to cover it. That is why it’s always a good idea to have an emergency fund consisting of $1,000-5,000, just in case something unexpected does occur.
Tackle each debt from “least to greatest”. If you have a debt total that is in the “five or six-figure range”, it can be tempting to get overwhelmed. The best way to tackle all of that is to first write down a list of the companies along with the amount that you owe. Then, contact all of your creditors to let them know that you’re aware of what you owe and that you want to make arrangements to pay off the balance. Send them a small amount each month; however, whichever debt is the smallest, put forth the most effort to pay that one off first. Once you pay that one off, move on to the next on the list. Before you know it, those “little debts” that cost a few hundred dollars will start to disappear and your credit score will be on the road towards recovery.
Discipline yourself to not look for “quick fixes”. There are a lot of people who stay in a rut of debt because they look for quick solutions to their financial problems; ones that, at the end of the day, really aren’t much of a solution at all. If you are someone who relies on your credit cards, payday loans or title loans to deal with your debt, make a commitment to stop doing so. The interest alone on those things are enough to keep you in the hole.
Make investments. There are a lot of things that you can do to make an investment into your financial future. Create a will. Make sure to take out a life insurance policy. Consider getting a couple of stocks and bonds. Put money into retirement. Open up a “no touch” savings account. All of these are things that can help your five-year plan go from “good on paper” to a great way of life for you and your family.