Tips for getting out of debt and starting a savings - KFVS12 News & Weather Cape Girardeau, Carbondale, Poplar Bluff

Tips for getting out of debt and starting a savings


Feel like you're never get out of the red? You're not alone.

According to a new report from the Blackrock Investment Institute, the ratio of household debt to income is still an average of 154 percent.  That means your own $154 for every $100 you're bringing in.

Those numbers are at 7.5 percent improvement from the peak of the recession.

People in the Heartland say they're feeling the pain as well.

J. Derieck Hodges, a financial planning advisor gives these tips for getting out of debt and starting a savings:

Here are the steps for getting out of debt.

  • Know your situation
    • Do you have a debt problem or do you just want to reduce or eliminate your debt?
    • If you have a debt or spending problem remove all of the temptations. Stop using the debt (e.g. credit cards, lines of credit, etc.) until you know you can control your spending.
  • Identify how much money can be used to eliminate debt.
    • You have to know where your money is going?
    • Create a monthly spending plan so you know how much money can go toward your debts.
  • Make a debt repayment plan.
    • Pay minimum payments on all loans except the smallest balance loan.
    • The smallest balance loan gets all of the extra money you have in your budget. 
    • When the smallest balance loan is paid off move all of the monthly payment to the next smallest loan until it is eliminated.
    • Don't add new loans until you reach your goal!
  • How to accumulate some cash reserves?
    • When you have created a spending plan you will know how much money can go toward your debts. Before applying all excess money toward your debts set aside at least $1,000 for an emergency fund. This will remove the temptation to use your credit card if the car breaks down or you have other unplanned bills that pop up.
    • If you can't find any extra money in your budget you might need to consider a part-time job until you have an emergency fund established.
    • Consider setting up an emergency fund (e.g. savings account) at a different bank than your regular bank. Don't make it too convenient to get to this money. 
    • Use payroll deduction savings plans, if available.
    • If you are a couple make rules on when the emergency fund money can be used and both must agree to the use of the money before it can get accessed.

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