If your New Year’s resolutions are to save more, spend less, and get out of consumer credit debt, you’re in luck. I had the opportunity to discuss how to make small, yet big financial changes this year with Daniel Bowen, the young founder of etfrugal.com. Y&F; is a popular blog for young professionals that provides resources and advice on topics such as saving money, getting a job and making less than $40 a night. Read on for Bowen’s tips to set yourself up for financial success in 2012.
Q: Considering that many of us are paying back as a student and going through difficult times with the help of credit cards, what do you think is the best way to go about it? extra debt?
A: One step at a time. The debt just doesn’t appear overnight and may or may not go away. It takes time and determination, but it is very doable. The first step is to stop your debt from getting worse. Figure out how to budget your money so you don’t have to use your credit, and build a small emergency fund just in case. do not go back to the credit card. Once you’ve built up an emergency fund of about $1,000, start eliminating your debt.
I am proposing the “Debt Snowball” as advocated by Dave Ramsey. In a nutshell, start with your minimum balance and send any additional resources (after paying your minimum payments on your other debts) to paying it off. When that debt is paid off, move on to your next smallest debt until you throw all your resources into paying off your biggest debt! Think of it as a game. Showing smaller debts are easy steps that anyone can beat, but the steps get progressively more difficult as the debt gets bigger… beat the game.
Q: Many people start the new year with a resolution to stick to a budget, what advice do you have on how to stick to a tight budget but still have fun?
A: Technology makes budgeting easier than it’s ever been, but the two most important things are making the budget realistic and as automated as possible. If it’s not realistic, you won’t stick, and automation makes everything easier. Look back over the next few months of spending and get a true sampling of where you spend your money and how much you want to save. The best tool available for this is Mint.com, a site that analyzes all your expenses and lets you know where you’re spending your money. From here enter the monetary systems. When you get close to claiming your portion of the currency, it will send you a quick reminder that you are close to your monthly/weekly budget. It is a great tool and we highly recommend it to those who are looking for an easy and effective way to manage their finances.
Q: Hypothetical situation: you hit a financial road bump and plan to dip into your savings. Is this always good?
A: Absolutely, unexpected expenses happen all the time, but it was unexpected because you weren’t prepared. It’s important to start an emergency fund before paying off debt because you never know what’s around the corner. I will say that my emergency fund is always in flux, because I have money for unexpected expenses (car repair, dog a Christmas decorations, job loss, etc.) than go into debt. This pillow allows you to weather the storm without digging a hole.
Q: Aside from feeding a savings account and living frugally, do you have any general advice for people who are trying to save money this year?
A: Most people focus on cutting expenses, which is good, but one way to make a much more drastic impact on your ability to save is to increase your income. Start a business, pick up a side job, don’t use sell stuff, and/or focus on being the best employee you can be for the site itself. or promotion. These programs are usually overlooked because they take more time, thought, and drive than just bringing lunch to work, eliminating Starbucks, or cutting the cord (all of which are good people to do). If you really want to boost your savings account then stop thinking about what you can’t do and start thinking about what you can do to make more money!
