How to Get Out of Debt

When it comes to managing your debt and getting it paid off, there really is no magic quick-fix. Having a system and a plan will help you however, but I don't mean "shuffling" your debt. You can try chasing lower interest rates and moving your balances from card to card, but it doesn't solve the real problem. Here are some starting ideas and resources to help you solve the root of the problem of debt:

1) Realize Debt is a Product, Not a Necessity:

Debt has been so highly marketed to my generation that it is just sad to me. People who don't know any better get themselves so leveraged in debt that almost all of their paychecks are going toward monthly payments. A layoff would wreck their finances within a month.

2) Make a Decision that You Want to Change:

When I first graduated from college, my husband and I felt the financial pressure of a similar situation. We made up our minds that we weren't going to keep living that way. I think making the decision to change is really half the battle. Debt is also something that's difficult to just "try" to fix. If your heart's not in it, no plan will work for you.

3) Cap Your Overspending:

You can attack debt on two fronts. The first is to get yourself to the point where you're living below your means and don't have to keep borrowing. This can require something as small as eating at home more and packing your lunch to selling the car you have because the payments are taking up a lot of your cash. Doing this is really hard in the beginning, but as you get your finances back on track you'll be thankful that you did it.

4) Pay Off Your Existing Debt

Next you need to have a system of paying off your existing debt. My husband and I got Dave Ramsey's book The Total Money Makeover, which has a great way of doing this. You can read more details in the book, but the idea of paying off smaller balances first and working your way up (called the "debt snowball") does work. I'm not the spreadsheet type, so the more practical the system the more easy it is to stick with it.

5) Find Ways to Increase Your Income:

A great side-effect of wanting to pay off debt is it made us more determined to find extra ways of making money. Our overall household income has nearly tripled from when we first got married. That is exciting to me because after we're out of debt, that money is going to be available for us to buy a home, fund our retirement, and allow us to do a lot of good things we couldn't have done otherwise.

6) Realize that Getting Out of Debt is a Process and the Advantages of Getting Out of Debt are Worth It:

As I said earlier, mainly what you need is just the desire to get out of debt and the willingness to do what it takes to get you there. For most people it won't happen overnight, but the rewards are worth it. I think it's amazing what a person can do when they have their financial freedom, and I'm personally looking forward to it. I hope you put some thought into it and make that decision for yourself as well.

How to Learn How Money Really Works

Even after 12 years of public school and 4 years of college, I never had a class focused on practical personal finance. I know a lot of other people in their 20s and 30s have had similar situations and have ended up with debt up to their eyeballs, without realizing how harmful it could be to their life until they'd already done it.

So how do you get yourself back on track? I think it comes down to two things, which are being willing to learn new concepts as an adult and being able to apply them. It honestly has taken my husband and I about five years to turn our finances around for the better, and this is basically what we did:

1) Read a Variety of Financial Books:

I mainly mean books in the personal finance and business section of retail bookstores, and not just theory-based textbooks. Different authors have different advice, and most likely after reading several books you'll find a few that "click" with you. Probably the three top authors I really like are Dave Ramsey, Robert Kiyosaki, and Dan Miller. I read other authors as well, and after several years of this my whole concept of money has changed for the better.

Be willing to keep a open mind however. For example, the first time I ready Robert Kiyosaki's Rich Dad, Poor Dad, I honestly thought he was a little nutty. The second time I read it, it made a lot more sense. One of the bad "side-effects" of a college education if you're not careful is an arrogant attitude toward new ideas, and I had to keep myself in check when I first started looking into this topic.

2) Create a Budget and Manage Your Expenses:

The mention of this used to make me cringe because I'm definitely not the spreadsheet type. The thing is however is most people don't know when and where they're losing money without having some way of keeping track of it all. The simpler you can make it, the more likely you'll follow it. If you're married, it also helps you work together and start having common financial goals. It makes your relationship better and reduces a lot of common financial stresses. Taking the time to do this is just smart.

Along the way, you'll naturally find things you can probably change. The good thing is sometimes just being aware of a potential problem will go a long way in helping you solve it.

3) Develop a Plan to Quit Getting Into Debt and Pay Off Existing Debt:

For a long time, I really did think that debt was required to function financially in society. The funny thing is however that the more debt my husband and I have paid off, the more money seems to flow into our lives. This is why it's important to not skip reading advice from other people with experience. It's hard to get out of debt without a system or plan of doing it.

4) Look at Ways to Diversify Your Income:

For Generations X, Y, and younger, we need to factor in the fact that the work world is completely different from what our parents and grandparents experienced. The problem is schools have not really changed to train students what to really expect. We're mostly still taught to pick one career and completely stake our future on it. What often happens with people is they will major in college for one thing and end up doing something totally different. It doesn't make going to college a bad thing, but that situation needs to be factored in upfront.

By "diversifying your career," I'm borrowing the investing concept of spreading our your investments to decrease your risk. If you literally spread out your career across a job and one or more side careers, you decrease your risk of a corporate layoff or downsizing from ruining your finances. If you're willing to do this, you really do have an advantage over people who stake everything on their jobs.

5) Use All the Previous to Develop a Long-Term Plan:

Your finances are going to change at different stages in your life, so you'll have to adapt your plans to fit your current situation. The overall principles will generally stay the same, but you may have to juggle certain aspects of your finances to make them work as efficiently as possible.

How to Prepare for Investing as a Family

Along with daily life, sometimes investing for your family's future can feel like a juggling act. It can easily feel like your focus is divided in many directions-covering your family's living expenses, wanting to save for retirement, wanting to save for a house or pay off the one you have, and saving for children to go to college. If you don't have a plan, the whole process can seem overwhelming. There are a lot of things you can do to get organized however, and I want to discuss them in this article.

1) The first step you need to do before investing is to create a budget for your regular expenses.

This does not have to be a complicated or overly strict process, but you at least need to see what is coming in and going out.

You want to make sure everything seems balanced. In this process, you may spot areas where you're overspending and just didn't realize it. This will also show you how much extra money you have to work with on a monthly basis. Do this for awhile until you have a general pattern on your finances.

2) Pay down your debt before you heavily invest.

If you have consumer debt (non-mortgage debt such as credit card and car payments), you need to realize that it can cancel out the good that investing does for your family.

Not only does paying your debt off cause less money to leave your household in interest payments, but you can also use the extra cash flow (that was all going to payments) to fund your investing as well.

3) Protect having to touch your investments by setting up an emergency fund as a financial buffer.

You don't want to put yourself in a situation where you have to draw out of your investments to pay on a debt or even a major unexpected expense. The penalties for doing this are usually high, both from a tax standpoint and how much money from interest you lose in the process.

This is why you should also have an emergency fund that you can easily access. The amount you need is going to vary by family, but at least a couple of months expenses is a good amount. This would cover most job layoffs, medical bills, or vehicle repairs, which are three common financial situations for families. It may take you a year or more to develop this kind of foundation, but long-term it will make investing an easier process.

4) Begin investing, but do some research first.

Never enter into anything you don't understand. Read some books and talk with several people before making final decisions for your investment plan. Also, don't be afraid to adjust your plan as your family grows and changes.

More Tips:

• Ideally, you want 10-15% of your family income going toward you and your spouse's retirement, which can be in a combination of 401Ks (matching and non-matching by your employer), Roth IRAs (if you qualify), and traditional IRAs. Take the time to research the investments within them to make sure you're getting the best possible return for the least amount of risk.
• College investing such as ESAs (Educational Savings Accounts) and 529 plans can be done as soon as possible, since you want compound interest working your favor while your children are young. You'll need to calculate how much you need, based on college tuition rising roughly 7-8% each year.
• Also based on your budget, you can ramp up extra money for your mortgage as you go along. When you pay your house off, roll the money you were paying into your retirement or additional investing.
• Don't put this process off. The sooner you can start, the better off your family can be financially long-term.

How to Have a Debt-Free Wedding

Money is the number one cause of fights in a marriage and the number one cause of divorce. More and more people are realizing the importance of starting a marriage off on a solid financial foundation. In this article, I will address ways that you can save money and still have a beautiful wedding. You may have to do things a little different than most people, but it can be well worth it.

1) The first thing you need to do is start planning as early as possible.

This will ensure you don't have to make impulse decisions. You need to decide the size of the wedding you want to have and start figuring out basics such as location, number of guests, reception location, etc.

Unless you're totally fixed on a certain location, try checking with several. My husband and I checked with the church we were attending while in college--they let us rent out the church, provided a wedding organizer and sound engineer, and gave us access to their lobby for a reception. Total cost--$150. We couldn't believe it. All you have to do sometimes is just ask.

2) For us, my dress was the most expensive single purchase of the wedding.

I found the perfect one at a bridal shop, and not knowing any better I just thought it would be fine to get my accessories there as well. I knew the dress was pretty expensive, and I was honestly caught up in the moment when they rang everything up.

By the time we got home and looked at the receipt, I realized that over 1/3 of the total price had been for a pair of shoes and a veil (basically consisting of thin mesh with a few sparkles thrown in)! We went back to the store, which said "sorry, no cash refunds--only trade credit." Fortunately we were able to use the money to get an entire dress for one of my bridesmaids. I later ended up getting nearly the same items for about 10% of the bridal shop accessories.

My husband decided to rent his tux, and the company we went through gave us a package deal where he got his free because we had 3 groomsmen and a ring bearer. They were really reasonable on everything.

I liked my dress, but I wouldn't have considered it wrong to rent one either. I was originally going to sell mine afterwards, but the market is saturated with a lot of women trying to do the same thing. I later decided to keep it.

3) Consider ordering some of your things online directly from manufacturers.

I mainly mean your invitations, party favors, cake decorations, cake cutting utensils, glasses, etc. If you save money on these items, it gives you more room to splurge on other areas.

Do some shopping around with your rings, photography, flowers, and catering. Music can be done live or on a CD mix that can be ran through most speaker systems. Talk with friends and family and get recommendations from them. This is why it's so important to give yourself plenty of time.

4) Have fun with the process.

We actually enjoyed being involved more in the process as opposed to having everything done for us. On the day of the wedding, we were the least stressed-out of everyone in the church. We had a beautiful wedding. Everyone thought we'd spent a lot more than what we actually did, and more importantly everyone had fun.

As a general bit of last advice, make it about each other and the event. Keep it simple. The less distractions you have, the better the wedding will go for you.

I wish you the best in your marriage and in life!

More Tips:

• Check with your local college's broadcasting or media department. You may be able to get some students to do your wedding as a project to film and edit. Something that would cost you thousands from a production company can be done for a couple of hundred that way. It's a win-win situation for everyone. The same can happen with still photography as well.
• Don't let people pressure you into spending more than you've planned. It's the hardest thing to resist in this whole process.