Decrease Debt - Improve Income

In order to start saving more and increasing your wealth, you must first begin to pay off the debts you have incurred that are inhibiting your advancement.  Many people have made the mistake of trying to tackle all their debt at once, which quickly leads to discouragement.  And here’s why.

There is nothing motivating about taking huge strides to pay off debt, but never fully realize the impact that it’s having on your bottom line.  If you stash away a few extra dollars towards each debt you have incurred without really keeping track of your progress or celebrating the little victories, you will very quickly experience burnout.

Therefore, your best bet is to first sit down and take the time to list out all of your current debts from credit cards to car loans.  Record the total debt amount along with the current minimum monthly payment on each account.

Next, choose the lowest debt and start to pay a little extra towards this one debt while paying the minimums on the others.  Choose an amount that will stretch you but is still within your means.  Once this debt has been paid off, you can then move on to your next lowest amount and apply the extra payment plus the monthly minimum of your old debt.

Continue this process until all your debts have been paid.  Be sure to celebrate along the way and keep track of your progress.  Over time you can then begin to apply your old debt payments towards a savings/investment account of your choice.

While you are paying off your debts and long after, there are various steps you can take to help increase your overall income while decreasing your expenses.  Essentially, each of the following ideas will require your commitment and discipline to follow through, but turning these ideas into habits can make all the difference.

First, by simply decreasing your spending on discretionary items, you can begin to better manage where your current income is going.  Many people fall into the trap of spending more as they make more, such as finally purchasing that big screen television, making upgrades to the house, taking the family on that 5 star cruise, etc.  Though there is nothing wrong with any of these purchases, we must learn to practice delayed gratification until the timing is right.  The average person typically makes a lot more than they think.

Next, you can take on a part time or second job, even if it isn’t that most ideal position.  Although this can be painful at first, building this discipline can be extremely rewarding and helpful when trying to pay off debts.  Additionally, you can begin to sell items within your household on Craigslist, Ebay, consignment shop or yard sales to bring in some extra cash.   Maybe consider starting a side business with a hobby or trade that you are passionate about.  Try freelancing, mowing lawns, or tutoring kids. 

Finally, you can either get a brand new job or stay in your current position and go the extra mile if you feel there is opportunity for advancement.  In the next post, we will cover some practical steps you can take to increase your income at your current position.  Stay tuned!