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Special Needs Financial Planning: A Definitive Guide


Special Needs Financial PlanningParents with special needs children know how expensive it is to raise their child. They know what care they can get, what financial aid they can get and what funded therapies and courses their children are entitled to. In short, they know the day to day costs of living with a child who has special needs.


But what about after the parents die? What then? The child will still need day to day care but who will provide it? Who will pay for it? And who will make the important decisions regarding the child’s healthcare?

There are many fears and stresses surrounding parents in this situation and it can seem daunting but if you prepare now then it leaves more time to enjoy the time you do have with your children.

Below are 10 ideas to help plan for the future for a special needs child. 

Set up a Special Needs Trust Fund


Supplemental Security Income (or SSI) is a monthly stipend that is available to children with special needs and Medicaid offers health insurance, however, to qualify for these benefits, the applicant (i.e, your child) must not have any assets worth more than $2,000 in their own name.

But, when you die, all of your estate and assets will be passed on to your children. Chances are that this will push them over the threshold and make the ineligible for SSI or Medicaid. This is where a Special Needs trust comes in. By setting up the trust, all monies and assets can safely be put into the trust and not into your child’s name. Meaning that your child will still benefit, but it won’t disqualify them for any benefits.

Talk to family members and friends


Family members may want to help with healthcare and educational costs of your children. But it is important for them to understand that nothing must be put in your child’s name.They cannot name your child as a beneficiary in their will or open savings bonds in your child’s name.Like wise, gifts of cash, checks or stocks must not be held in your child’s name as this will push them over the threshold for financial help.

If friends or family members wish to help financially, then ask them to name the special needs trust as the beneficiary in any wills and pay any cash gifts straight into the trust.

On a side note, the 529 college savings plan is usually not necessary for a child with special needs as this can only be used for education post secondary school and does not cover private tutors, therapies or private education needed before the age of 18.

Appoint yourself a Guardian, Health Care Proxy or Power of Attorney


Within the United States, once your child reaches the age of 18 they are legally regarded as an adult in the eyes of the law and will therefore have the same rights as any adult, unless you step in. If you feel that your child’s needs are such that they cannot  make important life decisions regarding finances or health care for themselves, then you need to apply to become your child’s legal guardian.  You can also petition the court to become your child’s legal guardian if you so wish. If you are happier to designate another adult to be the child’s guardian then you can do so. 

In fact, giving another trusted adult legal guardianship of your child will give you peace of mind, knowing that, in the event of your death there will be someone on hand to tend to your child’s needs.

Before you appoint a guardian, speak to the person that you have chosen and make sure that they understand the levels of commitment and care they would need to be responsible for.

If you do not wish to be a legal guardian, nor have power of attorney over your child’s affairs as perhaps your child would be able to make decisions but would perhaps need some guidance, you can appoint yourself or another adult to be a health care proxy instead.

Should your child object to a named guardian or is not in a position to agree to having a legal guardian, then the matter will most likely be decided by a probate court judge.

Write a Will


Again, this goes back to setting up a special needs trust. Make sure that all of your assets and estate goes to the special needs trust as without a will, a probate judge will name your child as the beneficiary and push your child over the threshold for Supplementary Security Income and Medicaid.  If you need help it might be advisable to approach a law professional.

You can also name the guardian you have chosen for your child in your will.

As making a will to include a special needs child is not something that can be done in an off the shelf will writing kit, it would be advisable to hire a lawyer who specializes in people with special needs and who would be familiar with your state’s laws surrounding people with disabilities.

Once you have your will finalized, give a copy to your lawyer and then distribute copies to any guardians you have named within your will.

Name a Trustee


The trustee will be the person who is in charge of the special needs trust once you are gone. This could be a bank, an attorney, a judge, a family member or an individual you trust. 

The trustee will be responsible for making sure that the money from the trust is spent exclusively on your child’s needs and any services, therapies or educational programs that you have specified or that become necessary for the care of your child.  It is important to note that your child’s legal guardian cannot spend any of the money held within the trust with out the permission of the trustee, thus making sure that the money is appropriately spent and will not be wasted on things that may not be appropriate or necessary for your child’s needs.

It is advisable though not to use the same person as you have named as legal guardian as this will ensure that everything is checked and that all finances are handled fairly.

Plan for your child’s independence


At the age of 21, 22 and even 26 in some states, education stops for children with special needs in the United States and you will need to decide what is to happen after this. Do you want your child to still live with you at home?  Is it possible for your child to go into independent or shared living?  If this is the path you want to take, then you need to start looking at homes and house shares.  Investigating different companies and looking at what each benefits package has to offer. Also, it is a good idea to apply to any waiting lists early to avoid disappointment should you find a placement that is perfect for your child.

Compile a Letter of Intent


Although this is not a legally binding document, it is helpful for you to outline your wishes for your child if anything should happen to you. This is your chance to be specific. If your child has a set routine that you would like continued then write it down in detail. If there are special dietary needs, or methods and educational needs that work well for your child, include them in your letter.

Include in your letter and medical support your child has or doctors and medical professionals your child is familiar with and also any medication they take and their schedules and dosages.

Once you have written everything down, make sure that you keep a copy, put a copy with your will and give a copy to any trustees or guardians you have appointed and make sure that the letter stays current by revising and updating it either every year or whenever any new medication is started or a new program is put into place for example.

As this is not a legal document, then it does not need to be seen or held by an attorney and you can change it as often as you want.  It will also cost nothing to compile and doesn’t need to be advised upon my a legal professional.

If you feel you need help, then get some!


There are many firms that offer financial planning for special needs children. To find one, ask the human resources department of the company that give advise you on your benefits package as they may offer this service.  Other areas you can try are the Special NeedsAlliance or the Academy of Special Needs for a referral to a professional special needs financial planner in your area.

A special needs advocate is also someone who will help you through some of the red tape and loop holes, file paperwork and generally support you through applying for help.  To get in touch with an advocate try approaching schools and colleges that offer special needs programs and ask if they can put you in contact with an advocate.

Create a contingency savings plan


It is always a good idea to have some put aside in case an emergency should arise. By saving up as much as you can as often as you can, you are safeguarding against any future financial problems.  It doesn’t matter if you are not in a position to save much each month, as even little amounts will soon mount up.

Other help available


Look into other help that may be available for your child. Look up your local social security office website and see if there are any benefits that you are entitled to that your child does not yet receive.

The United Healthcare Children’s Foundation do offer grants for eligible families. It is always a good idea to check with them to see if there is a grant available for your child. It may be an idea to supplement any medical insurance for special educational or medical therapies your child may need with grant money supplied by the United Healthcare Children’s Foundation.

It is also worth looking into opening an ABLE account for your child. This is not taken into account when assessing the $2,000 threshold for Supplemental Security Income or Medicaid and  is a tax free growth fund to help with housing costs, medical treatment, legal fees or educational costs.  Be aware though that there is a maximum annual contribution limit of $14,000 of tax free savings to this account.

Help can also come in the form of a medical professional such as your family doctor who may be able to help to navigate the mine field of medical costs.  Also, social workers will help you to plan for your child’s future and will lobby on your behalf.

It is also a legal requirement for all schools to offer a free and appropriate educational pathway for children with special needs until they graduate under the Individuals With Disabilities Education Act (IDEA).  In addition to this, the schools must fund private services if it is not able to meet your child’s educational needs.  [email protected] is a program that informs parents of children with special needs of any educational benefits that are available to them through their child’s school.

IDEA also has a program in place for children with special needs starting at the age of 14 and states that the school must provide cross over benefits to help parents of children with special needs to understand the options for their child once they have left high school. To find out more about these benefits, speak to your child’s school’s resource coordinator and discuss with them what you would like to happen once you’r child leaves school.

Another useful resource for finding programs and support is thearc.org. Your local Arc chapter will help you to learn what educational and therapy benefits there might be in your local area to help support your child after they leave school.

Emergency Funds: An Ultimate Guide

Financial Emergency Fund Challenges and Solutions

The American Dream for the past 60 to 70 years, ever since the Great Depression, has been that money can buy everything, including happiness. Buying brand name items has become a way to be seen as successful, the person who has it all.

Whether a Ford or a Rolls Royce, at the end of the day it is just a method of transport designed to get a person from A to B. Walking or a bike or public transport will often serve just as well, and cost far less.

Emergency Fund
Saving money hasn't been a priority for many people for a long time. We've become a culture of people who spend our entire paycheck before we've even deposited it into the bank. In many cases we're over extended, in debt to credit card companies which charge exorbitant interest. Many Americans struggle to pay the bills each month, even though most of them earn more than the Gross National Product of many third world countries.

If you are struggling every single month to meet your expenses, your obvious question is: How on earth are you going to be able to save money for an emergency fund for your household to cover unexpected expenses?

The truth is that it is exactly this type of situation and this lifestyle that makes a financial safety net a must. What would happen if you or someone in your family lost their job? Or had a medical emergency for themselves or a beloved pet? Where would the money come from to pay rent, food and electricity? Or doctor and hospital deductibles and vet's bills?

Maybe you think the answer is credit cards. That's a common financial emergency fund for many people, but in reality, it only makes the situation that much worse. If you don't pay the bill by the end of the month, interest rates start to mount up. If you pay only the minimum each month, you are looking at paying off your credit cards for the rest of your life.

Now we will take a look at the biggest challenges many people face when
trying to create a financial emergency fund.


They include:

  • Existing Debt 
  • A Tight Budget 
  • Bad Spending and Savings Habits 
  • Being Unsure of How to Start 


Existing Debt

Statistics tell us that the average credit card debt in America is now over $8100 per household as of  February 2018. This is the average. Some people don't owe anything; however, many people owe much more than that. 

Debt has become a fact of life for many. The recent financial crisis felt around the world has made many realize that debt is costing them more than they can ever imagine. It is putting a mortgage on their entire future. For example, many employers now run complete background checks on prospective employees. If they discover a bankruptcy or excessive debt, they might think twice about hiring the person, even if they are the best one for the job. 

In addition, banks and other mortgage lenders, and landlords you would be interested in renting property from, also do extensive financial background checks now. Therefore, if you are carrying any debt of any kind, be sure to start paying down your debt as quickly as possible. 

Be sure to check your credit report. If there are any errors, make sure you challenge the report as soon as possible and take steps to get it cleaned up. It is also a handy way to make sure that you have not been the victim of identity theft, which can cost people thousands through no fault of their own. You are entitled to a free copy of your report from each of the debt reporting agencies, so as a New Year's Resolution each year and to remind yourself, check your credit report and try to improve your score each year. 

The other key step to take is to pay off any outstanding debt as quickly as possible. Make sure you pay above the minimum and pay not only on time, but early. If you find yourself With any extra at the end of a month, and your debts are still high, put some into your emergency fund, but also make an extra payment to the credit card with the highest interest rate, rather than put all that money into savings. 

An emergency fund is extremely valuable protection for your financial future, but remember than any interest you might get on money accumulating in the savings account is going to be much lower than the amount of interest the credit card companies are going to charge you to carry the debts that you owe. 

This debt reduction and elimination plan often means that savings will put on hold. While that may have been recommended a short couple of years ago, most experts now agree that you must pay attention to both, paying down debt while still making sure you have a cushion in the form of an 
emergency fund. 

Financial expert Dave Ramsey recommends putting your debt payoff plan on hold until you've saved $1000 in cash. You should still continue to pay the minimum balances during this period so you don't incur any fees or ruin your credit score. However, keep putting money away each week until you reach that $1000 goal. Ideally, you'll have $1000 saved in six to eight weeks maximum is you are strict with yourself. It is good discipline, and real money you can use if there is an emergency at any time. Even a few hundred in savings in the bank as a cushion is better than nothing, after 

If you cannot make the minimum balances and save that much money, aim for $500 in savings. Then you can resume your debt reduction plan and slowly add more to your emergency savings account at the same tine. $1000? Because this is generally enough to cover most household emergencies. If your water heater breaks or you need a new set of tires for your car, $1000 will cover it. You won't have to go into a ton of debt or run up even more on your credit cards. 

However, Suze Orman recommends a more realistic emergency fund, one which will cover a full 6 months of household expenses, should the worst happen and you lose your job or become ill. For most people that would seem like an astronomical number, but check out your latest credit card 
statements before jumping to that conclusion. 

On the second page of the statement, you will see the total amount of interest and fees charged as a year to date figure. If you look at it and see more than $500, you've got a high interest rate card and chances are a high balance, and therefore a high debt to wages ratio, a perfect excuse for many card companies to send your card's interest rate soaring even higher. 

Now add up all those sums for all the cards you have. What could you have done with that money instead of give it to the credit card company? What about any overdraft fees on your account? If you don't sit on top of your finances, they will soon overwhelm you. That IS more money lost which 
could have gone into your emergency fund. 

Therefore, it pays to follow up on all your money at least once a week, to see where it is going and how well you are sticking to your budget. Often it does not require a lot of intelligence to keep track of your finances, just a lot of organization. 

If you don't have a budget, well, there is your place to start. Once you know how much you really have coming in and how much going out, you will then be able to plan your savings and especially your emergency fund. We have included a sample budget in an appendix at the very back of this 
article for easy reference at any time. Use it to start calculating your income versus your continuing monthly household expenses, so you can see what room you have, if any, to start saving for an emergency fund. 

If there is no room, then you are dealing with excessive debt, in which case, we will look at some strategies for this in the next section

Dealing with Excessive Debt

Being in debt is not desirable - especially in today's economy - yet most Americans are in debt. It is not impossible to get yourself out of debt, however. Many options exist that can help you compile and pay off all debt with some advance planning. With a plan and determination, you may find yourself getting rid of debt faster than you thought possible. 

Debt consolidation is a method of combining all of your credit card payments and loans into one lump sum payment each month. This can make your life easier because instead of tracking multiple payments and due dates, you will be tracking only one. This does not typically apply to a mortgage or car loan, although there may be specific options for those types of loans. 

Debt consolidation focuses on credit cards and personal loans. The amounts are consolidated into one lump sum, and a payment schedule that fits your budget is worked out between you and the consolidation company. This may not be an option for you, however, if you do not have enough debt. Most debt consolidation companies require a minimum of $5,000 to $10,000 in unsecured debt in order for you to be considered. 

If student loans are a problem, there are a variety of new options available for repayment. One of the most popular options is the income based repayment. The income based repayment plan Will work on the basis of your salary minus any expenses you incur each month. 

Other payment plans exist as well. These include the extended repayment plan, which will extend your payments up to 25 years, and the graduated repayment plan, which will start out with low interest and then increase your repayment every two years for up to 10 years. 

Be sure to do the research in regards to the types of payments available to you. Most student loan companies will work with you during a hard time to create a plan that meets both of your needs. 

Debt cancellation is also a good option. If you are in default on any of your credit cards or they have been turned over to collection agencies, this is the time to settle them for up to 50% less than the balance. 

Call the collection agencies and speak with a financial representative. Tell them what you can afford to settle the debt for and they will work out a plan with you. If they are unwilling to accept your settlement amount, they will continue to work with you on lower monthly payments until the debt 
is settled. There are scripts online that will tell you exactly what to say, such as at America's Debt Diet. It may sound terrifying to have to do this, but the alternatives are usually going to be much worse. 

Getting out of debt and becoming a debt survivor can be a difficult path. However, with a little bit of research and guidance, you will be surprised at how easy it can be to choose a debt repayment plan. Whether your issue is with credit cards, personal loans or student loans there is an option out there that will help you become a debt survivor. 

Above all, read the fine print before deciding on any of these methods of reducing debt. For instance, a debt management service may charge high fees and if the amount is small, you should be able to take care of paying down the debt yourself

Avoid so called debt management services that are really just offering you a lump sum loan, or a home equity line of credit. Your home is at risk if you do not keep up the payments. In many cases the interest rates will be higher the worse your credit score is and the more trouble you are in. 

To get started with debt consolidation, you will need records of all of your debtors, that is, anyone you owe money to, from credit card bills to medical expenses. You will need the bills for at least the last three months, plus your pay stubs. 

You should also call up the customer service number on each card to get a current balance on each and also check your credit report. If you are behind on payments, note that down too. 

Next, list your cards in order starting with the highest interest rates and then the smallest balances. Aim to pay those off first and then put the cards on ice, that is, not use them, but do not close the accounts. 

Keep one card in the event of genuine emergencies, such as one that gives you cash back on purchases or has the lowest interest rate. But otherwise, plan to pay down the debt in a structured way, even if it means giving up some luxuries for a while. 

Most credit cards sites now have a calculator that will help show you the results of paying even just a little bit more than the minimum each month. So if you use the calculator and can see yourself paying off all your credit card debt within a year to two years, chances are that you can do it yourself and not need a debt management service. Three to four years, you can try it yourself too, though it will be harder. More than five years, the service will probably be worth its fees if it can do that in a more speedy manner. 

Check your local area for free debt management credit counseling, especially if you are having trouble paying your mortgage. HUD.gov can help you with your mortgage issues and also refer you for credit counseling

And for anyone who has considered bankruptcy as their only way out of debt, think again. Many people believe that filing for bankruptcy will be the 'solution' to all their problems. In some cases, it will give you more problems than you have ever dreamed of. 

In the early years of this century, bankruptcy was a fast fix, with debts being wiped out at the stroke of a pen in the bankruptcy court, and banks and other lending institutions being able to write off the losses as bad debts. 

Now in 2018, there is no such thing as an easy bankruptcy. You will need a lawyer, who will have to be paid, and if there is any hope of you paying off your personal debts, you will be issued with a payment plan you will need to follow. 

While the creditors might make a deal for a lesser amount owing than is on the books, on the whole, you will have to pay off all your debts in a structured way. If you get in trouble with the tax man, they will garnish your wages from your employer--that is, they will get their share of your salary every paycheck until the money is paid off, before you ever see a dime, and you will have to live on whatever is left after they have taken the back taxes. This can leave you with a real financial struggle on your hands every month until the debt is paid. 

The biggest consequence of bankruptcy is what it will do to your credit history for the next seven years. In addition, it can even affect your ability to get certain forms of employment. Jobs in which money have to be handled on an ongoing basis are going to want to run an extensive background check and will certainly be very leery about hiring anyone with a bankruptcy in their past. (The same can be true of your bad credit rating at this very moment, even if you are not yet in serious financial 
trouble.) 

Your credit history can also affect your ability to rent an apartment, let alone get a mortgage or any other form of credit (read more here). Therefore, bankruptcy might seem like a short term solution, to get the calls to stop and just make the debts go away, but it certainly has long term consequences. If you have fallen on hard times due to the recession, you are not the only one. If you have fallen on hard times due to credit card debt then there are no fast fixes. It took you some time to get into that position. It will therefore take you some time to get out. Bankruptcy should be seen as a last resort, not a magic wand. 

So let's look at another reason why people get into debt in the first place: a tight budget. 

A Tight Budget

Even if you don't have any current debt, or much current debt, you may think that your budget is too tight to save any money each month. Maybe you're literally living paycheck to paycheck. Many families are at this point in time, and of course unemployment is not exactly untold riches. Yet if you are not carrying any debt any longer because you have made a conscious effort to pay it all down, then there is still an opportunity to save. 

Look at your budget and examine what you can eliminate. For instance, maybe you can start biking to work or carpooling, in order to save at least one tank of gas each month. If you estimate one tank of gas to be $50, then that amount can go toward your financial emergency fund. 

Do you eat lunch out most days? Cut it back to perhaps once or twice a week, brown-bag on the other days, and put the saved money in a jar to deposit in the bank at the end of the week. Chances are you will have at least $20, which can add up to $80 a month. 

Can you eat dinner at home more day in each month? Can you skip the morning coffee from the local shop and make it at home, and carry it to work in a thermal travel mug? Put all the money in your jar that you would usually spend on these items, and see how it all adds up. 

Carry a small piece of paper in your wallet on which you note down everything you spend. Leave the credit cards at home. Only buy what you can afford from the cash you have in your wallet. These are just a few of the ways to keep yourself on a tight rein to find some extra cash that would otherwise slip through your fingers. 

We are not talking about completely depriving yourself to the point at which you will be miserable, but we are asking you to take a long, hard look at what you are really spending your money on. Savings in the bank will give you a lot more sense of freedom than mindless spending on eating out all the time or drinking with buddies every weekend. 

Even if you only saved $1 a day, that would be $30 a month, $360 in a year. Most of us can do better than that if we cut down on our wants and focus on what we really need, for the sake of our financial future. 

Making sure we have an emergency fund is just common sense. Any other savings you can set aside for retirement college savings, and so on, are all ways to build a solid financial future for you and your family. 

Saving, not spending, needs to be your key strategy. Making money, not frittering it away, can be a challenge and requires some mental rewiring, but luckily, you are not alone. In addition to the experts out there that can help you plan and stick to a budget, everyone these days is looking for ways to save and earn extra income. 

There are a variety of titles at Eternal Spiral Books which serve as practical guides to help you meet your financial, business and employment goals, by ourselves and other exceptional colleagues. Whether you need Smart Spending Strategies or How to Turn Your Hobby into a Small Business or 
find Angel Investors, be sure to check out the latest offerings at EternalSpiralBooks.com and at Amazon

Bad Spending and Savings Habits

One of the toughest parts about creating a financial safety plan is not touching it until there is an emergency. That new flat screen television is not an emergency, nor is the new dress you want to buy for your first date  with a hot new guy, or you daughter's prom dress. All of these expenses 
can be predicted and planned for. 

The only true emergencies will be illness, death or job loss, things that no one can really prepare for in some senses, though they certainly can in others, such as by having good insurance coverage. If your family would be left in desperate circumstances if you were to ever lose your job, become ill, or die, then be sure you are adequately and appropriately insured. 

Budget insurance premiums into your household expense sheet and stick to it, and also keep saving for emergencies. 

If you have bad spending and bad savings habits, now is the time to improve them, to build your emergency fund for your household finances. 

Make sure you put your emergency fund in a separate account that will be relatively inaccessible compared with your personal checking account but not so inaccessible that you would have a hard time getting hold of the money if an emergency did occur. 

You don't want to put your money into an investment that can't be touched for a number of years without penalty. However, you don't want access to be so easy that you're tempted to spend your emergency fund frivolously. 

Online banking is one easy way to set up your savings account and put money into it easily. Transfers take a few days to withdraw, which means you may be able to resist spending it impetuously. 

In addition, you can set up automatic transfers from your checking account into your savings account. This automatic withdrawal eases some of the burden of saving for your emergency fund. It's gone from your account before you even have the chance to spend it. Once it is in your emergency fund savings account, pretend it does not even exist. Put the debit card that will come with it somewhere safe, and no matter what don't be tempted to tap into it unless a true emergency occurs. 

Not Sure How To Start Saving

Finally, one of the biggest challenges is knowing how to start saving. Many people just don't have a handle on their accounts and their finances. They spend money, use credit cards and pay bills without any sort of plan or budget, and hope that things will just work out. They spend almost all of their salary each month, and worse still they get into debt by using credit cards to buy things that are supposedly a great bargain, or that they really only want on a whim rather than genuinely need. 

If this describes your approach to dealing with your finances, then your first step is to get a handle on your finances. That begins by balancing your checkbook and creating a budget. As the old saying goes, "If you fail to plan, you plan to fail. " Your budget is not a straitjacket. It is nothing more than a financial plan you can live by. Your earnings level is not a judgment upon you as a human being. But it is a matter of what you can afford to spend, and what you can afford to save. 

Determine exactly how much you have coming in each month and how much you spend each month. Create categories that are unchangeable, like your rent, electric, and insurance bills. 

Also create categories that are flexible, like your monthly dining-out expenses. You may want to whittle down that figure to start putting money into more meaningful things like buying more groceries and cooking those meals at home, and taking the rest to start paying down debt and building an emergency fund. 

There are many online budget calculators available, and ones you can use on your computer which you can edit easily. Online is useful, but it is best to have a budget on your computer at all times that you can adjust as needed. We have provided a handy suggested one at the end of this article for you to access at any time. 

You can also use a simple sheet of line items to track your expenses for a week to two weeks,especially if you really have no idea where all your money has been going. It will help you hone in on the places you can save and help you come up with a reasonable plan to pay down debt and start to save with the help of a realistic budget. If you get paid once a week, track for one week. If you get paid every two weeks, track your spending for two weeks. 

So far in this special report we have covered the four most common challenges to creating a financial emergency fund: 
  • Existing Debt 
  • A Tight Budget 
  • Bad Spending and Savings Habits 
  • Being Unsure of How to Start 

If you're experiencing one or all of these challenges, don't worry. All it takes to get on financially sound ground is a plan and a commitment. Find a dollar a day, set it aside, and save it until you reach your goal. Use online banking and automatic withdrawal and a savings account which bears interest, and see the money start to add up. 

You emergency fund will start to snowball sooner than you think, especially if you have no debt. If you still have debt, pay it down first as a matter of priority, with a small amount in savings for a rainy day. It does not take much to start your emergency fund. Which brings us to the next key question readers always ask us— Exactly how much should you save? 

How Much is Enough When it Comes to an Emergency Fund?

As we have said, there are a number of suggestions out there as to how much is enough. From $1000 to Suze Orman's suggested 6 months worth of expenses, there is a lot of leeway. 

Visit any financial advisor or read any financial magazine, and you'll see a variety of recommendations on how much to save for emergencies. Again, it would also depend on the nature and extent of the emergency. A vet's bill can add up to over $10,000 in only a few short days; even with insurance and deductibles, it is still a hefty amount of money to pay at short notice. 

Dental bills for a broken back tooth, likewise. Front tooth, even more expensive! Take my word for it. I have personally had all these situations and more in the past few years, and even with insurance, it  certainly added up. 

So at the very least, I suggest that should have $1000 in the bank at all times as a reserve. That is not that hard to come up With if you plan carefully and commit yourself to growing your savings whenever possible. 

Quit smoking, walk to work, gather tin cans for recycle, whatever it takes you will find your perceptions will change as you seek to meet that savings goal. Once you reach that goal, you will most likely be so happy with the feeling of confidence and relief that this financial safety cushion gives you, you will want to save even more. 

Suze Orman's is a worst case scenario budget: what if you were unable to work? Lost your job, in other words, or worse still, became ill? Let's look at her six month emergency fund next. 

Coping With the Loss of a Job and other Major Financial Loss

The rule of thumb for this account is to save enough expenses to cover all of the essentials if you were to be out of work for six months. Some experts say it can be as little as three months while others recommend saving for an entire year. Three months just doesn't make sense with the current job market. 

It can take months, sometimes even years, to find employment, as many people have discovered. As of the writing of this article, in late April 2018, many people have exhausted the 212 weeks of unemployment that  they had been given - many ran out at Christmas in December 2017. We do  not know what the effects of this will be or whether there will be extensions, but it is a sobering reminder of just how deep this recession and financial crisis is, for all the talk of signs of recovery due to a bit of consumer spending at Christmas. (Which also made no mention of the prices they were paying or the profits for the companies. More than likely they were bargain sales items more than full ticket ones). 

The higher up you are on the totem pole, the longer it will take to get a position paying even a remotely similar salary. The executive job site The Ladders guesstimates it takes at least 6 months for top executives to find a new position: 6 months if you are earning 6 figures. Anyone we know who 
has used the site has also told us that the six figure jobs are few and far between. Even if they get an interview, they are not being offered $100,000. They are lucky to be offered $60-$70,000. 

So even when there are new jobs available, with the huge pool of qualified applicants, they can afford to be choosy, and can go as low as they like in the sure knowledge that people have to eat. Again, we do not know the  long term economic impact of such depressed wages on the economy as a whole, but we can certainly see it on American families in particular. There  is real suffering out there. 

And suffering for pets as well, who are getting abandoned on the streets because, as one shelter told us, people can't even afford the $30 surrender fee at the Humane Society. They will pretend to 'find' the animal, or they will just tie it up or leave it in a carrier outside. Worse still some people have left their pets behind in foreclosed homes, thinking that the bank would go there straight away to repossess the property, only to have the pets suffer from a lack of food and water for days, even weeks, to the actual point of death. 

Times are tough, but things should not be this bad. It is a question of  compassion, and also common sense. Six months at your existing salary level seems the best way to calculate what you need to save in the event of  a financial catastrophe and to meet all your obligations and responsibilities, including those of your pets, in the same way as your  children and any other family members you might be caring for. 

So, how on earth can you achieve this? It may sound strange, but start looking for a new job. If you think your job is at risk, be proactive. In the process of looking, you can take on a second job or freelance work and save all of the income you can from it. 

Consider starting your own business on the side as well, to make the most  of your talents. Do not put all your eggs in one basket if there is even the  remotest chance that your job won't be there in a month or six months. 


Ways of Making Extra Money

It may seem like the end of the world to lose a job for many people, but the good news is that it is not necessary to have a full time job in order to earn income. There are plenty of ways to earn money without going the traditional route. If you have talents or skills, you can put those to use to earn income. There are several ways to put your household and your knowledge to work for you to either
add a new stream of income to your household, or replace lost income. Read on to find out more.

Sell your own items: This can be a combination of belongings that you have lying around the house or items that you make yourself. Do an inventory of your belongings. Chances are you will find many items that you no longer use or want. You can sell these items either on eBay, Craigslist, Amazon or
another similar venue. If you make handmade items such as stationery, knitted goods or similar crafts, you can sell these for profit and make that your source of income.

You can also donate them to charity, such as to the Salvation Army. You will be able to get a receipt and should adhere to their guidelines for pricing, but the amount of money can be deducted from your taxes, resulting in savings on unwanted items.

Write for money: This may seem like a job in itself, but it truly is not. You are free to write when you want to and on the topics that you like. Man websites hire freelance writers for content and there are some publishers out there who hire writers on a freelance basis with a lot of work available. You will need to pass a writing test and be sure that your work is original content. Payment is anywhere from a flat rate to revenue share on the website, with the more articles you have up online giving you more chance of earning more page views and thus more cash.

If you have a talent such as gardening or musical knowledge, use that to your advantage: Offer gardening services or musical lessons in your neighborhood and others close by. You can schedule the musical lessons at your house and offer gardening services at the customer’s home.

Tutoring services are always in demand: Parents who have trouble understanding their children’s
homework problems are likely to bring in a tutor. If you have a college education or advanced knowledge of subjects such as English and math, chances are someone will be looking for your skills.

Sell other people’s belongings: Oftentimes people are not skilled at selling their own items, so they hire someone else to do it. Payment is normally a percentage of the selling value of an item. You
can sell the items in any manner that is acceptable to the owner.

Freelancing: There are a number of freelancing websites that match people looking for short term projects with those who need them completed. Just be careful of excessive fees.

Consulting: If you have been working in high-level positions for a while, consider offering your services as a consultant to similar businesses. Just make sure there is no non-compete clause in your contract.

Leveraging Your Severance Money to Create Your Own Business: If you got a good severance package, put some of the money to use to start your own business. In this way any income you earn from freelancing and so on can be offset against any deductible expenses related to running the
business. This has legal and tax advantages, through separating your personal finances from your corporate ones and allowing you to take more deductions than a sole proprietorship would be permitted. An LLC, Limited Liability Company, is easy to set tip and inexpensive. Rules vary by state so be sure to follow the rules.

Become an Affiliate Online: An online affiliate sells products for large retailers and prominent companies in exchange for a commission. Many people who have a website, and even those who don’t, post specially coded links on sites they usually participate in, and if people click on the link and either give their email address or other personal information (pay per lead) or buy something (pay per sale), you can get a flat fee or percentage commission. See Joan Mullafly’s great title on how to get started as an affiliate even if you have no website for a step by step guide on how to get
started in this multibillion dollar industry. The best thing is, once you set up the links, they will keep earning for you around the clock, 365 days a year. If you are crunched for time as well as money, consider becoming an affiliate marketer.

If you brainstorm, you can come up with several different ways to make money without having an actual job. Whether you decide to go into business for yourself or put your talents to use in helping others, where there is a will, there is a way.

You may find that you have to use several different activities in order to make ends meet or to build your savings accounts, but it is possible with some imagination and effort.

Six months can be calculated in round figures. If you make $30,000 annually, then the goal will be to save $15,000. Based on your budget and financial standing, this can take a while to save. But remember, once you’ve already saved $1000 and you’re on your way to paying off debt if you
haven’t already, you will be able to accomplish this goal too.

With interest, over time the amount you are saving will grow. Add in financial gains like tax returns, bonuses at work and any other money you can save rather than spend as soon as you get it, and you’ll reach your emergency fund goal in no time.

It may seem like a bad time to talk about a raise with your boss, but this is another way to save money. Put any extra that you earn right into the emergency fund. What you are not used to, you will never miss.

Because you’re not going to need quick access to this savings account, you can put it into a money market fund or other account with higher interest rates. You can earn around 5% with many online banking money market funds, which can all add up over time. Online banking terms are a lot more flexible than they used to be, and there are CDs that will allow a limited number of withdrawals, such as one or two, without any penalty.

As I have said, automatic savings into an interest-bearing account can help it grow without you feeling the pain. Once you are out of debt, the money you were paying to the credit card companies in interest and fees can also swell this account.

Just remember not to close your credit card accounts once you pay them off. Your creditworthiness is determined in part by the extent of your line of credit. And once you do pay it off, do not be tempted by all of the great credit card offers you will be bombarded with.

The only kind of credit card you should carry should be one that gives you cash back on your purchases or gives you points towards something you and your family could really use, like a 529 college savings account for college savings, and for repaying existing college loans which qualify for the program (see my special report on that subject for more information).

Planning Your Financial Future

The one question you’re probably mulling over is, “How am I going to save all of this money in an emergency fund and also still save for retirement, college, and live day to day?”

The answer is to make a plan based on your needs and priorities. For instance, if your child is about to go to college in 3 or 4 years, that should be a bit higher on the list of priorities as compared with them planning to go in 10 to 15 years.

Some financial experts recommend saving in tiers. Focus on tier one, your household emergency savings account first. Secondly, save for the loss of a job or a major financial emergency, accruing 6 months worth of living expenses. Third, save for retirement. College savings, if you can manage it, is a last priority. As they say so often, “You can’t take out a loan for retirement.” We would add that you can’t get scholarships for retirement either.

The key to knowing how much you can save and how long it’s going to take you to reach your goals is to create a long term financial plan and budget accordingly. Your budget will tell you not only what to expect day to day, but also help you set aside money for all of your financial goals. It is all a question of priorities, and balancing them.

Again, a second job, freelance work, or starting a business of your own at home are all ways to improve your financial situation. See our small business titles for ways to start your own successful business even if you have very little cash to spare.

Beyond Your Emergency Savings - How To Be Prepared 

A financial emergency fund is about more than setting aside money. It’s also about protecting your money and your finances. Asset management is not something they teach in school or college, but it is certainly one of the keys to financial freedom and all it takes is a little time and effort.

Here’s a list of the documents you should have in place and the measures to take to protect you and your family’s financial future:

  • Will and Testament
  • Living Will/Medical Directive
  • Trust
  • Home Insurance
  • Health Insurance
  • Life Insurance
  • Auto Insurance


Other documents to consider:

  • Long term disability insurance
  • Long term care insurance 


Insurance protects you and your family against emergency. It is one of the most responsible and
financially sound decisions you can make. If you don’t have insurance, consider visiting with an insurance representative for a package deal. If you are insured,consider consulting a financial advisor or insurance agent to make sure you’re properly insured and getting the best deal for your money.

Additionally, a will and testament and a medical directive will ensure your requests are met (though do check the laws in your state to be sure just how much impact they have). A trust ensures your wishes stay out of court and in the hands of your family.

Make sure you have a list of all your accounts and who the beneficiaries are to be. Your 401k, 529 college savings accounts, savings accounts, CDs and so on should all be accounted for and kept an eye on.

Other items which you might consider to be a good investment might not be. Similarly, items you might take for granted such as clothes and computers, are a serious investment that you should take more than a bit of passing thought. In the next section we will look at some of the best ways to make your money stretch even further than you think.

Can Less Be More? Avoiding Consumerism

In the quest for living a more simple, and economical life, it can be difficult to make the necessary changes. It’s tough to know where to start. It’s also tricky to know where you should scrimp and where it makes sense to splurge. Here are several key ways that less can be more.

#1 Buy your clothing and gear off season.
This practice takes a little preparation and forethought. However it’s a great way to save tons of money. Buy your swimsuit for next year during the winter months from a closeout website. You can get a suit that once cost $300 for $30. The same holds true for exercise equipment and even home goods. You can buy that patio table and chairs for a quarter of the cost when you buy it on closeout during the fall and winter months.

#2 Coordinate your wardrobe.
Clothes are about two primary things, form and function. You want to look good and feel comfortable. One great way to make your clothing budget stretch further is to buy quality basic items like black pants, white shirts and navy or brown blazers. These items can be mixed and matched with other less expensive additions for a wardrobe that looks expensive and extensive but really isn’t.

#3 Get your pantry organized.
A well-stocked pantry can make a busy evening mealtime easy. Generally, when the family has to be in four different places at once, we tend to order out or go through the drive though. That’s expensive. A well-stocked pantry can turn it around. A package of pasta, a can of sardines in tomato sauce or anchovies in oil, and voila, you have a ten minute gourmet meal that can be eaten right off the stove or heated up quickly and easily. Additionally, pantry items generally cost a tenth of what it’ll cost you to go through that drive through, and it’s healthier too.

#4 Get rid of the landline, unless you really need it.
Most families have a landline and a cell phone plan. The landline rarely serves a purpose any more. You can save $30 to $50 each month by simply getting rid of it. And you can get rid of the cell phone contract by purchasing an inexpensive pay as you go phone and a Google phone number. Simply forward your free Google calls, text and voice mail to your pay as you go phone. You can save hundreds annually by evaluating what you really need when it comes to phones and phone plans. An unlimited plan for the whole family, for example, can save you thousands of dollars a years. Avoid being nickeled and dimed to death by texting and other fees (more like 20 cents each the last time we looked!) Sit down with your phone bill and see what you are really spending. Then comparison shop to save.

#5 Get rid of your car or downsize.
It may sound extreme, but many people are paying hundreds of dollars each month for a new car and a car lease payment. Stop for a moment and consider what you could do with that extra $300 to $500 dollars each month. A lot, right? In fact, simply saving that money for your emergency fund or retirement would put you way ahead of your savings targets in no time.

If possible, get rid of your car completely. If you’re close to town or public transportation, you can buy a bike for a few hundred dollars. You can buy a motor scooter for not much more these days.

However, if getting rid of a car entirely isn’t an option, consider down-scaling or reducing the number of cars in your household. A used car will take you the same places a new car will and it’ll save you thousands.

Finally, if you have more than one car, can you cut back? Can you sell a car? Cars eat up a budget fast, and down-scaling or eliminating them from your monthly budget is a great way to reduce financial stress.

#6 Cut down on cable.
Have you checked your bill lately? Chances are it costs a lot more than that ‘great’ deal you were offered last year.

Do you really need to have three thousand channels? See if there are ways to cut back and also explore other options such as the competition’s offerings, or ways to get a bundle or to un-bundle services you really don’t need after all. Ten dollars might not seem like a huge difference but when you add it to the other savings, it all adds up and is better than being ten dollars in debt.

Can you do more with less? Absolutely! These tips are only the beginning. Take a look at where you spend your hard-earned money and evaluate where you can cut back or modify your needs and still have all ou really need for a simple but good life.

Then put your savings into your emergency fund and once you hit your target, keep saving for your next goal, such as retirement or college for the kids, or even a great vacation one day.

Throughout this report we’ve discussed several types of savings to have in your emergency fund, and a tier based system, with savings allocated in order of importance to you and your family. We’ve also mentioned where to save your money depending on the savings type. In the next section, we will review your savings options.



Where To Save Money

Depending on how much you’re saving, how much access you need to the money, your tolerance for risk and how much interest you want to earn, there are a number of options to save your money.

These options include:

Interest bearing checking accounts:You can find access to this type of account online or with your local bank or credit union. Research bank fees and interest rates to find the best option for you. This is an ideal account type for a household emergency savings account of $1000 or less.

Money Market Accounts: These sometimes offer check-writing services and offer a higher interest rate than a standard checking or savings account. Some of them will even offer a debit/credit card for emergency access.

Money Market Funds: These are not FDIC insured but are generally safe investments. They tend to pay more than any type of bank account. There are no huge interest rates at the moment on these funds, but any interest is better than none, especially if you have paid down your debts.

CDs or Certificate of Deposit: These are Federally insured for up to $250,000 and have a good interest rate. However, you don’t usually have easy access to the money. They’re better used for long-term savings like saving for the potential loss of income. Many people build a CD ladder with the CDs falling due on a regular basis to take out the money if needed, without any penalty, or reinvest it if it is not needed. Time periods range from a year to five years, with the interest being highest on those of the longest duration of commitment. There is a new class of CD which will let you make a
withdrawal without penalty, so shop around carefully for the best deal for your circumstances.

What To Not Use To Pay For Financial Emergencies 

In an ideal world, we would all have a nice plump emergency fund and good savings for all of our needs, from retirement to college funds for the  kids.

Alas, this is not an ideal world, and especially in this economy, many people are feeling the pinch and struggling to make ends meet.

Therefore, an emergency can really propel them right over the edge into dire financial difficulties.

While it is tempting to do so, these are some of the ways you should  AVOID paying for any emergencies which might arise:

  • Credit Cards 
  • Home Equity Line of Credit 
  • Second Mortgage 
  • Tapping into your 401k or retirement plan 
  • Postponing key monthly payments in order to try to deal with emergencies 


Your financial emergency fund should be established to help you avoid falling into the trap of borrowing from anyone in order to cover any  emergencies which might arise. You don't have to borrow from yourself  and mortgage your future, or borrow from creditors to stay on solid
financial ground.

All it takes is willpower and some time and effort for solid financial planning. Even if it means sacrificing cable TV for a month or two, isn't it better to bank that $70 to $100 a month and have the peace of mind of money in the bank rather than a whole bunch more channels that you
most likely never even watch?

Looking carefully at your monthly expenses to weed out memberships that you never use, expensive phone plans With extras you never use, and cutting back on convenience foods and take away and cooking at home yourself, and brown bagging lunch at least a couple of times a week, can add up to big savings. If even one of these steps helps you find a nice tidy sum to put in your emergency fund, just think what trying all of them can do to your bank balance.

Your home is your most important investment for you and your family. Yes, credit card debt is serious and it can ruin your credit rating, but there are ways to recover from it. Homelessness is less easy to rebound from. Likewise, not having enough money to live on during retirement can mean disaster later in life. Think short, middle and long term for all your financial needs not just the here and now, and you will soon be able to get a handle on your spending, and get into an even better habit of savings.


Conclusion


Financial emergencies happen. They're a fact of life. When you're prepared for them, you can focus on getting through the tough times in your life without dealing with the added stress of financial insecurity, which can in some cases be so drastic it can lead to bankruptcy. Bankruptcy is not an
easy way to escape the debts you owe. It is a black mark on your financial future that will have long-term implications for at least seven years, if not many years to come in the form of not being eligible for a mortgage, certain rental properties, and various job and career opportunities.

You owe it to yourself, to your family, and to your future to take a look at your financial plan right now. Create a plan to:

  • Budget 
  • Pay off debt 
  • Save for minor emergencies 
  • Save for major emergencies 
  • Protect your finances 
  • Save for retirement 
  • Save for college for the kids 


Pay down your debt first. Then start saving. Use the three tiered approach, focusing on your goals in order of priority. Review your budget and meet your obligations to your savings plan even if it means making some short term sacrifices for long-term gains. Set the money to come out of your account with automatic withdrawals.

Use only bank cards or credit cards (preferably a single one for emergencies only) which gives you a low APR and/or cash back.

These few simple steps, and some time and effort will get you started on the road to a solid emergency fund and a more stable financial future. Start today and in only a few weeks, you'll be amazed at how much you have managed to save.

Take a second job, freelance, start your own home-based business, and watch your savings grow even more rapidly.

We hope this guide sets you on the road to building a solid emergency fund, and that you never have to use it. In the event that you do, at least you will know that no matter what disaster befalls you, it can always be worse: you might have no emergency fund at all to help you cope.

If you are living paycheck to paycheck at the minute and not really focusing on the future, remember, it is not a question of IF an emergency will occur, but WHEN. Arm yourself With the knowledge from this special report and take action TODAY, for a more secure financial future tomorrow. 

Debt Management: A Complete Guide

Debt ManagementAs we all know, debt is money that you owe someone. We all borrow money at some point, and it is not necessarily a bad thing. You may borrow money to go to college, start a business, buy a house or a car, or simply meet your daily expenses. The first two types of debt on the list can be looked upon as investments that can help you make enough to repay your debt along with interest, and save some money for yourself.

Even buying a house may earn you a fair amount of money if you sell it with a good profit a few years down the line. The last type of debt is an unproductive one, though. If not repaid on time, it will become an increasingly bothersome liability that you could well do without. However, the sad reality of our times is that too many Americans are far too much in debt than what is good for them. The fact that millions of people are sailing in pretty much the same boat probably does not make them see things in a serious light.

It is estimated that about 40% of Americans will not be able to rustle up even $400 if faced with an emergency! Based on the US average household, credit card debt stands at $16,748, which adds up to a whopping $779 billion nationally. What has caused this? There's a host of reasons like living beyond your means, spending like there was no tomorrow, thoughtless and wasteful spending, and having a wrong sense of priorities, which places instant gratification above saving for the future. This kind of lifestyle may be pleasant while it lasts, but clearly, it is not sustainable forever. The sooner people realize this, the better it is for everyone concerned.

You as an individual can choose to do the right thing and step out of this debt dance. Instead of rampantly spending on everything that you desire, spend only on what it is that you need and can afford after paying all your bills and saving some money for future use. Life is all about achieving a balance between what is important for you to have in life and the occasional indulgence and luxuries. Get this equation wrong and you could easily slide into a debt trap, which is unfortunately what millions have done.

One should think about the dangers of debt and desist from living dangerously. Unfortunately, this
is not the case. It has been proven from the fact that living under perpetual debt and beyond one's means has been depressingly common from the days of the ancient Romans and Egyptians right up to the present.

There are instances of nations living beyond their means and not biting the bullet, ending up resorting to the tough economic decisions needed to be taken to remedy the situation. Greece is a fine example of that. While nations have international financial institutions and even foreign governments to lend a steadying hand to some extent, individuals do not have that luxury and cannot allow their debt to reach unmanageable and catastrophic proportions.

This guide teaches you the skills to better manage your money and save, as well as extricate yourself from the debt trap that seems to have ensnared millions. It does so by guiding you on how to cut back on your expenses and eliminate debt by creating a budget and saving money. Getting out of a debt trap is liberating in more ways than one. Not only does it take a huge burden off your mind, it also frees you up to pursue your true desires in life.

Anyone can be weaned off the debt diet if they are ready to take the required medicine. This post delivers it by guiding you to take the right steps and measures to not only get a firm handle on your debt situation but also develop the ability to eliminate it from your life ultimately. For too long has the culture of easy availability of debt inured people of the need to talk to themselves and ask, "Hey, wait a minute. What am I doing? I am sinking in debt. I need to stop this mindless spending and start 
thinking of paying back." 

This guide will help you have that conversation with yourself and hopefully find all the right answers.

Setting Financial Goals 

When you talk about setting financial goals to help you get out of debt, you might want to rethink your strategy a bit. Instead of thinking of getting rid of your debt as your ultimate goal, think of one that involves doing things with your life once you are debt-free! This could be something like moving into a bigger house, traveling to all the places that you ever wanted, or having enough money for your retirement. Going about it this way keeps you motivated not just to knock off your debt, but also reclaim the life that you have always aspired to lead.

Debt has a fancier cousin, Capital. Unlike the former, capital does not have any negativity attached to it. We are, above everything else, a nation of capitalists. But we should not forget that even the premier capitalistic nations of the world can get into a debt trap if they do not plan and set sensible financial goals for themselves. Our nation's recent financial history is a sobering reminder of that. It is also a fine example of what can be achieved by sensible planning and the setting of financial goals. This is as true of individuals as it is of nations. The setting of financial goals is the first major step in the fight against debt.

Goals Should Be Realistic and Attainable 

While it is good to set financial goals to help one scale the mountain of debt, it is important that you go about doing it in a rational and achievable manner. The first thing you should do is to set goals that are precise and specific in terms of what you plan to do going forward, and what you hope to achieve by that. For instance, you may want to clear your credit card debt over a period of six months. Are you in a position to do so considering that it might leave you with no money for emergencies? Maybe a year is a better time frame.

Secondly, whatever steps you might have outlined should be quantifiable.

For example:

  • What is the exact amount of money you need to pay off your credit card debt in six months' time?
  • How will you break up the payments? Will you pay back equal monthly sums or in some other manner? 


Thirdly, it is important to set goals that you can achieve. If you plan on achieving more than you realistically can, you are bound to deviate from your stated objective, which could lead to frustration and loss of focus. If you had planned to pay back $5,000 of your credit card debt in six months' time and manage to achieve only half of that figure, you are obviously at sea regarding the flow of your funds. This doesn't augur too well for your attempts at eliminating debt.

Lastly, there is no point in setting a financial goal if you don't set a time frame and adhere to it. That is the whole point of setting financial goals, Isn't it? If you plan to be totally debt-free by the end of the year, you must factor in all the information pertaining to your incoming funds and expected expenditure within this period for you to work out a debt repayment schedule that helps you achieve your target.

Create Monthly Financial Goals 

A good way of getting a total handle on your debt repayment situation is to add up all your debt first. The next step is to set a realistic time frame in which to knock it off. Once you have done that, calculate the total amount (inclusive of interest) that you need to repay. Lastly, divide this figure by
the total number of months in which you plan to pay back the debt.

Having this organized monthly payback plan in front of you will give you the most precise idea of the schedule you absolutely need to adhere to until the time your debt gets totally eliminated. It always helps to be on top of a situation with regards to facts and figures, if one is serious about its resolution. Creating monthly financial goals does just that.

Smart Spending 

Rather than curtailing your spendthrift habits, it would make far more sense to learn to spend smartly. You might scratch your head and wonder what it is that you could do differently to fall into the category of the smart spender. It so happens that there are indeed a number of small steps you
can take to curtail the needless outflow of money. These include the following important ones:


  1. Draw up a monthly expenses budget: This helps you obtain perspective on your spending and helps you make rational decisions. If you are the kind who has no idea as to how much you spend monthly, drawing up a monthly expenses budget will be a much- needed reality check. 
  2. Use credit cards sparingly: This will help you to overcome your habit of impulsive spending, which if  left unchecked can ratchet up debt like anything. Try keeping your credit cards locked up for a very long time and see how that impacts your spending pattern in a positive way. 
  3. Negotiate a lower rate of interest with your credit card company and always pay your bill on time to avoid late payment charges: This is bound to have a salutary impact on your debt and will also prevent a similar escalation in the future. However, this will only happen if you make an attempt to talk to your credit card company and ask. It is not going to happen on its own. should the credit card company want you to pay them less? 
  4. Always use your bank's own ATMs to withdraw cash so as to save on charges that are levied in case you use another bank's ATMs: On average, most banks charge about $2.60 as a withdrawal fee to customers of other banks. In addition, your own bank will charge you $1.53 for using an ATM which is not theirs! That's a lot of money you can save by simply using your bank's own ATM. Instead of making many small withdrawals make bigger and fewer withdrawals. 
  5. Spend less on recurring expenses like magazine subscriptions and cable and cell phone bills: Seemingly small recurring expenses add up to quite a lot over the months and years. You would be amazed at how much you would save if you had a good and rational look at these and made an attempt to trim the fat. For instance, in the digital era, you can simply cancel your magazine subscriptions. If you don't spend all your waking hours watching television, opt out of that super-premium cable package of yours. Likewise, you could opt for a cheaper cell phone plan that is more in tune with your actual requirements. 
Apart from these, there are certain specific measures you can initiate to start knocking down debt in a systematically concerted manner. Here is what you can do:

  1.  Make consistent small payments towards your credit card debt: Throwing up your hands in despair because you face what you perceive is a mountain of credit card debt won't solve anything. Take proactive steps to knock back your debt by making consistent small payments regularly. These payments could be made on a weekly or monthly basis, depending on what you are comfortable with. In time, you will gradually see your debt reduce. It makes a lot more sense to pay back a debt of $5,000 in two years, making weekly payments than paying back only the minimum amount for the next quarter of a century. 
  2. Pay back faster: This makes a lot of sense when you are repaying a mortgage. Try and accelerate this process by repaying more than just once a month. Try a biweekly or weekly mode of payment. Not only will you pay back the debt faster, you will also save interest. This could just as successfully be used to reduce your credit card debt. 
  3. Don't be a spendthrift:  Impulsive spending has led more people to debt than has anything else. If you are a spendthrift who just can't seem to be able to stop yourself from splurging, you have got to put a stop to things if you are serious about getting out of debt. It might not be a bad idea for you to open another account into which you can deposit any sum of money which you would otherwise have spent on an impulsive purchase. Not only would it keep a lid on wasteful and unnecessary expenditures, it would also save you a bit of money. 

How To Save 

The most important thing to remember about saving is that a penny saved is a penny earned. This means that every attempt to save will reward you with a little extra income which eventually will go a long way in helping you eradicate debt and have enough left for your old age. For sure, the 
question you will ask is "How does one go about doing that?" When you are already involved in the process of knocking off existing debt, trying to save money becomes a tricky proposition. However, you can strategize and find ways to go about it. Here they are: 

  1. Allocate a percentage for saving: Let's say you are paying $100 every month to service your debts. You could consider apportioning $5 out of that to be placed into a savings account. As your debt becomes smaller, you could incrementally increase the percentage of money that you deposit into your savings account. Likewise, a part of any windfall gain you might make from time to time could be similarly apportioned. 
  2. Create an extra stream of income: In the ultimate analysis, while your ability to service a debt and save money is limited by your earnings, how much you earn does not need to be limited. Nothing would give you a bigger leg-up in your savings than the creation of a parallel revenue stream. This is so much easier these days with the freelance economy gathering steam. Maybe you could start creating content for people or give cooking lessons on YouTube. Anything that augments the money inflows would alter your situation dramatically. 
  3. Save all change: When you are in debt and hard-pressed for cash, you must look at every possible option to squeeze out a little savings to improve your financial position, if only by a bit. This includes the time-honored method of saving all small change. In fact, you can do this a little proactively and start depositing the small change that you come by from time to time in a coin bank or something similar. Apart from that, you could consider even depositing a weekly fixed amount, like maybe $5 or so. You will realize that as the weeks turn into months, you would be sitting on a growing heap of hundreds of dollars. 
  4. Watch your grocery bill: You would be amazed at the kind of savings you can make by simply buying the in-house brands of your grocery store rather than the fancy brands that most people are used to consuming. We are talking about serious savings here it's something like 50% of your usual grocery bill. Considering that groceries need to be purchased on a consistent basis, you could save a fair amount of money regularly. 
  5. Identify low-cost entertainment and eating out joints: Just because you are paying off a debt does not mean that you won't hang out with friends or eat out. However, you can try and identify places that are fun but not necessarily expensive. You can zero in on restaurants, which have happy hours during which you can have large meals that cost far less than usual. Similarly, you could check out buffet options instead of a la carte. These measures can save you a fair amount of money while ensuring that you still have decent ways of keeping yourself entertained. 

Using Your Savings 

Once you have made a fair amount of savings using the suggestions given in this guide and any systems that you might have implemented, you should think of deploying these savings. It goes without saying that if you still have outstanding debt, you should start by repaying it. 

  1. Pay back your debts strategically: Use your hard-earned savings judiciously in servicing old debt. Pay off the smaller debts first. Doing this will help you clean your slate faster, apart from giving you the satisfaction of having paid off some of your debt. Once you are through with these, turn your attention to the bigger ones. In time, you will make similar progress there. 
  2. Pay off your credit card debt: Credit card debt is the most pernicious form of debt because it is so easily incurred. Try and knock this off as fast as possible because the interest payable is so high. The more you pay above the monthly minimum, the better it is for your financial health. There cannot be a better utilization of your savings than taming this beast of credit card debt. Being the easiest way of incurring debt that has a very high rate of interest, credit cards are designed to rip you off. Be wary of them! 
  3. Create an emergency fund: Quite often in your quest to reduce your debt, you divert a sizable portion toward its repayment, leaving you quite vulnerable in case you were confronted with an emergency. Initially, you might be better off creating an emergency fund out of your savings than using them all up on debt servicing, especially if the loan that you are repaying is a low-interest one. In this case, not only would you have funds to delve into if required at short notice, you could also earn a bit of interest income by keeping the emergency fund in your bank account. 
  4. Fund your children's education: There is no better gift to give to your children than to fund their education. With the high cost of student loans that people end up paying for the major part of their working life, a little financial help from you would make things a lot smoother for your children going forward. This is one legacy for which they won't be able to thank you enough.
  5. Secure your post-retirement future: If by the time you retire you have been able to eliminate your liabilities and saved a tidy sum for your post-retirement life, you will not have to scrimp and compromise on your lifestyle once your regular paychecks stop coming. Your golden years will be golden in the truest sense. 

The Essence of Debt Reduction and Elimination 

By now, you would be quite sure of the absolute necessity of debt reduction and ultimately debt elimination in one's life for anyone who aspires to live a quality life in the future. If you are free of debt, you can focus your energies to pursue things that really matter rather than worry endlessly at an ever-growing mountain of debt. 

To enable you to do this, you must establish some ground rules in life: 

  1. Do not acquire additional debt: It is bad enough that you have reached a stage where debt has become a problem. Not acknowledging it and continuing to add to it will make a bad problem worse. Admitting to yourself that there IS a problem is the first step towards redemption. The next important thing to do is to start tackling the problem immediately. Tackling debt is much like treating alcoholism or drug addiction. The sooner you start the better. 
  2. Rein in your spending: You must find ways and means to rein in your spending. The most obvious way to do that is to hide away your credit cards. Once you have gotten used to not spending so much like you're used to, you will realize how much money you had been simply sending down the drain. Credit cards devastate you with a double whammy of easy credit and high interest. Steer clear of them. 
  3. Spend money on necessities, not luxuries: Until the time you get out of the hole that you have placed yourself in, spend only on necessities like groceries and utility bills. Try and use discount coupons wherever possible and let eating out be a rare event or better yet, a thing of the past until things improve. Opt for cheaper cable TV and cell phone plans. Getting rid of debt is serious business. Half measures won't do. You must grab the bull by the horns before it throws you off. 
  4. Make provisions for an emergency fund: While cutting expenditure and paying back debts are of primary importance, it is as important that you don't overlook the fact that you could be visited by an unforeseen emergency. Therefore, you must create some sort of contingency fund out of your savings, even if it means paying a little less towards your debt. Discovering that you owe a huge amount of money can be disconcerting and emotionally wrenching. Many people are just not able to cope and even need counseling. It is, therefore, a good idea to share your worries with people close to you so that you can come to grips with the situation and get down to the important task of grappling With it. That is always the most important part of the process of redemption. Once you start on the path of paying back your debt, you will get there, even if it takes a little time. 
The steps described above will make it possible for you to approach debt repayment in a cool, calculated, and measured manner. This way, you would not only be able to service your debt in a time-bound manner, but you would also save a little for any emergencies that might arise. Above all, the golden rule is that the more you pay and the quicker you pay, the easier it will be for you to climb out of debt. 

Summary

Debt has been the bane of many. Though it truly should be a no-brainer that a debt trap is the worst kind of trap to get into, things are not as simple as they appear to be. You need debt for you to do certain important things in life like buying a house, going for higher education, starting or 
expanding your business, or even buying a car. 

If you plan well for these loans and make the necessary repayments in an orderly and timely fashion, you should have no trouble with debt. In fact, you could end up creating assets for yourself. Not only that, your credit rating would be quite good, enabling you to avail of further debt if necessary. 

The problem mainly arises when you throw caution to the wind and start living beyond your means on borrowed money. The consumerist society that we live in compels many of us to start indulging in blatant conspicuous consumption. The easy availability of credit cards makes things worse by blinding us to the fact that comeuppance is just around the corner. 

However, like most problems that are the result of our missteps, the solution lies in retracing those and slowly but surely getting ourselves out of the hole that we have dug ourselves. This guide has detailed in quite an elaborate manner, as to what is required to be done. From setting financial goals and teaching ourselves smart spending to learning how to save alongside knocking off debt and teaching ourselves how to deploy our savings, this post guides you through the stage of indebtedness to the stage of being debt-free. 

Difficult as it is to get rid of debt, it is far from being the impossible task that many people assume it to be. As long as you are ready to acknowledge that there is a problem and possess the willingness to work toward its redress, notwithstanding how painful the process might be for a period of time, it is doable, and the payoff is definitely well worth the effort. 

Think of getting rid of your debt as trying to climb Mount Everest. You can't scale the tallest mountain in the world without careful planning. Your ascent must be gradual and in stages. To succeed, you must have the right clothing and equipment, but above all the will and commitment to 
succeed. The climb itself will be long, arduous, and tiring, but in the end, it's well worth the trouble. Once you reach the summit, you will forget all your tiredness and exult in being on top of the world. 

Being debt-free is similarly wonderful not just from the point of view of eliminating your outstanding debt or making you stress-free. It frees you from spending most of your time watching over the funds-flow status, apportioning expenditure, sacrificing your myriad wants and desires on a regular basis, and living a life that is nowhere near what you always desired for yourself. A debt-free status, in fact, goes way beyond by freeing you to pursue what really makes you happy - a bigger house, a 
foreign holiday, a secure post-retirement future, or something else. 

Our time on Earth is limited, and we can sure find a better use for it than to be trapped in a never-ending cycle of debt. Unfortunately, that seems to be the fate of millions of people, which is a pity for all of them can be guided to a better debt-free future. To that extent, this guide can be more than an eye-opener, it can be a lifesaver.