There's a reason why consumers fresh out of bankruptcy begin to receive credit card offers in the mail after they're discharged. Credit card companies have a deep understanding of consumer spending behavior, and they realize that it takes a drastic lifestyle change to reduce your spending habits.
It's a surreal feeling once you've paid off your last credit card. You feel a thousand pounds lighter and finally feel liberated. You'll probably reward yourself for a well-deserved victory (and you should), but this isn't the end of the road. The other half of the battle is the challenge to stay out of debt and start saving for your rainy day and retirement fund.
So what now? If you haven't already figured out how you got into debt in the first place, take a long hard look at your past. Stare debt in the face and be honest with yourself. You shouldn't be ashamed of once being in debt, it happens to the best of us.
So why do people fall into debt? Simply put, it really just comes down to spending more than you earn and not creating a rainy day fund. We live in a culture where technology is growing faster than we can keep up with. We're always being pressured to buy the latest gadgets: TVs, iPhones, tablets, or cars. Our friends and neighbors are buying it, so we succumb to it. I'll be the first one to admit that I use an iPhone 4S, but it wasn't until the prices dropped where I bought one. There's nothing wrong with spending your hard-earned cash to buy nice things, but there's a line between spending carelessly and shopping frugally.
Another reason is the easy access to credit. When we think about having a $10,000 credit line, some of us might tend to think of it as "free cash." It's easy to get sucked into paying small monthly minimum payments with the idea that you'll eventually get out of debt. Technically speaking this is true, but at what cost? Having a high credit limit doesn't equate to success, it only creates a false sense of available cash at your disposal.
So now that you've finally figured out how you got into debt and created a game plan not to follow the same path, it's time to start saving for your rainy day and retirement fund. Before creating your monthly budget, take a look at your last few months of bank statement. Itemize all your expenses and figure out where you can cut your expenses. In doing so, you now have a framework of what you should be spending each month. I get it, budgeting is not the most enjoyable thing in the world, but it's necessary to monitor your spending. Budgeting doesn't have to be boring, and as a matter of fact, there are ways to make budgeting more enjoyable. There are also awesome online budgeting tools such as Mint or SpringCoin that can help you automate your monthly budgets.
My biggest tip is this: You've faced the harsh reality of being in debt, and I'll go ahead and assume it wasn't enjoyable. It was a costly mistake and you learned the hard way. The most important thing you can do moving forward is to learn from your mistakes.
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