Save or Pay Down…

Many people question whether they should pay off debt or save money. While saving money is great idea and everyone should do, but if you have debt, which needs to be attended to first. If you have a 401K program through your employer, I think investing the minimum 3 percent is a good idea provided your employer matches that amount. This gives you 6 percent of your income going towards retirement and in most cases you will notice very little difference in your net income by investing 3 percent and the advantage of this small investment is to your benefit.

That is far as I would go with saving, until your high interest debt is paid off. If you are saving through a vehicle that makes 8 percent and you are paying on a credit card that is costing 14 percent in interest, you are losing ground. It is in your best interest to payoff debt before saving. It is the most economical financial solution. The one exception to this rule is student loans. In most cases the interest rate on these loans are low enough that you make more money, by investing your money at a good rate of return. So, the answer to the question is payoff and then save.

Are you a Big Spender…

Part of getting out of debt is learning how to reduce your living expenses. The best way to do that is to figure out where your money is going. There is show on television called �Big Spender� and the shows host, Larry Winget, helps serious over spenders get their financial lives back on track. He does that by evaluating the spending habits of the people he is helping. He tells them how much they spend on unnecessary expenses, such as; eating out, personal care (hair, nails, etc.) and clothes, among other things.

Looking are what we spend our money on, may reveal some things we were not aware of. It may also enlighten us to places where we can save money. Some of the things Larry recommended that his �big spenders� cut out back on are as follows:

• Eating out was usually cut back to $0.
• Personal care was set at $50 monthly.
• Clothing budget was set to $0. Many of the people had thousands of dollars of designer clothes in their closets that they were asked to sell to pay their bills.
• Most of them were asked to turn off their cable.

With the money they saved by cutting back on these expenses, they are asked to put the extra money towards paying off their debt. After 3 weeks, most of Larry subjects have done pretty well with their new plan, but staying out of debt takes long-term changes. Only time will tell if these people can may the necessary changes to get out of debt and stay out of debt.

Staying Out of Debt

There are some people that no matter how much money they make they seem to have debt and money problems. On the other hand there are other people that make very little, support several people and still manage to keep their debt under control and save money. What separates these to groups of people?

I believe there are 3 major things that separate these 2 groups of people. People with financial stability do the following:

1. They live on a budget
2. They know where their money is going
3. They live within their means

Following these guidelines is not as easy as reading these words, but there are many resources available to help you budget and to help you keep track of your spending. Living within your means takes practice, but it all starts with knowing what money you having going in and what you have going out.