Earning More Money…

How much more money would you have to earn to get out of debt? 1%, 5%, 10%?

Almost everyone who is in debt says the same thing… no matter how much they make it is the same… if I only earned 10% more money I could get out of debt. But the fact is that it really wouldn’t help. 99% of all debtors would just waste that extra 10% and they would be in more debt than before. After all, unless you are just starting out, you are probably making 10% more than you did not too long ago anyway… and you are still in debt. And 25%, 50%, 100% more will only help temporarily.

There’s only one way to get into debt…

and that is to spend more than you earn. It is as simple as that. Spend more than you earn and you will be in debt. The actual process to rack up the debt may vary… the fastest road to becoming a debt slave is through vices like gambling, drugs and alcohol. But even if you don’t participate in those vices, but you are a shopaholic or use credit cards to make unnecessary purchases, it all boils down to one thing. Spending more than you earn.

It doesn’t matter how much money people earn they can still be in debt. It is almost a cliche to hear of stars like Willie Nelson, Burt Reynolds, MC Hammer and Nicolas Cage filing for bankruptcy after earning millions. The income side of the equation is not the problem, you can always spend more than you earn. At the time of his death it is rumored that Michael Jackson was more than $400 million in debt because of his lavish spending. Imagine spending $35 million on improving your property by adding 2 railway lines, a fire department, and a zoo. Who needs 75 cars and amusement park rides? Even big lottery winners that have won millions have ended up in debt simply by spending more than they earned every month.

Just as the Bible says in Luke 16:10 “Whoever can be trusted with very little can also be trusted with much…” but if you can’t learn to handle a little money how can you handle more?

The only way out…

The only way out of this horrible cycle of debt is to begin saving more money than you are spending. Although Michael Jackson’s case sounds extreme, he had massive annual income from music royalties (some his own and some he bought from others including the Beatles). So if he had cut his spending, gotten rid of the zoo animals and sold even 70 of the cars… even with that massive debt, he could have paid it off and gotten out of debt.

How Direct Deposit Can Help You Save…

Direct deposit benefits those who have difficulties saving because it takes control out of their hands, but they do have the option of deciding where they would like the money to go. For example, you can designate a percentage to go to your checking account to pay your monthly expenses. You can also have a percentage of your pay placed into a savings account automatically. If you need the money to be deposited into different banks, this can be arranged as well.

The Best Type of Account for Saving

In order to make the option of direct deposit beneficial, you will need to make sure that your savings account does not have an ATM card attached to it. It should not be too easy to access the money allotted toward savings, or else direct deposit will only be a temporary solution to a long-term problem.

After you have saved a bit of money, you can begin to pay down your debt.

Cut Expenses

In addition to forced savings, the other major option is to apply more money toward your debts. In order to do that you need to cut expenses. Stories abound of people who finally decided to get out of debt. Once they got serious and put their mind to paying off their debts it usually only took two to three years. Even though their debts were previously so large they couldn’t even imagine ever paying them off. But in actuality, it was just a matter of making it a priority and looking for ways to cut expenses to the bone and applying every spare penny to reducing debt. Pay off the highest rate debt first because it is taking the biggest interest bite out of your wallet. Just as growing debt is like a snowball the interest just multiplies. But as you start cutting those interest payments, more and more can go toward reducing the principal and so the debt shrinks faster and faster as well.

Continue the Saving Habit

Once you have decreased your debts by saving more than you are spending, you will need to continue doing so to keep from falling into debt a second time. Unexpected expenses are the reason that people find themselves resorting to the payday loans and credit card use. If you have money in an account that you have limited access to, you will be able to pay for these, unexpected expenses in cash as they present themselves. This keeps you from carrying a balance for several years and needing to pay interest on these expenses.

One of my favorite ways to save is the EverBank® Yield Pledge® Checking and Money Market Account it is available only online so they can have lower overhead and can offer higher rates. Also by keeping your money separate and not local you have to consciously choose to dip into the money. It makes a great place to save for emergencies.