Reader Question Thursday: How Do I Get out of Debt, Fix My Credit, and Save Money? Part 1

Every Tuesday I’m going to try to answer a reader question. The question can be about anything related to personal finance. You can also ask me a question about anything you’ve read on my blog. If you ask me a question I don’t know the answer to, I’ll do the research and get the answer for you. πŸ™‚

Please ask me question(s) in this post so I can get started and pick one to answer next week. Today, I’m going to answer a reader question from last night. Feel free to chime in with your advice by posting a comment.

Tamara “Tam” Major said…

“…i’m 25 and i wanted to read what others were writing at my age. ive really enjoyed reading your blogs the past few days – but i honestly have no idea where to get started saving in the finance world. my husband and i just got married and my plan for the new year is to get our credit up, get out of debt and save as much as possible. if you have any suggestions on where to start id really appreciate your input.”


thanks,
tamara

Tamara, great for you in doing research on how to get your credit up and get out of debt. I’m not sure how much of my blog you’ve read, but I’ve never been in debt for many reasons that have nothing to do with my being good with managing my money. But now that I’m a personal finance blogger and looking to save, I apply many of the principles of getting out of debt to saving money (though not always perfectly, as my readers will attest.)
That said, there are many great personal finance bloggers who are or have been in debt, and have impressively pulled themselves out of debt in relatively short periods of time by being really smart about their spending.
Let’s break this question down into three parts… I’ll start with part one in this Reader Question Tuesday… how do you get out of debt?
Some of this may be obvious to you, so forgive me for starting with the basics. Making a budget (and sticking to the budget) which includes a significant debt repayment each month is going to be key. I don’t know about your spending habits so if you already do this and are extremely frugal and have absolutely no funds to spare for debt repayment, then this advice may not be as relevant for you. However, if you buy things you don’t “need” — even if that’s a latte from Starbucks or a song off iTunes, it’s time to re-think your spending patterns.
Suze Orman is a great resource for debt reduction. She is a tough-love type advisor, which is what people need when they’re in debt. (And when they’re out of debt and living on a limited income). I don’t always agree with her but at the core she’s probably the best resource for learning how to get out of debt. I skimmed her book Young, Fabulous and Broke when I first got out of college and found it provided some great advice for 20 somethings who are in debt. You probably get get it at your library, or read it at the book store if you don’t want to buy it right now.
Secondly, I recommend reading all the wonderful personal finance blogs available where people have written about how they got out of debt. Since I don’t have these stories, on the debt end you’re probably best off reading some of these other blogs. Here are a few to check out:
Give Me Back My Five Bucks (by Krystal at Work) — Krystal has $17,000 of debt and got out of debt in ONE YEAR! Now she’s started an emergency fund, savings, a retirement portfolio, and I bet her credit score has improved too. She has a sub-section of her site about getting out of debt where she provides a lot of advice through experience.
Also check out Ugly Debty, Out of Debt Debt Again, Blogging Away Debt for starters. Lots of the personal finance blogs out there were started by people in their 20s and 30s about getting out of debt. If you are so inspired, start your own blog to track your process and goals. I find it is really helpful to have your goals read by the public… even if only one other person is reading your blog, you’re accountable to that one person. You’ll think twice before buying that latte.
Another helpful tool that I write a lot about is Mint.com — on Mint you can connect all your credit cards, debit cards and see your debt-to-income ratio, track your budget and your expenses. Sometimes just getting a clear picture of where your money and where you can be saving is a huge help in getting out of debt.
Figure out how much you can afford to live on, realistically, but cutting back on things that you think cost too much in your life. Make a budget based on that. Pay your debt off first. If you have time to do side jobs, do them, and put that money straight to your debt. The quicker you can pay it off, the better.
Without knowing how much debt you’re in, what your income is, what kind of debt (education? car? credit card?) it’s hard to give you specific advice about how to get out of debt. If you comment with some more details, I’ll post them in this blog.
Also… readers… please chime in with your advice for Tamara. πŸ™‚
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One comment

  1. Lulu says:

    I would advise Tamara to make a budget. She needs to write down what she is spending for a month to see how her cash flows in and out.After having the figures in one month she can begin the next month by picking a spending area to cut down and transfer that savings to her debt.It will seem tedious at first but once you get past the first month it becomes a lot easier, especially when you track using Mint or some other online tool.If she spends cash then she can track that in Excel as it will not show up in Mint.

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