Q. Recently, I became head nurse of a medical-surgical unit in a large teaching hospital. Along with the promotion and new responsibilities, I received a hefty raise. It seems I am always in debt and this may be a good time to make changes in my spending pattern. What are some steps I can take to get out of the red into the black financially?
A. You are not alone. In fact, the average American family devotes about 25% of its spendable income to outstanding debts. There are several basic steps that when followed, will free you from financial indebtedness and allow you to invest in the future.
The first step is to live within your income. This involves establishing a realistic budget – the foundation for fiscal fitness. Without limits, it's difficult to control the flow of finances. You must then make spending decisions that allow you to honor your budget.
The second step is to establish a plan to pay off current debts. Prepare a list of your debtors and the amount owed to each. In separate columns, write down the total amount owed, the monthly payment for each one, and the length of time it will take to pay off each one. Now you have a realistic picture of your financial situation and the timeline necessary to take care of your obligations. If possible, take steps to pay off the principle in advance. This will reduce the amount of interest paid and free funds for use in lowering the principles of other debts.
The third step is to borrow from yourself. Instead of going to a bank or using your charge card to borrow more money, establish a savings account that equals at least three months of living expenses. With this as a base, you will have a source from which to draw money to pay for unexpected bills. Cash for a broken refrigerator, a ruined tire, or a new roof will be readily available. In essence, you become your own banker. Additional funds can be put aside for specific purchases, such as a new car, a lawn mower, a vacation, and holiday gifts. Include savings as part of your monthly budget now, even though you're still paying outstanding debts. This will establish a small reserve from which to draw for emergencies and a healthy pattern for the future.
Finally, once you have established a cash reserve, money can be invested for the future. Retirement, a new home and college education are three common areas for which people invest.
Getting out of debt and staying out of debt takes discipline and hard work. The person committed to following these four steps will experience the peace of mind and financial freedom provided by gaining financial control.
Key Takeaways
- Understanding the core concepts is essential for growth
- Consistent application of principles leads to transformation
- Small daily actions compound into significant results
- Mindset shifts are the foundation of lasting change
Moving Forward
The journey of personal growth and transformation is ongoing. Each step you take, no matter how small, contributes to your overall development and success. Remember that progress is not always linear, but persistence and commitment to your goals will ultimately lead you to where you want to be.
I encourage you to take action on what resonates with you from this article. Choose one key insight and implement it into your daily routine. Small, consistent changes often lead to the most profound transformations.