Beating Debt News

Photo by FreeFoto.com

At the end of the day, if you find yourself with extra money that you don’t normally budget (like a tax return, lottery winnings, or gift), remember to distribute those funds in the following manner:

Give 10% to charity: The noble thing to do when given an extra blessing of money is to be a blessing to someone else. Kind of like the pay it forward concept, but better. Money drives this world. Furthermore, charities need money to survive and continue helping those in need as well. No amount of logic will be able to explain the return you will receive if you give generously. But trust me: giving is essential to balanced finances. That is why it must be the first thing done with extra money. Giving 10% of your new money to your local church or to a national non-profit organization is the best and first thing you should do with your money.

Give 10% to yourself: After thinking of others by giving to charities, the next 10% of your new money should go to yourself. Now, this is not a plug to go out and buy that dream loveseat you had your eyeball on for the past month. This money should be sent to your savings for future use. Now you can decide if you want it to go to a short term emergency savings account or long term investments. But the point is to get into the routine of saving for the future by contributing at a minimum of 10% of the extra money to savings.

Spend 80% wisely: After taking some money and using to it fund some helpful charities and funding your savings, you must use due diligence in the spending of the remaining 80%. Here lies the temptation to buy the aforementioned loveseat. However, before the money completely burns a hole in your pocket, take a step back to determine the best ways to spend the money. Every family situation is different. Some might not have taken a family vacation in 10 years and are longing for a break. That extra money would help fund this. Some might have necessary repairs on a car or house. Again, that extra money would help. But most people have large amounts of personal debt, and that extra money would help beat that debt down to a more manageable amount. I would suggest your first consideration for spending the 80% is paying off debt. Remember, paying off X% of credit card interest is equal to earning X% in an investment vehicle. In addition, it would help you progress toward completing your debt payment goal. Consider all your options carefully, but spend the final 80% wisely.