How to Fix Your Personal Economy

How to Fix Your Personal Economy

Another election year is upon us and with it, the ever-present mention of balancing budgets. To hear the media and talking heads tell it, balancing a budget is the easiest thing in the world to do, which could be why every elected official, it seems, never gets around to actually doing it.

But you’re smarter than the average politician, and by following these few simple tips, you can take control of your finances and restore your own personal economy.

Reduce the Debt

Your first step to economic stability should always be planning for a reduction of your debt. In medical terms, this is like establishing and airway and getting the vital signs stabilized before taking the patient in for exploratory surgery.

If you have a ton of credit card debt, you’re definitely not alone. According to a report on consumer credit by the Federal Reserve, as of December 2011, consumer debt in the US was $2.5 Trillion. That’s trillion with a “T.”

If you fit into this group of people, you simply have to stop using credit cards to pay for things. It’s always easier said than done, but if you don’t have the cash to purchase something outright, you shouldn’t be purchasing it. This may seem a very foreign concept to many of us - as we’ve essentially been brought up on plastic. But think about it: The extra money you’re paying toward interest each month won’t make a dent in your debt if you continue to incur new debts.

Once you pay down your credit card debt, you can begin using the extra money you’ll have every month to pay down other debt, such as car and student loans. As long as you maintain a money-saving mindset and only purchase items with cash, you’ll be able to continue reducing your overall debt and securing a better and brighter future for yourself.

Another debt reduction idea: Shop around for lower insurance policies. Whether it’s auto, homeowner’s or health insurance, it’s a great idea to take some time and shop around for a more affordable plan. If you’re currently happy with your insurance company, call them up and see if they can give you a better deal. Do they have any discounts or special packages that will save you money? Not wanting to lose business, often these companies will be willing to work with you, and you’ll never know if you don’t ask. Lowering your insurance policies can save you hundreds of dollars a year.

Stimulate Your Economy

Once you’ve reduced your debt to a manageable level and stopped your economic bleeding, it’s time to stimulate your personal economy and start creating new cash flows.

One obvious way to do this is to up your income by improving your value to your current employer. You need to make sure they can see you as someone who can move up the ladder. This means taking on new responsibilities at work such as training new-hires and organizing team projects. In other words, become a leader.

Another way to stimulate your personal economy is to start your own small business on the side. You might think doing this in an economic downturn is a bad idea, but it’s actually a fantastic one. The internet has opened up new possibilities for you and made it possible to turn a hobby into a business that can bring in a little or a lot more cash flow each and every month.

Along those lines, if you’re someone who blogs just for the fun of it, consider monetizing your blog. The addition of Google Adsense ads or an affiliate product to your blog is an easy way to monetize the traffic you already have. You could also consider selling advertising space on your blog or website for a recurring monthly price. This extra money can help pay a utility bill or be put into your emergency fund. You do have an emergency fund, don’t you?

Fiscal Responsibility

No one said getting out of debt was going to be fun, but it doesn’t have to make you miserable either, you’re just going to have to come up with more creative (and cheaper) ways of living. In the past you may not have blinked at the thought of going out to dinner and a movie - and purchasing popcorn and soda – but now you will have to create a budget for this kind of discretionary spending.

Establish a realistic monthly allotment for entertainment expenses and stick with it. If popping your own corn at home while watching a movie on cable television (that you’re already paying for) is a cheaper option, which it is, then this is what you will have to do for awhile.

But fear not, there are a few positives to buckling down like this in an effort to fix your economy. By becoming more creative with how you spend – or don’t spend – your money, you will more often than not become closer to your family. What may start off as a “forced” game night at home can end up creating wonderful memories that can last a lifetime. It may even become a new weekly tradition.

Another positive to realize is why you are doing this all in the first place – your debt is not going to last forever and you will one day taste financial freedom again. At the same time, you are setting some very good financial habits that will help ensure you don’t ever wind up in debt again.

Every day that goes by without action is a day with mounting debt. The longer you wait to get started, the longer it will take you to get out of your financial hole. So think about it carefully, make up your mind and make the decision to get started on your road to a great personal economy today.