How To Stay Out Of Debt

I read this article today about how to stay out of debt and it was a good article. The first rule they talked about was living below your means, something I mentioned in a previous post. I read it and thought it was pretty good so I figured I’d mention it here.

Home Budget Software

I use a home budgeting software package called Home Budget that is based on the envelope system. At the start of the month it puts money into envelopes for each category of spending (home, food, gas, etc). Then as the month goes on you enter your expenses in those envelopes which takes money out of them. Your goal is to end the month without spending more in your envelopes than you started with. I’ve been using this software for a few years now but even before I started using it I knew that spending more than you make is a bad idea.

I’m surprised at how many people spend more than they make. Sure the whole economy is organized to make it easy to spend more than you make – from credit cards to loans that build debt rather than equity to same as cash offers at stores, etc. Still, it is a simple principle that should be taught in school from a young age – it is bad idea to spend more than you make. If you learn just one thing about managing your finances let that be it – “Don’t spend more than you make”.

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Fake 10% CD Rates

This article in the yahoo finance section describes how to get CD rates well over the average 4-5%. The catch is that some will only pay that high rate on the first 1k of money or only offer that rate to new customers at a credit union that you can’t join, etc. Seems like there were some 6-8% offers too but I couldn’t find any that would seem to work for me. I’ve also seen a google ad that I clicked for high yield cds at 8%. These had problems too. They were from some bank I had never heard of who required a large deposit (5-100k). On the high rates they will not allow you to pull out early (even with a penalty like most CDs do). I don’t know if it was real or not but it didn’t look safe like a 5% cd from GMAC Bank.