For people struggling with ever-growing mountains of debt, it can be tough to decipher whether you're treading water or drowning. And it's at this juncture you should definitely seek help from a financial expert, says personal finance blogger Christopher Burns.
"When the end of the tunnel is getting farther and farther away, before you slip under, you should consult a professional," he says.
They may have some tips or tricks or know of ways to help you. And, in the worst-case scenario (even if we don't want to admit it), a payday loan may be a one-time saving grace that could help you out, but you need to make sure you use them wisely, he adds.
Chris, who works as a senior accountant/accounting manager at a local nonprofit, writes about personal finance on his blog This That and the MBA. He recently checked in with us to offer advice on everything from creating a budget to managing debt. Here's what he had to say:
Tell us about This That and the MBA.
This That and the MBA started out of a need to keep myself fresh with many principles learned in the MBA program. Then it really evolved into a need to share the information that was learned and put it out there so that others could understand and grasp concepts that maybe are not taught as much as they should be in school.
When did you become interested in personal finance? What drew you to it?
Originally, I started out college as a chemistry major; then I realized that while there was good deal of math in chemistry, I really was drawn to profit and loss statements. Call me crazy, but I really love accounting and knowing that you can get a good gauge of how a company is doing by looking at their financial statements. I have always been amazed at how businesses operate, and knowing how to decipher their financials only made sense.
What's your philosophy on how to spend/save/invest money?
My philosophy has changed quite a bit in the recent years ever since we had children. Before, I was more free spirited and going on trips whenever we got some money in our account, but lately I have taken on more responsibility. We are in the midst of purchasing a second house, so discipline is very important so that my family can reach our goals.
What advice do you have on managing debt? Do you prefer to live debt free, or do you think some debt is OK?
I wish I could say I was debt free and knew what that felt like, but I do not. I think that understanding the types of debt is important - a credit card debt and a mortgage are two very different types of debt. Having a mortgage is seen as a good thing, while having too much credit card debt (revolving credit) is negative. Live within your means, make sure you are setting aside for retirement and you should do just fine.
What advice do you have on managing and paying off debt?
I like the snowball method; when you pay off smaller debts, it gives you momentum to tackle bigger debts and just keep the ball rolling.
How long do you think people should track their finances to get a clear picture of their spending habits?
If you are a person who uses just your debit card, then going down your bank statement should give you a good idea where all your money is going. My wife and I did this a few months back, and we were shocked that we were spending so much money on our Saturday and Sunday ritual of going out for coffee. Now we make our kids breakfast at home and go out and get coffee. Still an expense, but cut back from close to $20 down to $5. Just finding small ways to save like that goes a long way when you factor it over a year.
After analyzing spending, what advice do you have on creating a workable budget? How often should it be revised?
I have a spreadsheet on my computer that I use to track all my bills, and then before I am paid next time, I clear out my checking account and put it into my savings account. That way I start fresh every two weeks. My wife and I have separate accounts, so we have really been focusing on saving, and I can say it has been working. We allocated our bills based on how much we made, and it's great. We revise our budget yearly or whenever a new bill appears, but ours are pretty much the same day in and day out.
What are your favorite types of investments for someone who's just getting their start?
Right now I am risk averse, so I have been investing primarily in index funds. But when we get this second property, we will have rental property. I could see this as something that I would like to get more into.
What are the most common questions or concerns your readers come to you with? How do you respond?
Most recently I have gotten more and more questions surrounding debt, how to manage it and some additional ways to make some extra money to pay down the debt.
I gave them an entire list of ways to pay down additional debt without taking on more, and some ways such as selling on eBay or Craigslist to make some extra money. All very worthwhile, but you need to assess your own situation. Depending on your skill set, these may or not be feasible. But there are ways that you can definitely trim expense such as cutting cable or using coupons. I want everyone to be successful in their own sense, and I love getting followup emails where they say some of the advice given has really paid off. And that is why I continue doing what I am doing!