In today’s times, many are motivated by a desire for instant gratification and social acceptance; however, we pay for that fulfillment at the expense of our financial futures.

Paychecks can only stretch so far before they break. Learning to manage your take-home pay and desires will help sustain you through rough times and tough economies. Author Scott Bilker, in his book “Credit Card and Debt Management, wrote, Debt is not the problem, buying decisions are the problem.  

Buying items you truly cannot afford is a surefire way to mismanage your paycheck.  Managing your income starts with a plan (budget) on how those funds shall be spent. In order for any plan to work, it has to be executed and measured.  Executing your plan and measuring your progress can ensure that your goals, objectives and strategies will result in detailed actions that produce positive results.  

It is best to use your net pay instead of your gross pay to calculate your debt-to-income ratio.  You will then be able to better determine where you stand financially. The standard rule has been that 15 percent or less means you are in very good shape. A debt-to-income ratio of 16 percent to 20 percent means most lenders still consider you are as a good prospect for a loan.

A ratio of 21 percent to 39 percent means you should evaluate your spending habits and begin slashing debt. This level also raises red flags for creditors. Having a debt-to-income of 40 percent or more means your finances are in critical condition.  

Once you determine your status, you can now take steps to improve.  You can start by not incurring any additional debt, and by choosing a budget plan that suits your needs. You may also need to seek employment with higher earnings.

If you are already in good shape financially, you can take advantage of opportunities such as saving pay raises instead of incorporating the additional funds into your spending pool.  As your salary increases, you can boost your 401k contributions, add to your cash reserves or pay additional amounts toward outstanding debts.

Accurate record keeping is essential to maintaining financial wellness. Though recordkeeping can be a tedious job, it is necessary to get, and keep, your financial house in order. It will take more time and money to clean up your finances than it will to purchase a few organizing items to maintain your personal records.

When working your way out of debt, it’s important to understand what got you there. You need to examine what motivates you to buy impulsively, or spend outside of your budget.  There is usually a subconscious reason as to why we spend money; there is often more to a purchase than how an item looks.

No matter what your income level may be, impulse buying can negatively affect anyone.  It’s important to to think about impulse buying before you start charting your course of action.  Otherwise, your efforts may be in vain. You will just be using the Band-Aid approach: treating the symptoms, but  not addressing the root issue.

Taking charge of your financial wellness is your responsibility.  You have to do the work to get out of debt, and remain out of debt.  

Once you are there, it is equally important to maintain good credit, abide by the budgets you have created and maintain accurate financial records.


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