Ever wonder why we think it’s fun to scare ourselves with creepy movies and haunted houses? Some experts believe it gives us a sense of control. And of course there’s the relief when the fright is over and we know we’re safe.
Money is a scary subject for a lot of us, but it helps to know that you don’t have to tackle your fears all at once. You can take them on in bite-sized chunks.
Know good debt from bad
Yes, there’s a difference between types of debt. Understanding the difference gives you confidence to know when it’s smart to go ahead and borrow money.
- Good debt: Good debt eventually pays you back. Use it to purchase things that appreciate in value. A home mortgage can be good debt, for example. A fixed-rate mortgage lets you manage your housing expense and hopefully reap a profit by selling for more than you paid if you decide to move. Student loans to pay for a college education can be good debt if you can earn more with a degree than without it. Nevertheless, it’s a bad idea to take on vast amounts of college debt or buy a home that is unlikely to appreciate in value.
- Bad debt: Bad debt is the kind you take on because you’re spending more than you earn. Living beyond your means, in other words. “High interest consumer debt is the worst type of debt,” says the Consumer Financial Protection Bureau.
Borrowing to buy a car is one type of bad debt. The car starts losing value as you drive it off the lot and you’ll sell it for less than you paid for it. Financing a vacation with a credit card instead of saving and budgeting for it is another example.
Get a Will.
Everyone needs a will. Even you. The good news: Making a will isn’t as scary, difficult or expensive as you might think.
Track your expenses
Budgeting is scarier than zombies for a lot of people. But budgeting fears are inflated. It helps to know that you don’t have to become a budgeting convert overnight. Start out slowly by simply watching where your money is going. There are several ways to do this.
You could try a free online budgeting tool like PowerWallet. These programs import your bank and credit card transactions and show you where your money is being spent. These tracking tools can be employed to great effect alongside tips that help you keep your spending behavior in check.
Others prefer to record purchases on a spreadsheet. It’s more hands-on. Give yourself an hour at the end of each month to record purchases from your receipts, checkbook and credit cards.
The bottom line: Get your feet wet to see what works best for you. There’s no one way. Trial, error and your own experience eventually will guide you to a system you like and can stick with.