by KYW's Salil Gutt
New data reveals that U.S. households have cut spending and started paying down debt. That is good news. Families who have low or manageable amounts of debt are the ones who are riding out this economic tsunami easier.
People have asked me about the differences between good debt and bad debt. There isn't any. All debts must be repaid and true financial freedom only comes when you are not beholden to anyone.
The best way to look at family finances is to divide them into two categories. Fixed expenses. These you are on the hook for no matter what happens. And variable expenses. These you can control.
For most families fixed expenses like debtpayments, insurance and taxes make up three quarters of total expenses. Cut these fixed costs and you can eventually maintain the same lifestyle of variable costs on half the income you currently earn.
So, make a resolution for 2009 to start an aggressive program on eliminating fixed costs. You need a starting point. Buy a good budget software program like Quicken.
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