Mention the word debt and it evokes in people a flurry of emotions. There are those who feel self pity based on a slew of bad decisions made in the past, others cringe at the idea of falling in debt while others are super confident based on the soundness of their financial situation at the moment. That being said, the number one reason people fall deeply into debt in the UK and other parts of the world is simply poor management of finances. Poor spending, impulse buying and a bad saving attitude can plunge anyone into debt if not pushing them into filing for bankruptcy.
So how do you manage your money to escape the all too common debt rut? What are some of the ways you can effectively manage your money and avoid falling into debt? Here’s how you can make the most out of your finances, develop a culture of saving and clear any of your outstanding debts.
- Come up With a Proper Budget
Do you have a habit of spending money as soon as it gets into your hands? Do you find it difficult resisting the urge to engage in impulse buying? If that’s the case, it could simply mean you lack financial discipline and this can easily be fixed by a drawing up a budget and getting on top of your finances. Simply come up with a proper record of all your incoming cash as well as outgoing cash and draw up a budget to help you manage the same wisely. If you feel like you don’t know how to come up with a good budget, you can always make use of an online budget planner. A budget helps you cut down on impulse buying and focusing on spending cash on the essentials.
- Identify Areas to Cut Back on Spending
The purpose of drawing up a list of your incomings and outgoings is to essentially help you determine whether you are living beyond your means. If the record you draw up shows that you spend more than you earn in a month, it’s about that time you identify areas you can cut back on spending. To do this, it’s important to closely scrutinize areas that the bulk of your money goes to and cut down on unnecessary spending. If you spend lots of money on food and going out, you can start carrying packed lunch to work and simply putting a top to going out for a while. To fix a problem, you need to identify where the problem stems from.
- Clear credit card debts and pay off your loans beginning with the ones that attract high interests
Are you feeling like you always spend more when using your credit card as opposed to when using cash? You are not alone. A lot of people look at credit card money as “play money”. The downside is that they end up spending more and hence increase the debt they have to pay to credit card companies. The effect of this is that it really puts a dent on a person’s finances. If you have a couple of loans under your name, its instrumental that you first pay off ones that attract high interest rates and purpose to clear the same in the shortest time possible.
- Develop a saving habit
You can never go wrong with saving. Developing a saving habit can save you a whole lot of stresses when an emergency happens and you need money like yesterday. Saving regularly and religiously means that you keep on increasing your money and your financial soundness remains intact. However, to save diligently, you need to wondrously cut on unnecessary expenditure and be disciplined.
- Get specific and attractive deals on insurance and other financial product
Do not just take an insurance policy for the sake of it or doing it to please a friend working in a given insurance company. Make a habit of making comparisons of the various insurance products and settle for ones that have little strain on your finances. Go for credit cards or bank accounts that charge relatively low interest rates. The more you cut down on money financial charge you, the more you have to save.
In a nutshell, money management tips is dependent on how you interact with your money, the sound decisions you make and your commitment to avoiding the debt rut at all costs. While we are sometimes forced to seek debt for one reason or another, the same should not mean that it becomes a permanent feature in our lives. With the right attitude, saving habit and adherence to money saving tips, each and every single one of us can better manage money and become financially strong.