Four Steps to Help Save Money and Get Out of Debt
Effective debt management is essential for saving money and making the most of the amount you earn.
However, it can often be difficult to show the financial discipline needed to ensure that you do not make a bad situation worse.
Being financially responsible will require some hard work in the very beginning.
Think about your behavior, identify the biggest mistakes you’ve committed and chosen the right possibility for decreasing spending.
You don’t have to introduce major lifestyle changes in order to maximise savings and get out of debt.
- For some additional tips regarding ‘financial spring cleaning’, please check out the following Huffington Post article – https://www.huffpost.com/entry/9-fees-to-cut-from-your-l_b_6794904
If you feel as though you are ready to start making the changes you need to bring your debt down, the following article will offer you 4 steps to help you along the way.
Step No. 1 – Give yourself a financial audit
It’s very easy to start writing down notes about each amount you spend and the type of item you spend it on and you’d be amazed how quickly this helps to paint an accurate picture of your expenditure.
Keep up the practice for several months and you’ll figure out what your money is dedicated to and whether you wasting money.
This great article titled ‘6 Ways To Track Your Spending‘ by Forbes offers a number of great tips and is well worth a few minutes to read through.
Keeping track of spending will reveal patterns and enable you to become much more efficient and reasonable. There are certain kinds of expenditures that you need – utility bills, food, medicines, and transportation all rank among the essentials. You can, however, limit the amounts you’re spending on clothing, cosmetics, and entertainment.
Once you have done this, you can set yourself a budget to determine the absolute minimum amount that you need every single month.
For more tips on working to a budget, please check out the following ‘Money Saving Expert’ video:
Step No. 2 – Start cutting back
Whilst the odd treat from time to time does no little harm, a few too many treats can often become a big problem in regards to spending money.
Prioritising the essentials over the treats can go a long way towards freeing up some extra money each month.
- Struggling to find ways to cut back? This great article by Jenny Keefe over at Money Saving Expert can help to get you started – https://www.moneysavingexpert.com/family/stop-spending-budgeting-tool/
Step No. 3 – Get rid of your credit cards
Owning a credit card can often create a false sense of financial wellbeing. In fact, credit cards can often be the root cause of the debt building in the first place.
Cutting up your credit cards is the one sure way to ensure that you are not tempted to use them again and make your debt situation worse.
- Please Note – Martin Lewis says that you can ‘slash your credit card debt with simple tactics‘. We think it’s definitely something to keep in mind.
Step No. 4 – Improving your personal credit rating
Next, you should make steps towards improving your credit rating.
Reducing all kinds of debt that you have, paying loans on time, refraining from taking new loans and making sure that your report is error-free will all be important.
Improving your credit rating is something that can seem a little daunting but with a little knowledge, it is definitely achievable.
- The great team over at The Money Advice Service have created an excellent article designed to fill in a few of the blanks regarding all things credit score! ‘How to improve your credit score‘.
Create an emergency fund
You never know when and what you’re going to need money for. Dedicate a small amount of each salary to an emergency fund.
This money should be kept available for emergencies only.
The amount could be small – start with five or 10 per cent of your salary. As time goes by, you can begin dedicating larger amounts to the emergency fund. You should also have a really good idea about what the money’s going to be used for.
The emergency fund shouldn’t be kept at home. Put the money in a bank so that you’ll benefit from the interest rate. Otherwise, the inflation will decrease the value of the amount you’ve managed to save.
Making inroads into your expenditure can play a key role in helping to create some extra money to put towards your savings. Trent Hamm over at ‘The Simple Dollar’ has written a tremendous article that targets a variety of ways to make the desired cutbacks.
Whilst this is aimed primarily at an American audience, many of the ideas are still valid in the UK.
- To see what he has to say, please click here.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY