Debt has the potential to work against your financial health, but it doesn’t have to be the enemy. today in this article you will gain some knowledge on how to avoid troubles of financial debt.
5 Easy Ways to Avoid Getting Troubles of Financial Debt
- Create and Maintain a Budget
- Cut Back on Spending
- Start Saving!
- Avoid Spending Pitfalls!
- Easy Money-Saving Changes
Create and Maintain a Budget
The very first step to avoiding the troubles of financial debt is to create and maintain a budget. It’s not as intimidating as it sounds, don’t worry.
First off, create a list of all your monthly incomes and also a list of your monthly expenses. When determining income, list all your income sources including Earned Income, Interest Income, Side Jobs, Rental Income, etc…
In calculating expenses, be sure to include housing, services, bills, rents, utilities, entertainment, etc… To gain an accurate reflection of actual expenses, sit down each night and write down whole day expenses, just make sure to save receipts. Determine if your income covers all of your expenses. If the answer is no, then some expenses need to be reduced.
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Adjust expenses: If it is a small discrepancy, it may mean reducing some minor expenses like entertainment or traveling. If the deficit is larger, you may need to downsize your vehicle or living arrangements. If your income covers all of your expenses, you still may want to trim some of the excess fat off your spending habits. This can free up extra money for things such as vacations or college funds for your children.
There are several advantages to sticking to your budget. Firstly, most people have set financial goals that they would like to reach in the future. Sometimes it may be a trip, a brand new car, or a college education. A budget can help people save money to make these goals a reality.
Additionally, many people are crushed under heavy consumer debt. Without a disciplined pattern of spending, it is virtually impossible to make much headway in reducing debt. A personal budget will provide the necessary framework to begin eliminating these inflated account balances.
If executed properly, a budget will allow a person to simultaneously meet their expenses, place money into savings, and payback outstanding debts. Therefore, it is in anyone’s best interest to create and implement a budget.
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Cut Back on Spending
At first, it may seem difficult to limit your spending and stick to a limited budget, however, there are a few practical changes that you can make every day that will cut your spending more than you expect.
Firstly, alter credit card behavior.
Start to pay with cash whenever possible. This will help you avoid making a purchase unless you actually have the money available.
If you decide to make a credit card purchase, be prepared to pay the balance off monthly. This will save a lot of money by avoiding interest charges.
If you already have a credit card balance, then transfer to a card with a low-interest rate. Also, find a card that does not charge an annual fee.
Another tip is to pack your own lunch every day. All of those lunch hours spent at restaurants will add up. Bringing your own lunch can save you several dollars every day, which will add up over time.
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Finally, bundle your insurance. Many insurance companies will offer their customers lower rates if they purchase multiple policies. For instance, some people use the same agent for multiple cars, and others combine their cars and house. Always keep in mind that a dollar here and there really begins to add up. Avoid the temptation of thinking that changing your spending habits wouldn’t save that much money.
Start Saving!
So you are loaded down with bills to pay each month and wondering how you can begin savings account for emergencies and other high-expense endeavors. In other words, where can you find that extra cash to put away for later?
Firstly, when configuring your budget, plan for your savings first.
You will grow richer each month if you begin to pay yourself first.
Before paying any bills, decide on a set amount that you will pay yourself first—maybe five or ten percent—or whatever you decide—of your paycheck. Then, deposit the amount into a savings account before paying any bills.
When you do this at the beginning of the month, your entire paycheck will not suddenly slip through your fingers. If you wait until the end of the month, there may be nothing left to save. Paying yourself first will give you a systematic way to make your money grow. Regardless of your profession or your income, this system will work if you stick to it.
Another technique you may try for saving money is to empty your extra change into a coffee can or a jar each day. At the end of the month, roll the coins and put them into your savings account. You may be able to save 30 or 40 dollars each month just with your spare change.
Remember that good money management is more than just a mathematical formula. It’s too closely tied with the ups and downs of living to be just that.
Your money management plan is always subject to change if your life situation changes. The object of a good budget is to make your money go the farthest in helping you reach your goals, it is not there to force you to abide by rules.
Don’t get discouraged if the budget plan doesn’t work perfectly right away. It may involve some revising and editing until it fits your needs.
Then, make sure to review it often, and be sure it is making the best use of every penny! Because we know how helpful those spare pennies can be!
Avoid Spending Pitfalls!
With all the advantages that are evident from personal budgeting, it is no wonder that more and more people are relying on them to reduce debts and increase their savings. However, all ‘budgeters’ need to be careful to avoid some common pitfalls that appear often.
Credit cards may seem like small pieces of plastic, however, they can cause a great deal of trouble for the owners. It is common for people to make unwise purchases, which they would have avoided otherwise because they had the credit card in their wallets. The best solution for many people is simply to get rid of credit cards and begin paying only by cash, check, or debit cards.
You may want to keep one card handy for emergencies, but it is probably best to keep it out of reach, and far away from your wallet.
Another problem with budgeting is impatience. There are financial goals set, but people do not have the patience to complete a savings program.
For instance, an individual begins setting aside money for a new car; however, after a few months, they discover the car of their dreams. Rather than waiting, they make the purchase. This could pose some serious financial strains. Discipline is a must to prevent impatience from breaking your budget.
Once a person makes a budget, they often fail to adjust it when necessary. A budget is created using a set of expenses and income figures that are liable to change. As these figures do change, it is important that the budget changes reflect the adjustments. There could be some major deficits if this is not done appropriately and promptly.
Of course, nobody forgets about Christmas, Hanukkah, and Newyear, however many people do not consider budgeting for holidays when creating a budget. Therefore, adequate funds have not been set aside for presents, food, parties, etc. These items should be factored in and saved for throughout the year.
Finally, many people factor in transportation and accommodations for vacations in their budget, however, they underestimate the money needed for food, entertainment, and spending money. Keep in mind that all the resorts and tourists areas are double or triple what you would normally pay.
With a little planning, you’ll be on your way to saving more money than you ever thought possible!
Easy Money-Saving Changes
One of the most obvious and easy ways to save some extra cash is to change some of the ways you use products and items in your everyday life. The key is to make minor changes.
For instance, always buy the cheapest hand soap you can find. The quality doesn’t necessarily go up with the price and you can use it in place of ‘bath soap.’
Never use more than you need. Just because it says on the box that you need a full cup, doesn’t mean that you really do need it. Half a measure of laundry detergent and a half teaspoon of dish soap are examples of what are usually enough, rather than what the manufacturer says.
To save some cash, you can use some of the things in your house in some unique ways. Instead of spending lots of money on fancy floor cleaners, try using ammonia. It does a great job, and you can use plain water in between times.
If your furniture needs some polishing, mix equal parts of white vinegar and vegetable oil and rub them on the furniture. Buff with a cloth until it shines.
For a freezer bag, use empty chip bags and close with masking taps. Also try a bowl with a lid, such as a margarine tub.
If your skin is feeling a little dry, there are several substitutes for expensive lotion. Petroleum jelly (vaseline) rubbed into your hands at night after a warm water soak, Just be sure to put it on immediately after your hands have been in the water.
To save some money on laundry, dissolve a bar of handsoap in water to replace laundry detergent. Add three gallons of hot water, mix thoroughly, and add a cup of washing soda.
Sure, these are small changes but added up, they can put some extra change into your pocket throughout the year!
