You may earn a wad of cash every month, but does it really make sense if you end up spending more than you save and are burdened with debt in the process? Managing and planning your expenses is essential to remain debt-free. This can be done easily if you start to track your daily expenditure and alter your spending habits. Here are some ways to ensure that you stay out of debt.
Get Your Priorities In Order
Start by identifying your priorities and sticking to the items you assign them to. You need to make a distinction between what you need and what you want. Therein lies the secret to being debt-free. Things you need, you can't do without and things you want, you can. As much as you'd like to treat yourself to something expensive once in a while, if you're on a budget, you'll have to exert some self-control and draw the line. If spending cash on your 'wants' doesn't support your budget, you'll find yourself riddled with debt.
Gauge The Monetary Assets You Have At Your Disposal
When you have a crystal clear picture of the money that you have at your disposal, including all your assets, you will get a better insight as to how you can begin to spend your money wisely. If you think you have plenty of cash, but in truth really don't, you may end up spending more than you should, which could lead to you being in debt.
Budget Your Expenses And Stick To It
When you understand how much you really have, measure your needs and wants adequately and then go on to create a budget for yourself based on these factors, you will be able to stay on a path that's safe, tried and tested. To create a budget, you have to first understand where you are spending your money on a daily basis. You can do this by monitoring your spends for about two months by collecting receipts and keeping logs. Next, segment your expenditures into categories such as food and entertainment. Combine this information with your monthly bills to get an idea about your monthly spending habits. Analyze these habits to find where you can cut down on expenses before you create your budget. This leaves you with more cash on hand to save and pay off bills. Whatever you have left at the end of the month, use to pay off credit cards or add them to your savings. Don't forget to create an expense account for entertainment etc. Depriving yourself completely will make it more difficult for you to budget and save.
Ditch the Cards And Use Cash Instead
It is easier to keep a track of how much and how little you have spent when you are spending hard cash from your pocket. This makes you more careful when it comes to spending it. It could be psychological, but watching hard cash disappear from your pocket is much more effective than swiping a credit or debit card. Since you have already created your budget, you will be able to assess whether a certain item is within your budget or not. If it isn't in your budget, try your level best not to swipe your credit card for it by saying to yourself, 'it's ok, I'll pay it off next month'. Herein lies the biggest problem of debt. Credit cards make you assume that you have more money that you actually do and therefore create a vicious cycle that's hard to break free from. Use your credit card only in case of an emergency and stash it away for the rainiest of days.
Track Your Expenditure
Tracking your expenses allows you to see exactly where your money is going each month. Write down how much you spend on a daily basis and what you're spending it on. It will give you a better idea on your expenditure, both daily and monthly. After you write down your expenditure, you can then start to see where you can cut down on it. This allows you to manage your finances better and lowers the possibility of being riddled by debt.
Make Purchases Only If You Can Afford Them
There is an alternative to almost everything in the day and age that we live in. It may be that designer dress you saw at the mall, that pair of leather loafers or the trendy restaurant which is the talk of the town. There are always tons of options to choose from, one that suits every single budget. If something doesn't fit within the confines of your budget, try not to consider it. Choose sensibly from the options available to you and pick something that won't give you sleepless nights.
Try Not To Take Too Many Personal Loans
It makes more sense to save rather than taking a personal loan. This is because the interest rates that are associated to personal loans go sky high. This makes it difficult for most people to repay the loan in time, leading to further debt. To avoid this scenario, cut down on your expenses wherever you can and save instead of relying on personal loans to get you out of a pickle.
Watch Out For Those EMIs
There are EMIs available for pretty much everything these days - vehicles, home appliances, mobile goods and more. But EMIs means that you are locked in to paying off something for a stipulated period of time. This time doesn't count for damage or theft. Most EMIs also charge interest rates or processing fees which are in addition to the cost of the item in question. This means you will end up paying extra for the item, as opposed to if you were paying for it outright. Opt instead, to save up for a couple of months to purchase a product outright.
Live Within Your Means
Always live within your means. If you can't afford something, there's no shame in admitting to it. If friends want to go out to a fancy dinner and if you can't afford it, politely decline. It'll save you a lot of heartbreak in the future.
Get Your Priorities In Order
Start by identifying your priorities and sticking to the items you assign them to. You need to make a distinction between what you need and what you want. Therein lies the secret to being debt-free. Things you need, you can't do without and things you want, you can. As much as you'd like to treat yourself to something expensive once in a while, if you're on a budget, you'll have to exert some self-control and draw the line. If spending cash on your 'wants' doesn't support your budget, you'll find yourself riddled with debt.
Gauge The Monetary Assets You Have At Your Disposal
When you have a crystal clear picture of the money that you have at your disposal, including all your assets, you will get a better insight as to how you can begin to spend your money wisely. If you think you have plenty of cash, but in truth really don't, you may end up spending more than you should, which could lead to you being in debt.
Budget Your Expenses And Stick To It
When you understand how much you really have, measure your needs and wants adequately and then go on to create a budget for yourself based on these factors, you will be able to stay on a path that's safe, tried and tested. To create a budget, you have to first understand where you are spending your money on a daily basis. You can do this by monitoring your spends for about two months by collecting receipts and keeping logs. Next, segment your expenditures into categories such as food and entertainment. Combine this information with your monthly bills to get an idea about your monthly spending habits. Analyze these habits to find where you can cut down on expenses before you create your budget. This leaves you with more cash on hand to save and pay off bills. Whatever you have left at the end of the month, use to pay off credit cards or add them to your savings. Don't forget to create an expense account for entertainment etc. Depriving yourself completely will make it more difficult for you to budget and save.
Ditch the Cards And Use Cash Instead
It is easier to keep a track of how much and how little you have spent when you are spending hard cash from your pocket. This makes you more careful when it comes to spending it. It could be psychological, but watching hard cash disappear from your pocket is much more effective than swiping a credit or debit card. Since you have already created your budget, you will be able to assess whether a certain item is within your budget or not. If it isn't in your budget, try your level best not to swipe your credit card for it by saying to yourself, 'it's ok, I'll pay it off next month'. Herein lies the biggest problem of debt. Credit cards make you assume that you have more money that you actually do and therefore create a vicious cycle that's hard to break free from. Use your credit card only in case of an emergency and stash it away for the rainiest of days.
Track Your Expenditure
Tracking your expenses allows you to see exactly where your money is going each month. Write down how much you spend on a daily basis and what you're spending it on. It will give you a better idea on your expenditure, both daily and monthly. After you write down your expenditure, you can then start to see where you can cut down on it. This allows you to manage your finances better and lowers the possibility of being riddled by debt.
Make Purchases Only If You Can Afford Them
There is an alternative to almost everything in the day and age that we live in. It may be that designer dress you saw at the mall, that pair of leather loafers or the trendy restaurant which is the talk of the town. There are always tons of options to choose from, one that suits every single budget. If something doesn't fit within the confines of your budget, try not to consider it. Choose sensibly from the options available to you and pick something that won't give you sleepless nights.
Try Not To Take Too Many Personal Loans
It makes more sense to save rather than taking a personal loan. This is because the interest rates that are associated to personal loans go sky high. This makes it difficult for most people to repay the loan in time, leading to further debt. To avoid this scenario, cut down on your expenses wherever you can and save instead of relying on personal loans to get you out of a pickle.
Watch Out For Those EMIs
There are EMIs available for pretty much everything these days - vehicles, home appliances, mobile goods and more. But EMIs means that you are locked in to paying off something for a stipulated period of time. This time doesn't count for damage or theft. Most EMIs also charge interest rates or processing fees which are in addition to the cost of the item in question. This means you will end up paying extra for the item, as opposed to if you were paying for it outright. Opt instead, to save up for a couple of months to purchase a product outright.
Live Within Your Means
Always live within your means. If you can't afford something, there's no shame in admitting to it. If friends want to go out to a fancy dinner and if you can't afford it, politely decline. It'll save you a lot of heartbreak in the future.
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