Quick snippets from my morning read on Tuesday, 24th November 2020
Today’s morning was inspired by the responses to a poll we put out on twitter yesterday. The read focuses on debt management and it is taken from an article by Miriam Caldwell.
If you constantly find yourself in debt, it is important to take control of your finances immediately so that you can change your financial future, into a positive one. If you have serious spending issues, you will need to address them in addition to taking these steps.
Start by Listing Your Income and Expenses
The first step is to create a list of your income and your expenses. You need to make sure that you are making enough to cover your necessities. These things include your food, your shelter, your utilities, and your clothing (but not designer labels). If you do not make enough to cover these basic expenses, then you need to bring up your income and slash all other expenses in your budget. You may need to look at your housing costs to see if your house payment is taking up more than 25 percent of your income. If it is, you may need to consider moving.
Create a Monthly Budget
Next, you need to create a monthly budget. This step is important because it gives you control over where your money is going. It helps you to track your spending, so that you can find your trouble areas, and fix your spending habits. Your budget should be able to cover all of your expenses that are needs, and then you cut back on the things that you want until you are no longer overspending each month.
Find Ways to Cut Back on Temptation and Impulse Spending
You may want to change to a cash only or envelope budget if you are having problems sticking to your limits. When you switch to cash, it is easy to stop spending because you can see when you are out of money. The key to making this work is to not rely on your debit or credit cards when you hit that limit. Leave your credit cards at home, especially when you are headed to the mall or somewhere else where you would spend money.
Save Up an Emergency Fund
Many people rely on their credit cards when it comes to unexpected expenses. An emergency fund can help you stop doing this. A good amount is between $1,000 and one month’s salary. This will cover most car repairs and other emergencies. Once you are out of debt, you can work on saving up a year’s worth of expenses and have a larger emergency fund.
Find Extra Money to Put on Your Debt
You also need to find extra money to apply to your current debt. This means that you may need to cut back on your cable and cell phone plan or cancel your gym membership so that you can take care of this debt. Make sure that you are not counting luxuries as necessities when you work on cutting expenses. You may also want to sell some items or get a temporary second job to get out of debt. The more money you can find or raise the sooner you will be out of debt.
Start Saving for Major Purchases
Once you are out of debt you need to start saving for the major purchases so that you do not go into debt for them. For example, you can pay for your car with cash or for your home repairs and improvements with cash. Additionally, you should save up an emergency fund of three to six months of income, so that you will not go into debt when an emergency arises.
Remember That Discipline Is Key
Discipline is essential to taking control of your finances. It does take sacrifice and hard work to get out of debt, but it is worth it. Once you are out of debt, you can begin to build wealth. This will help you to manage your money and give you true financial freedom. Your budget is the best way you can take control of your money and make changes to your financial situation.
Find New Ways to Save Money
This will help free up additional money in your budget to cover your needs. Instead of shopping and buying things that you do not need, spend time trying to save money on the things that you must buy on a regular basis. Cooking at home, taking lunch to work, and shopping for second-hand items can help you save money on the things you need each day. People who love to shop can become some of the best bargain hunters available.
Read the full article – How to Stop Going Into Debt Each Month by Miriam Caldwell.
And as always, if you enjoyed this, check out the rest of our daily snippets, curated daily, right here on The Red Notebook.
