Are you experiencing monetary distress? Being underwater in your financial commitments can be a frustrating and disempowering position. Managing your financial responsibilities is the key to ensuring that you stay solvent and have enough money to last an entire month.
If you are finding it challenging to manage your finances, here are five tips you can implement to get your mind right and focused on your money.
#1 Analyze Your expenses and Income
How much gross income do you earn? Do you know what portion of your salary is allocated to taxes? It’s time to do a review of your finances and analyze where your money is going. Total up your annual gross income, subtract your taxes and you have your net income.
Calculate all of your expenses including mortgage or rent, food, utilities, car notes, and any other financial responsibility that you are liable for repaying. Once you know your expenses and your income, you will have a clear picture of your budget and your spending habits.
#2 Consolidate Your Debt
How many loans do you have outstanding? It’s quite common for the average city-dweller to have multiple credit cards, store cards, small loans, mortgages, and car payments. Servicing all of this debt can end up costing you a bundle. Consider debt consolidation to cut down the costs and free up your credit. A debt consolidation loan will consolidate all of your existing payments into one single facility that you will pay monthly. A consolidated loan often comes with a low-interest rate that saves you money on your more expensive debt facilities.
Consolidating your debt improves your credit score and allows you to take advantage of the financial system to raise your credit score while paying down your debt.
#3 Create a Budget
Once your loans are consolidated, and you have a crystal clear figure for your debt responsibilities, its time to create a monthly budget. A budget will help you to control your finances and keep your spending from becoming out of control.
Calculate your monthly expenses including your debt, your living expenses, and your entertainment costs. Once you have this figure, stick to it during the month and don’t spend a cent over your budget limit. Allocate any additional funds left over to paying down your debt. By clearing up your loan early you save on the added interest costs, this is as good as saving.
#4 Be Frugal with Your Spending
Spend less wherever you can. Swap out premium brands for cheaper ones and limit your entertainment spending habits. Disconnect the cable and downscale your car if you need to. Cutting back on your expenses will save you thousands every year that you can use to pay off your consolidated loan facility.
#5 Don’t Take on Debt You Can’t Afford
Debt can be productive if it is used to finance assets that produce an income. However, unproductive debt, that is; debt that cost you money, should be avoided at all costs. While it’s essential for anyone living in the modern economy to accumulate debt at some point in their lives, being prudent with loans and credit facilities is critical to ensure you avoid falling into a debt trap that you cannot escape.
We need money to live, without it, we are forced into poverty. Being penniless and broke means that you will lose control of your environment and held at the mercy of social programs for your financial future. By managing your finances and being prudent with your spending and saving, you are ensured a prosperous financial future.