Personal Finance Blog Rotating Header Image

Tips on money management Debt Reduction

Finding yourself in a financial mess is a frightening personal discovery. Normally, people don’t really realize that they are in such a jam until they’ve reached the breaking point. Whether you’re already at the breaking point or not, unfortunately shrugging it off or running away from it won’t make it go away. It actually takes a long time to get in debt, even years. Hence, getting out of debt can never be fast-tracked.

There are no short cuts in addressing such a problem and this is where money management debt reduction or debt consolidation loans comes in. Majority of the people who are in debt are the ones who don’t realize where they’ve gone wrong. They are the ones who spend their money impulsively without thinking of the repercussions of their spending habits to their financial commitments and other responsibilities. However, if you are in debt, don’t despair; the good thing is you’ve come to realize it which is the first step to solving such a problem. The first thing to do is to manage your money in such a way that it will reduce your debt and hopefully get out of debt as soon as possible.

Your Money Management Debt Reduction Plan
There are a couple of steps that you can do to reduce your debt. If you could take these steps religiously, then you could be off to a new and financially healthy life in the future.

1. Assess yourself.

The first step to money management debt is to face the music. Find out how much debt you really have. Once you already have a clear picture of the gravity of the situation, you will be more pumped up to do something about it. Of course, you have to find out where you’ve gone wrong and you can do this by looking at your spending habits for the past months and past years. Check out which of the expenses you made were not really necessary; your goal is to find out your biggest source of unnecessary expenses like cigarettes, dinner dates, gas, etc., so you could see if you could do something about them. One of the main reasons why people get into such financial problems is their spending habits so it’s very important that you take extra measures to correct your spending habits.

2. Create a monthly budget and mean it.
Having a budget is one thing, sticking to it is another. It’s very hard to stick to a budget, but it’s not impossible as long as you keep it realistic. Money management is basically about planning, monitoring, and controlling. When you do your budget, compute for your monthly income and your monthly fixed expenses like rent, food, travel allowance, etc. With this, you will see if you are really earning enough to cover all of your basic or fixed expenses. If not, then perhaps you should find other sources of income like doing freelance work, selling some of your stuff that you’re not using, or getting a second job. Don’t forget to count in your miscellaneous expenses. When computing for your miscellaneous expenses look back on your past buying behaviors and clarify within yourself which expenses you can do without. In doing this, be honest with yourself. Money management debt reduction in really is a lifestyle changer; the main thing to remember is to not spend more than what you are making.

Of course, don’t forget about your main goal when you make your budget and that is to reduce your debt. Factor in your loan or debt payment schedules per month to your budget so that you’re sure that you’re able to pay them on time and save yourself from the late finance charges and other fees.

3. Be a smart credit card holder.
If you have credit card loans or debts, what you can do is to learn more about your credit card services. Find out which credit cards have the lowest interest rates; some credit card offer 0% introductory rates for a certain period of time. One of the things that you can do is to transfer your outstanding balance from one credit card to another credit card that has lower interest rates. Make an effort to pay more than your minimum amount due because when you’re only paying the minimum amount due, realistically you’re not really paying for the capital that you used or your debt. Also, prioritize paying your credit cards that have the highest interest rates.

If you’re biggest culprit is your credit card, then perhaps you should consider not using your credit cards. At least until you’ve paid your outstanding balance fully and until you’re very sure that you can manage and control your credit card habits for good.

4. Be a smart saver.
Every month, make sure that you save a certain amount of money even if it is just small. If you’re having a hard time controlling yourself from spending the money that you’re supposed to be saving, set up an automatic deposit for your savings account wherein a certain amount of money gets deposited into your savings account on a regular basis. Another way to save is by saving your pennies. Every night, put your loose change in a container; at the end of the year, you would be surprised how much money you’ve saved in it.

Money management entails a change in lifestyle. If you want to reduce your debt and even get out of debt in the future, then sacrifices have to be made.

Leave a Reply

Your email address will not be published. Required fields are marked *