Dealing with expenses, allocating income, and keeping up with debt repayments can be a daunting set of tasks to complete. They become even more daunting when you start running into issues with repaying your debts or expenses. Even worse, many of the personal finance tips and tricks available online are not suitable for those who suffer from debt problems.
Having difficulties paying your bills or debts doesn’t mean you cannot regain control over your personal finance. You also don’t need to have complex strategies to be able to manage your finances better. There are simple things you can do to reorganize your personal finance and return to a healthy cash flow, and we are going to review them in this article.
You’ll be surprised by how effective using cash can be when it comes to dealing with bad financial habits. Credit and debit cards are handy and convenient, but you don’t always get the sense that you are spending money when making payments using your cards. Switching to cash, on the other hand, allows you to be more meticulous with your expenses in an instant.
Start with a simple goal: using only cash for one week. Leave your cards at home and use only cash for everyday expenses. Stick to the plan and complete that one-week period, and you will gain a new perspective altogether. Next, repeat the process, only this time do it for two weeks.
Continue using cash until you can really manage your spending habit in great details. You can also use this training to get used to writing down every expense you make no matter how small it is. At the end of the month, you have a detailed list of expenses that you can use to make monthly budget for the following months.
Learn to Budget Your Income
Creating a budget for the month is the next step to take. As mentioned before, you can use the list of expenses from the previous month to help you better understand how you are spending your money. Allocate portions of your income for specific expenses and use a money management app to help you monitor your progress.
While creating your monthly budget, you also need to cut expenses that are not absolutely necessary. Since the goals are repaying your debts and gaining control over your personal finance, trimming expenses and making do without the non-essential ones is the way to go. You can then allocate the extra money towards your debts.
Back to keeping track of your progress, using a money management app is how you stick to the plan. You can monitor your expenses in real-time and see whether you are in budget using charts and other visuals.
These tools help you take control of your expenses as you go along. When you see more than 50% of your entertainment budget already spent after only one week, you know you have some cutting back to do. More importantly, stick to the plan no matter how tempting it may be to veer off.
Start Looking into Your Debts
The previous tip is actually another exercise. You are training yourself to be more aware of your spending. That spending awareness is handy and comes with an added benefit: you can review your debts just as meticulously.
Take a closer look at your debt repayments and write them down. Include additional information such as the interest rate, the remaining balance of the loan, and fees or other charges you have to pay if you continue using the loan. Lenders such as Emu.co.uk display this information prominently.
With the details listed, it is time to review your options. If you have multiple credit card bills that are expensive and hardly manageable, for example, you can choose to consolidate them using a personal loan or a consolidation loan. You will end up with one repayment amount while saving a lot of money on interest and other charges.
For bigger – secured – debts, you can also negotiate a restructuring deal, find balance transfer deals for secured loans, and weigh other options available to you. The goal is eliminating expensive loans and saving money along the way. The money you save can then be allocated towards repaying the remaining debts.
Keep It Simple
There is one thing you need to understand about regaining control over your personal finance: it will not happen overnight. When you have a lot of debts to repay and expenses to cut, you will have to go through some discomforts before you start seeing results.
That is why keeping the entire strategy simple is a must. You know how you can raise more money to repay your debts; you can either find new sources of income or cut your expenses, with the latter being the easier of the two. All you have to do now is stick to the plan, continue making small adjustments, and work your way towards improving your cash flow.Continue Reading