Personal finances and money can cause a lot of stress and it is normally due to debt or not enough money to pay for bills and the things you want.
Getting rid of your bad debts and having cash reserves can lead to a simpler, happier life.
Here are five tips to start the road to a debt free life.
1: Create a Budget
The first step to ridding yourself of debt is to get your finances in order with a household budget. Write down everything that you have coming in each month and what you spend on bills, rent or mortgage, eating out, shopping and so on. Try to classify the costs out and look for non-essentials you can cut back on. If you find you have more out goings the incomings then your going to end up in more debt every month.
2: Track Your Spending
It’s hard to figure out exactly where all your money is going when creating a budget using bank statements as a reference. Using a notepad or a mobile phone app such as Toshl spend a few weeks tracking everything you spend. This will save you money by making you think twice before spending and also give you a detailed view of where your money goes so you can find further areas to make cut backs.
3: Pay off Debt
To be rid of your bad debt you are going to have to pay off your existing debt and stop creating new debt. Think about doing the following:
* Consolidating credit cards using a balance transfer or using a debt consolidation loan to bring as much of your debt into one place as possible at a lower interest rate.
* If you can’t get all your debt consolidated then focus efforts on the accounts with the highest interest rates first.
* Make room in your budget to pay off as much debt as possible each month.
* Avoid new debt by cutting up your credit cards and switching to debit cards linked directly to the money in your bank accounts.
4: Create a Savings Plan
Make sure you have a savings account with a high interest rate and then create a savings plan with short term and long term goals for items such as holidays, cars and emergency funds for unexpected costs.
5: Avoid Temptation and New Debt
Temptation will be with you all the way along the road so you need to resist it. Avoid taking up new credit, store cards or personal finance loans and try to stick to spending with your own money to enjoy the full benefits of a life without bad debt.