1. Budget Your Money
Monitor your
spending for two months by keeping a log and collecting receipts. Then segment
your spending into expense categories such as entertainment and food. Once you
have that information, you combine it with your monthly bills to get a clear
picture of your monthly spending habits. Before you start to develop a budget,
analyze your spending to find ways to reduce your expenses and free up more
money for savings and paying off bills.
Write
your bills into a checklist and compare that to your monthly income. As you pay
bills or use up expenses, check it off your list. Make your savings accounts
bills that you pay every month. Vacations, holiday spending and an emergency
savings account should all get something put into them to make sure you have
the money when you need it. Any extra money you have at the end of the month
goes into the savings account or is applied to paying down the balance of a
credit account.
Remember
to create expense items for your weekly entertainment, food and gas for your
car. Anticipate one-time bills each month and account for them in your budget.
Do not deny yourself money for going to the movies each week, but rather you
should keep track of it and limit your spending to make sure you have money for
important bills and expenses.
2. Make More Money
Is
it practical to lower your monthly food budget or put off paying credit card
accounts to try and apply that money to other things? No, that is not a
practical solution. If you find yourself falling short on your budget each
month, then the practical approach is to take on an extra part-time job, pay
your bills down and then get your finances under control.
One
of the difficult things about budgeting money and being practical with your
personal finances is that you need to objectively look at your situation and
make hard decisions. If you put yourself in a financial hole, then develop the
initiative to get yourself out of that hole by making more money. If you can
spend more money, then it is practical to expect yourself to also be able to
make more money.
Even
if you have a balanced budget and no money problems, if you have the time, then
it may not be a bad idea to get an extra part-time job anyways. You can put the
money you make into your various savings account and strengthen your financial
situation even further. It can be difficult to anticipate the future, and that
is why it is always a good idea to take prudent financial action when you are
able. Adding money to your savings accounts when you do not feel you need it
will create more available funding when you do need it.
3. Credit Cards
A discussion of
credit cards is part of practical financial planning because credit cards can
offer several benefits that a person with good spending habits can take advantage
of. When you are applying for a credit card, look for one that fits your
situation. If you travel a lot, then get a card that offers discounts in
travel, hotels and rental cars. Look for the card with the best cash-back
feature to help you put extra money into your pocket during the course of the
year.
The
most practical way to use a credit card that offers rewards and cash back is
for items that you know you have the cash for in the first place. For example,
if you use your credit card to buy groceries, then you can get the benefits of
travel miles and cash back while you pay off your entire credit card balance
with the grocery money set aside in your budget. Regular expenses that you know
you have covered by cash are excellent candidates for credit card spending
because you will not be carrying the balance from month to month, but you will
still get the rewards credits.
Credit
cards are also necessary when it comes to renting a car and doing other
activities while traveling or on vacation. Once again, it is practical to have
the cash ready to pay the credit card bill when you get it in 30 days. But if
you can continue to rack up cash-back payments for spending cash that you have
on hand, then that is a good financial move. If you pay the balance within 30
days, then you reduce your interest debt to almost nothing. Learn how to use
credit cards responsibly to benefit from them.
4. Save Rather Than Spend
One of the ways
that retailers convince people to make large purchases is to entice consumers
with low monthly payments on financing. If you know that you can easily make a
monthly payment on a financed item, then you should also be able to save the
money needed to buy that item in cash.
For
example, if you are not in a hurry to get a new television, then you should do
some research and find out how much the television you want will cost. Then you
can develop a savings plan that will help you to save the money you will need
to purchase the item. Look at it as making payments on a finance account for an
item you do not own yet. Once you reach your goal, you can purchase the item
outright without having to pay interest and finance charges.
Saving
money for purchases is always preferable to opening a finance account for the
practical consumer. You may have to wait a few extra months for the item but,
if the item is not a critical need, then saving for it will allow you to have
the things you want without putting yourself into debt.
5. Do It Yourself
Spend
time learning how to do tasks that you would normally pay a contractor or
professional to do. For example, you can save some money each year by changing
your own oil and taking the old oil to a local auto mechanic for disposal. If
you have an interest in home remodeling, then start researching ways to do
projects on your own rather than paying extra for a contractor to do them.
Any
time you get a chance to save money by doing something yourself, the practical
approach is to take that opportunity. If you go out to a company party at a
facility where there is valet parking, then look to see if you can park your
vehicle yourself to save the valet charges. Wash your vehicle each week in your
driveway with your own water and supplies to avoid paying for a car wash.
Do
not take the "do it yourself" approach to dangerous levels. If a
family member needs medical attention, then get to a doctor. But if you find
practical ways to save money by doing something on your own, then you should
take the chance to save money and avoid putting yourself deeper into debt.
These
were our best five tips to easily stay out of debt. Of course these aren't the
only things you could do to stay financially healthy! You can find more
effective tips on these links we bundled for you. They're a great addition to
our relatively small website. Good luck!
