You read a lot about managing debt these days as if somehow it’s a complicated business but that there are various strategies you can adopt. But really, for most people whose debts aren’t beyond the point of no return, it all boils down to managing your money better. But how do you actually do this – and where’s the best place to start?
The first step to take in taking control of your finances is to look at where your money goes and why and to then learn to limit your spending and/or increase your income.
This may sound obvious, but have you ever really sat down and looked at how, where and why every penny goes? Very few people have but it’s a vital first step if you’re spending more than you earn.
Make a note every time you spend money (even the really small amounts) of how much you spent on what and make a note of what amounts leave your bank account directly by direct debit and standing orders. This process often throws up some real surprises. It will also enable you to see once and for all where your money is going. Try to include a monthly equivalent amount for things you may pay in one annual sum. Then have a look at where you can realistically reduce your spending.
Next, create a realistic monthly budget and include all the things you need to spend money on – as well as a few small luxuries.
Then, the really hard part is disciplining yourself to stay within your budget. Involving someone else in this process is often a good idea. You’re more likely to succeed if you’re in it with your partner or if you need to report your progress to a friend at regular intervals. Whatever you do, don’t give up. If you have a setback, accept it and carry on with your efforts.
If you’re in deep financial trouble and the burden of debt seems insurmountable – face up to your problems reduce your spending and take expert advice. If you’re receiving free debt management advice – then at least ask yourself why that advice is free. What has the company giving you the advice got to gain from your situation? There’s nothing necessarily wrong with a company profiting whilst it assist your debt situation – as long as you understand exactly how that company is making its money.
Above all – be realistic about your situation.