Why wait until you are in serious debt?
Sort out your money now
Why do people wait until they are in serious debt before they start looking for help? Because they bury their head in the sand and they do not watch what their money is doing. The thing is that millions of people are doing this because everything is electronic and people have lost touch with their money. Years ago people would get their wages in a pay packet and divide it in to separate jars. They would have one for their phone bill, their gas and electric, council tax and rent, and all the others, so that when they needed to pay them, whether it was weekly or monthly, the amount had been added to up until it was needed. This meant money was physical and easy to manage, unlike today where we can easily forget that the piece of plastic we are handing over is actually to remove our money.
Where to start with your personal finances
You can start looking at your finances one of two ways. If you are a technophobe, then grab a pen and paper, otherwise go in to your Windows work and look for the budget sheet, it is a spread sheet that will do all the math for you. You will also need a recent bank statement of the bank account all of your direct debits and standing orders come out of. Then make a list of all the major bills that are necessary to be paid, these are;
- Your rent or mortgage
- your electric, gas and water bill
- your council tax
- House insurance.
The above are things that with out moving home, you really can not alter too much, they are the major things that need paying because with out them you will be homeless or freeze. When looking at your money you should think survival and think, food, shelter, warmth. Once these have been dealt with anything else is a bonus. This attitude is what will get rid of your debt quicker. The next things are important but a few can be changed with care.
- Car insurance, tax and fuel
- Loans and credit card payments
After these list you must write down all the other things that you spend on every month, EVERYTHING, even that odd cup of Starbucks you buy or magazine. Next add all of these totals up, and that is your total expenditure. Make sure you list spends on things that are not monthly, birthdays, Christmas, holidays, anniversaries, clothing etc. Add up how much for all of these non monthly expenditures and divide it by the 12 months to get your monthly figure.
Once you have done this you must then add up all of your household income, your wages, your partners wages, any overtime that is regular etc. This is your Income.
Now minus your expenditure from your income and this is your disposable income.
How to increase your disposable income and reduce your debt faster.
Hopefully you now know that the money you have left after paying all of your outgoings is the money you have to do with as you will, and what you will do with it is reduce your debts, which means reducing the interest you pay and further increasing your disposable income later on in life.
There are a few ways in which you can make the difference between your income and outgoings larger and manage your debt at the same time.
- You can take a look at your insurances, your house insurance, car insurance, and even life insurance. Go to a cash back site such as Topcashback.co.uk and get a quote for all of these. You should never keep your renewals for home insurance and car insurance with out phoning around, as they all put them up and the people who pay are those who just shove the renewal in the drawer. I have done this myself and my renewal for home insurance was £15 a month higher than a new deal I found, for the same cover.
- Lower your grocery spend. No this does not mean that you have to live on lentils, but if you eat a lot of processed stuff, start thinking about learning how to cook properly, it really is not that hard. There are plenty of sites on line that tell you how to feed a family of 4 for £50 a week. I myself feed 6 of us and 3 dogs on £100 a week, and always have a full canned foods cupboard and full freezer. The reason that I can do this is because I think about what I am cooking. If I cook a minced beef stew, I usually have some left over, so I make some pastry and make a beef pie, so a pound of mince makes two meals. Learn what are fillers but cheap, porridge, cereal, pulses etc.
- Shop around and check all of your loans and credit cards, are you getting the best deal that you can? If you are paying interest on credit cards, take a look and see if you can get a balance transfer to a 0% credit card. That means all of your payment would be coming off your total and not being swallowed up in interest only.
- Get rid of all non essentials. You do not need the 200 channels when you are in debt.Go down to free television and save anywhere from £30 to £70 a month, depending on what you pay for your extra channels. You can always get it back when you have reduced your debt.
Increase your income by taking on overtime, or if that is not possible, work a second part time job or work online in your spare time.
Once you start being more thrifty with your money, you will soon find even more ways to make your money stretch further. This is not about living uncomfortably, it is about not wasting and getting the same as you have for cheaper. Why waste money and get in to debt for things you can get cheaper? Manage your personal finances and you will be able to enjoy even more in the future.