We are already two months into the New Year, and predictably, most are eagerly making head way on their lists of resolutions, goals and deadlines for the year ahead. What better time to perform your personal finance audit by tidying up your budget, bank accounts and debts than the beginning of the year.
Here are several practical ways to reduce debt, avoid debt traps and take control of your finances:
- Calculate the expenses on your list and compare the sum to your monthly income.
- Prioritize – decide what or which things are essentials and which are discretionary.
- Assess each debt, its terms of repayment, interest you are paying monthly and what the debt costs you over it’s lifetime.
- Consolidate your debt where possible – borrow enough from your bank to pay off smaller, more expenses debts in one go – this way you’ll save money and then have only one creditor, the bank.
- Close accounts and tear up credit and store cards as you pay them off to prevent you from re-drawing the credit line.
· If you have financial difficulties, speak to those you owe money to – they will be more understanding if they see you have a plan and are prepared to make sacrifices and they could possibly assist in rearranging or restructuring your debt.
- If you have high debt pay this off first, as the interest you pay on your debt is likely to be higher than any returns you will receive on a sound investment.
- Don’t be afraid to cut back –make sure you live within your means.
- Consider a part-time job – it allows for additional cash-flow.
- Use cash instead of credit, research shows this behaviour will help you save 12-18% whenever you shop.
- Ask for professional assistance if you are having trouble coping on your own.
- Schedule a few (inexpensive) rewards to prevent slipping back into old spending habits
- Getting out of debt is not an impossible challenge. The solution begins with the correct attitude and a commitment to resolve or improve the situation, undertaken in small steps that will result in dramatic change.
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