Manage Your Expenses To Climb Out Of Debt

by : Alan Farrow

Most people find it difficult to save money. They think that with their perceived low incomes and high expenditures it's nearly impossible to do so. However that's not the case. Even with a discouraging looking personal balance sheet, one can save money. The starting point is to be realistic and understand all income streams and expenses you have on a daily, weekly, monthly, and even annual basis.

Prepare a Budget

Be realistic about your expenses. Food, clothing, entertainment, gasoline, travel, gas and electric bills, water, grocery bills, and more all add up. These purchases are needed for your bare existence, your most basic living requirements. Additionally, there will almost inevitably be an occasional bill for a medical need, dental visit, or even emergency. These all need to be paid. Sometimes you will splurge on the personal luxuries. You must account for these as well. Though tempting to ignore the grand total, don't.

Now total all your sources of income, from pay checks, to investment income, and even financial gifts. Compare your monthly expense total against the amount your earn on a monthly basis. For example let's say that your current monthly pay is $4000 (after taxes) and your outgo - taking all costs into account averaged on a monthly basis - amounts to $3700. You are then capable of saving up to $300 if you wish. This means that over the course of a year you could conceivably save and invest $3600. And if trying to save $300 per month seems too insurmountable, start with $100. Or $50. Or even $10. But definitely start.

Don't Overspend

Sometimes its fine to purchase fun or frivolous items for sheer enjoyment. But curb your desire to routinely spend simply for the sake of buying the most current or fashionable item if what you already own truly meets your needs. If you accumulate debt for such purchases, it can take a lengthy period of time to repay. Doing this is much like eating that extra piece of cheese cake. It tastes great for the few minutes it's going down, but the extra weight "penalty" is a poor trade off.

Pay Off Larger Loans First

Rank your loans from both most-to-least expensive and also from most-to-least urgent to repay. Then pay the largest, most critical amount first, and proceed in decreasing order from that point.

Obtain Credit Cards with Lower Interest Rates

Sign up for credit cards that have low rates of interest. In fact, don't even use credit cards if they are not necessary. Use cash to purchase whatever you truly need, and save the credit cards for more urgent requirements that cannot be paid by cash. At least this way, you are much less likely to spend more than you have.

Lower Credit Card Limits

If you struggle to discipline your own credit card spending, then you can swallow hard and request your credit card company to lower your credit limits. This way you won't spend more than is required.

Shop Smart

There are almost unlimited possibilities for making purchases at discounted prices of most things you buy. The trade off is the additional time that it will take to research the deals. However you can do it - online, coupons, newspaper ads, etc. There are no shortages of opportunities to save.