Are you stressed about paying back your high-interest debts? Do you also feel worried about how to take control of your money so that you can have a better financial future?
Well, paying back debts is important. Otherwise, you can’t save a substantial amount of savings. Until you become debt-free, you will have to contribute a significant amount, every month, towards paying back debts.
It is equally important to take control of your money. It will help you repay debts and build a good financial future at the same time.
Here are a few tips to do so.
Plan a budget to save about 30% of your income
If you follow the 50-30-30 budgeting strategy, then you need to save 20% of your income, 50% goes toward meeting your necessities, and 30% for satisfying your needs. But, when you have to repay debts and take control over your money, try to save 30% so that you can repay debts and save a substantial amount at the same time.
Change your mindset
Yes, you need to change your mindset to get going with taking control of your money. But, what does that mean? That means you need to be conscious of your spending.
You need to differentiate between your needs and wants. Curbing your wants doesn’t mean that you’re sacrificing your enjoyments. Think it this way! You’re focusing on your needs and curbing your wants so that you can put your money towards the things that are valuable to you.
Check out where your money is going
Even if you’re able to save a substantial amount every month, you need to know exactly where your money is going. Take a look at your debit and credit card statements and make a list of where you spend. Also, take into account the things you buy with cash.
Now, analyze your spending. Is it worth spending the amount on your wants? Can you reduce your spending a bit to repay your debts and build a good financial future for yourself and your family?
This analysis can help you plan a good and realistic budget.
Reduce your expenses
Check out where you can cut your expenses. You can reduce your monthly home or car loan payments that we’ll be discussing later in this article.
Another place where you can reduce your expenses is utility bills and monthly subscriptions. Check out how many subscriptions you use. Cancel what you don’t use. If you have a gym membership but visit there rarely, cancel it; choose to work out in the open air with your family.
You can also bundle your internet and telephone to save a significant amount.
Save for the rainy days
It is equally important to save for the rainy days. Think for a moment! What led you into debt? Might be you had to swipe your credit cards to tackle a financial emergency. You could have avoided swiping your high-interest credit cards if you had a good emergency fund.
The experts always advise you to have about 5-6 months’ worth of savings in your emergency fund. So, calculate how much you need in a month and check out what amount you need to have in your fund. Start by saving a little amount until you repay your debts.
After you repay your dues, contribute a substantial amount to build your emergency fund fast. And, when you have to use a portion of your fund, replenish it as soon as possible.
Increase your savings
Earning a little more always helps when you’re trying to repay debt or trying to improve your financial situation. To do so, you can do a part-time job. Browse through the internet for some side gigs. Choose something that you’ll enjoy doing. By doing so, you’ll enjoy your part-time job and earn a bit extra every month.
Automate your savings
This is a great way to save. Experts always say to pay yourself first. When you automate your savings, you don’t have to worry about savings anymore. Definite amounts will get deposited into specific accounts on particular dates. By doing so, you can invest without even realizing it.
Prioritize your spending
You have to prioritize your spending. As I have mentioned earlier, check out what values to you most. It will help you to choose where you need to spend.
Even while paying back debts. You might have to prioritize. If you have a car loan, home loan, along with credit card debts to pay off, you might have to prioritize being current on your home and car loan payments because you don’t want to lose them.
If required, talk to your lender and opt for a mortgage loan modification. If you think the market interest rates are low now, you can also refinance your home loan to make your monthly payments manageable.
But, while doing so, make the minimum payments on your credit cards and other unsecured debts.
Plan a suitable debt relief strategy
To discuss the last point a little further, you have to choose a debt relief option to repay your unsecured debts and be current on your secured debts like your home loan.
You can take professional help and enroll in a consolidation or settlement program to repay your unsecured debts with ease.
If you can repay your debts in full, opting for debt consolidation can help you. However, if you can’t repay your credit card and other unsecured debts in full, then debt settlement might be the better option for you.
So, assess your financial situation and find a suitable debt relief option to become debt-free.
Do not be too harsh on yourself
While paying back debts and taking control of your money, do not be too harsh on yourself. Keep an allowance in your budget to enjoy, but don’t splurge much. Once you meet a short-term goal, celebrate a bit. It will motivate you to achieve all your goals.
Do you have any more tips to manage your finances in a better way? Do share it here!
Author’s Bio: Good Nelly is a financial writer who lives in Milwaukee, Wisconsin. She has started her financial journey long back. Good Nelly has been associated with Debt Consolidation Care for a long time. Through her writings, she has helped people overcome their debt problems and has solved personal finance related queries. She has also written for some other websites and blogs. You can follow her Twitter profile.
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