If you’ve ever had to deal with debt, then you already know how easily it can spiral out of control. High interest rates, late payments and penalty fees all add to an ever-growing sum that becomes harder and harder to manage. What’s worse, being behind on your payments can damage your credit score, which in turn can hurt your chances of being approved for future loans.
Fortunately, there are ways to help take control of your finances. With proper planning and guidance, you’ll be able to successfully manage your money. You’ll also gain peace of mind in knowing your debt is under control. Here are three steps to help get you started:
Step 1. Plan Out a Budget
Planning a budget is an important part of staying in control of your finances. Start by writing down all of your expenses. If you use a credit card for the majority of your purchases, keep track of anything and everything you buy. After a week’s passed, go through and take an in-depth look at your purchases. You’ll be surprised to see just how many of them were unnecessary – and expensive.
After you’ve taken stock and looked through your spending habits, your next step is to start planning a budget. Give yourself an allowance, so to speak, each week and force yourself to stay within those lines.
Step 1-Part 2: Make a Payment Cheat Sheet for Your Bills
Now that you’ve calculated and charted your spending habits, your next step is to write down when your bills are due. Make it a priority to actually write down the due dates, and make sure you have enough money allocated within your budget to cover them.
Although it’s possible for you to pay some of your bills up to two weeks late, it’s important to try and stay ahead of your due dates. Late payments often result in late fees and higher interest rates, which in turn sets you back on the path to financial recovery. You should also try to figure out which bills have the higher interest rates – these are the ones that need to be paid first. Making a cheat sheet for your bills will help you keep track of everything you owe.
Step 2. Pay More than the Monthly Minimum
One of the biggest reasons people continually stay in debt is because they only pay the bare minimum monthly payments on their credit cards. What you may not know is that as you get closer to reducing your balance to zero, your monthly payments may also start to reduce, thus prolonging how long you continually pay back interest. Instead of simply paying the bare minimum on your debts, try to pay a little more. It may be hard at first, so start small and aim towards increasing your payment little by little every month.
Step 3. Start Savin’
Now that you have a financial budget in place, you can start saving and building up your checking and savings accounts. This will help you save funds that can be used for emergencies. You can also deposit a certain amount of money into your savings account automatically each time you are paid.
With a proper budget and routine in place, you’ll be able to see holes in your spending habits you may not have noticed before. Although it may seem impossible right now, one of the best ways to start curbing your spending habits is to resort to only using cash. Though it almost sounds prehistoric nowadays, cash-only spending can have an incredible effect on helping you save more every month. With cash, you have a limited amount, so you tend to be less inclined to spend it impulsively.
Let’s face it: Everyone deals with money problems at some point. That’s why fixing your finances is an important step to improving your overall quality of life. Learn more about taking control of your finances by visiting CreditGUARD’s financial management page. Here you’ll find valuable information on how you can regain control of your finances.