Every small change you make to reduce your debt and cut your spending will have not only an immediate impact but every reduction puts you on a better footing for a brighter financial future.
Here are some pointers on how to apply some simple but effective strategies in order to improve your current financial position and clear the path for a stronger financial tomorrow.
Suggestions include a savvy tip to help you cope with a financial emergency, why you can’t avoid the need to budget, plus a strategy for clearing your debts.
The importance of a financial buffer
The timing always seems to be the worst possible when it comes to your car or boiler breaking down, about a week before you next get paid and when your finances are already stretched to the max.
If you need a short-term loan option you can visit King of Kash for more details but you should also try to make a commitment to yourself that the best way forward is to create an emergency fund so that you can cope with an unexpected bill without resorting to borrowing the money.
Credit cards and short-term loans can soon become expensive even if you only borrow the money for a short space of time. Start putting some money away each month into a separate savings account that you can access when you need to. Your aim should be to try and get somewhere between $500 and $1,000 in emergency savings so that you can cope with a boiler breakdown or whatever it is that needs fixing in a hurry.
Even if you start putting small amounts away each month, if you manage to avoid any unexpected bills for a while it will soon build up to a reasonable sum. When you do have to borrow the money, make sure you work a plan to repay it so that you are ready for the next emergency.
There’s no escaping the need for a budget
You wouldn’t be the only person who thinks budgets are a boring thing to sit down and do but there is no escaping the harsh reality of financial life that without a detailed analysis of where your money goes each month, you will be fighting an uphill battle to put your finances straight.
You simply must make the effort to create a simple budget that lists all your expenses so that you can compare how much you spend to how much you earn.
It is often a revealing and even startling discovery when you first put all the numbers down in black and white, and realize that your lifestyle and expenditure is not in line with your current income.
You have two choices at that point. Find some extra work to cover the shortfall or work out what you need to cut down on and cut out completely from your expenses to balance the books and put you in the black for the month.
The obvious things to target are restaurant treats, little indulgences like your favorite latte on the way to work and other small amounts of spending that when you put them all together can add up to a larger number than you might have estimated.
Without a budget you can’t create a viable plan to improve your financial position, so however boring it sounds there’s no other way to gain the sort of financial control you need over your spending.
Make a debt plan
As well as creating a budget that you can use to track your expenses, the other important step you need to take to improve your financial future is to work out a plan to pay down your debt.
The starting point to clearing your debt is to make a list of all the amounts you owe from credit cards to loans and once you have a total, work out much you can afford to put towards paying more cash off your balances than the minimum payment or monthly repayment figure.
A sensible strategy would be to target your debts in order of how expensive they are. The loans with the highest interest charges should be cleared first as that will put you in the clear in a shorter period of time.
When you do manage to clear your credit card balance a good tip to remember would be to not cancel the card completely, as this could have a negative impact on your credit score. Instead, have the discipline to leave the card alone with a zero balance, and if you do use it at any time make sure you only do so when you can pay the balance in full when the statement arrives.
Follow these simple steps and you might be surprised how quickly your financial future suddenly looks brighter.
Aimee Pope is a financial advisor who enjoys helping others budget their money. Always on the lookout for new tips and tools, she shares them on a variety of money and family websites.
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