Debt and money management are two techniques that help you know your financial status. Poor money management will lead to excessive debts and good one will create wealth. The ways you manage your money will decide how poor or wealthy you are. If you are deep in debt read on to discover your way to a debt free life.
Why are you deep in debt? Let’s analyze your spending habits. Do you tend to buy unnecessary things? Do you create and stick to a monthly budget? Do you record on paper everything you spend? If most of your answers are no then it’s all about how you handle your expenses — how much you spend. Here are tips to improve the way you manage your debt and money.
Managing Your Debt and Money
Record the money you spent for at least a month. Group your list of expenses into different spending categories, such as food, clothing and so on. This is the easy ways to scrutinize your needs and wants. When you know where your money is going you will know all things you can’t live with and all stuff that you can sacrifice.
Check out your list and find one or more expenses that you are willing to forego or postpone. Prioritize items you want to keep on the list based on one that increases in value. Also, eliminate or reduce recurring expenses related to entertainment such as satellite TV, internet service and other monthly conveniences.
Create a new spending plan and try to stick to it. When you go out for shopping always carry a shopping list. If you are an impulsive shopper, use the list to find the amount of money you will carry for shopping and remember to leave your credit cards at home.
Finally, pay off your debts using the money you save from the above efforts. If you have spent money more quickly than you’ve earned it you will be able to reverse the situation through new spending habits.
Converting Your Debt to Wealth
Once you have your debt under control it’s time to build your wealth. While you are reducing expenses you can also start increasing income. This means you will have to find other sources of funds and then place the cash in investment instruments that potentially offer higher returns than the interest rate of your debts.
There are different investment instruments from ones that are low risks-low returns to others that are high risks-high returns. Before you choose certain types of instruments make sure you understand your tolerance for risk and only make your investment based on your profile.
So to get ahead financially start with managing your debt and money. Know the flow of your money and then pay off your debt using the money you save from unnecessary spending. Once you can control your debt level find investment instruments that suit your profile to convert the debts to wealth. These are the debt and money management tips to a debt free life.