Saving money and becoming debt free. It should be a goal all of us are aspiring to. At one stage in our life most of us will have some debt, either in the form of a home loan or maybe car finance. Debt on its own is not bad, sometimes it is unavoidable especially when one wants to acquire big ticket items like property or cars. However when your debt is out of control or becomes unmanageable then it is or becomes a problem.
When to start saving or manage your debt.
How about now. The sooner one starts saving and starts to manage ones debt the better it is. Impossible ? Maybe or maybe not. Start thinking with a can do attitude and we talk again. A positive mindset is the first step towards financial freedom.
How to start saving money
Ok you have to start somewhere. One of the first things to do is analysing where all your money is disappearing every month. If yous spend more then your income on a regular base you might be in a debt trap. Start by creating a spreadsheet with all incoming funds like salary, pensions etc. Now create a similar sheet with all known expenses like rent, electricity, subscriptions etc.
This should give a quick overview of what is left. I hope something is left after this exercise. Next create a column with all other expenses you can think of and didn’t cover already. See the trend here. You must start analysing all your expenditure maybe do this for a few months to get a clear picture.
Don’t feel like tracking this by hand, maybe use some modern technology like MoneySmart a free Budgeting Software For Personal Financial Management
After a while you should have a clear picture of where your money is going. You can move to the next step.
Cutting back on expenditure and start saving money
Now starts the fun part although feel free to disagree. Cutting back on expenditure and start saving money. Ok the cutting back is maybe not so fun, but the saving money part makes up for that. Take your list of all your expenses and start prioritising them according to the following scale. 1 to 5 with 1 impossible to cut expenditure and 5 being very easy to cut your expenditure. You should have a list now with some 1’s some 2’s and hopefully some 3,4 and 5’s as well.
Starting with the list of expenditure you ranked 5 I am taking a wild guess. These most probably consist of entertainment, eating out, magazine subscriptions, premium tv and satellite subscriptions etc. All the things which make life fun. I won’t tell or ask you to cut all the fun out of your life but have a good look at this list. I am sure some of it can be cut down a bit. Maybe go out one evening less a month or have a glass of wine less. Just remember it is all to reach your goal of saving money and becoming debt free.
Going down the list will become harder and harder especially when coming down to expenditure you have marked with 1 or 2. But still go through every item and think how you can save money on that item.
Just as an example. Maybe your electricity bill is high. Start thinking why is it so high, maybe when you are aware of this cost you can start changing some habits like switching of lights etc when not in use.
The next step to saving money and becoming debt free
You have come this far you have cut some expenses and actually you have some money left over at the end of the month. Now don’t go and paint the town red, but yes you deserve a reward. Take some of the savings and put it away in a fun jar or account and save enough that you can treat yourself one day. The bigger part of the savings I would like you to put in your most expensive debt, like your credit card debt, personal loan etc. You will see if you keep doing this every month (rank your spending regularly s well to make sure you don’t fall back to old habits) you will see your loans disappear which in turn makes it easier to start saving money.
If you made it this far reading the article you have the right attitude and you are well on your way to saving money and on the road to financial freedom and all the fun that goes with that.