It's not until you are hounded by debt collectors wherever you go, that you realize how terrible it is to be indebted and unable to pay back outstanding loans. It's only then at that you realize the wisdom of the advice, "A stitch in time saves nine." Here are five foolproof tips that will ensure you are never caught in the dreaded "debt trap."
We all know that it's necessary to budget for the month’s expenses. However, why is this not happening ... even with the best of us? Everybody can draw up a rough budget for the month. Everybody can keep track of their daily, monthly, and yearly expenses, provided they are willing to put in a little effort.
Start today. Start now. Make a list of recurring expenses, projected expenses, and unforeseen expenses. Ensure that you do not plan to spend more than 2/3rds of your income, so you can save at 1/3 every month.
There's nothing better than savings when you're in a financial jam. Even without the financial jam, savings can boost your personal credit score quite a bit. Try to save 20% -30% of your income every month, and you will never have anything to worry about. This safety net will come in very handy if you are suddenly laid off, want to launch your own business, have an accident or sudden illness, and the like.
3. Prioritize expenses.
Too many people keep complaining that budgeting does not work for them because there is never enough money around. Wrong! You are unable to prioritize your expenses and hence, you never have enough for these expenses.
In case you are having trouble staying within your budget, or are unable to make a budget for lack of funds – try prioritizing expenses. Take care of the top priorities first – some of which should be non-negotiable – and the rest will fall into place. Do not compromise with the portion you kept aside as saving.
4. Cut all that can be cut.
Look around you. Chances are that you will see about 30% of the things in your home as clutter. Take a close look at your budget (the part that shows expenses itemized) and you will definitely see the same, i.e. about 30% clutter.
Stop draining your income on unimportant things. Consider going on a Spartan life style for about 3 - 4 months per year, and you will be delighted with how much you will be saving. For best results, try this every third month – or any other way you find easy to follow. Chances are that once you realize how your money is drained off, you'll stop spending on frivolous items.
5. Make your money work for you!
Whatever your income may be, when you are earning money, it's a shame to use it only for spending. Make it work for you! Invest. Learn HOW to invest. In this way you'll multiply your money easily, and have more for your needs/savings.