Is there a way to manage money and eliminate debt step by step? Perhaps if there were a absolute way we would all be doing it every day, week and month of the year. However, I have found several steps that can help and if you attempt to follow each as closely as you can you should be one step closer to eliminating your personal debt. You can begin tomorrow and it can change your life.
Step Number 1: Assess your current financial situation.
Are you currently in the red or black? Do you use your credit card to manage your money and daily expenses? This may be a definite indication that you are in a state of financial trouble. There is a free tool at my blog that may help quantify your current situation.
The Second Step: Analyze your spending habits.
Look at your weekly and monthly spending habits. Do you find that many of your purchases don’t need to be made? When discussing spending, there really is no ‘grey’ area. Some things we all need to purchase and there are items that we don’t. You might have to re-learn how to manage money if you discover that half of the cash you spend is on eating out, entertainment, fancy clothes, alcohol etc. Try this next step.
Step Number 3: Budget.
I’m pretty sure I’ve mentioned this once or twice on my blog but creating a budget is without a doubt the most key step to make. A simple way to begin to budget is to sift through your credit card bill and create list that lists what you MUST HAVE and what you DON’T NEED. This will only take a a bit of time but it will show you how to manage money in a very easy way. If you want, try to go through a few months of bills. The 1st thing you will probably discover that you could chop those bills by 50%! From here on in, when it comes to buying things in the future you will know exactly what purchases get the ‘green’ light for necessary spending and what gets ‘red’ flagged. Just like that you have created a basic budget.
Step Number 4: Eliminate those ‘Red Flagged’ purchases.
Step 4 will take the most determination, dedication and will power from you. The key of how to manage money is to understand where the money is going and why. You don’t need the finest fashions, or that expensive bottle of wine, football tickets or the newest pair of shoes if you are already having difficulty with your finances. The only things you really need are a roof over your head and 3 square meals. Make an effort to live a very modest lifestyle for a month and you will surely be shocked with how much cash you will save.
The Fifth Step: Find a low or no cost credit card.
You may have to search around to different companies but this is a very important step to take. The key to this is if you carry a balance or if you always pay it off each month. If you do have a an amount that carries over you need to find a credit card with a low interest rate. It is almost impossible to pay a balance if they charge you 18% interest or higher. That amount adds up fast. If you are lucky enough that you can make the payments, find a credit card with low or no fees. In my opinion you should eliminate your credit card altogether and only use it for emergencies.
Step Number 6: Consolidate your debts.
Plan this step carefully. The positive side is that debt consolidation offers the opportunity to lower your monthly payments, save on interest and may even help you get out of debt faster. But there are downsides that should be taken into consideration like not finding out the root of why you are in debt and stopping those tendencies that got you into debt to begin with. You may end up paying more in the long run with debt consolidation if you don’t change your habits.
There is another free calculator on my blog that can show you how to manage money through debt consolidation.
The Seventh Step: Seek financial advice.
This is straight to the point. You can’ know all of the things you need to about debt and the ways to eliminate it. These steps will help but it is still wise to seek face to face advice from a professional.
Step Number 8: Fix your credit.
Having bad credit is, well, bad. There are plenty of huge purchases you are going to make in the future and you must have a quality credit score to do so. Be sure to check your credit at your financial institution or even find out online with a company like Equifax. The sooner your credit is fixed the better.
Is there a way to manage money and eliminate debt step by step? I truly believe that if you take these 8 steps you will have the right tools to eliminate your debt. Good luck and I look forward to any success stories that you may have!