Staying out of debt is a lot easier than digging yourself out of a mountain of financial liability. With the state of the current economy it is easy for people to fall into owing money. Unemployment, job loss and interest hikes all lead to an increase in past due accounts. Follow these handy common sense tips to help avoid the fall into financial ruin.
1. Track Your Spending
Hand in hand with tracking your spending is keeping a financial tally of the household income. At the end of each month add the money that comes into the household. This income includes regular pay checks, tips and commissions.
The next step is to make a list of all monthly expenses. Include big ticket items such as mortgage and loans, electrical bill, groceries and insurance for example. Do not forget the incidentals such as the early morning coffee or the evening foray to the pub with the gang. Do not forget about the bills that are paid semi-annually like home insurance or taxes.
Having everything written down allows you to see exactly how and where the money is being spent. Spending more each month than what you earn should raise a red flag and encourage you to stop spending.
2. Get Rid of your Credit Cards
Credit cards are easy to get and easy to ‘run up’. The convenience is matched by their ability to make the card holder overspend. Keeping track of each transaction will help prevent overspending. If you are unable to control your credit card spending habits, get rid of your cards and pay by cash.
Using a credit card can be helpful to defer spending money until a later date. However, if this is done, it is best to pay off the entire balance at the end of each month. This avoids being saddled with hefty interest payments. Be warned however. You can stop using your credit cards but don’t rush out to close the accounts. Doing so can hurt your credit score.
3. Eat at Home
Eating at restaurants can be a strain on the monthly expenses. Stay at home and put the money that would be spent on a meal out into the grocery store fund. In addition to creating meals at home, read the local sales flyers and buy groceries on sale. Cut costs and buy non-perishable items in bulk when they are on sale. Toilet paper, tissues, and canned goods can be bought in bulk at decent prices.
Track your spending and living within your means will help keep you from overspending and help you to stay out of debt.