So many people would like to reduce their debt or get out of debt completely, but are unsure of how to start. Waiting for too long to gain control of your financial situation can have devastating results. The best time to start getting out of debt is right now, before you reach the point of bankruptcy. Here are a few practical ways to begin your journey to debt free living so you can avoid bankruptcy in the long run.
Set a reasonable goal for each debt that you have. Make sure that it is a goal that you can achieve so that you are not setting yourself up for failure. Keep track of how you are doing on a spreadsheet or even just on a scrap sheet of paper. It is important to be able to see how you are doing so that you are motivated to keep moving forward.
Keep track of every penny you spend for one month. Knowing exactly where your money is going helps you to determine where you can cut back your spending. Keep your receipts and record every dollar spent in a journal. At the end of the month tally up what you spent on the things you wanted and the things you needed. Then decide where you can cut back in your want category and use that money to put towards paying down your debts. You will be amazed at how much that morning latte will add up over the course of a month. By making your coffee at home in the morning, you can save yourself over $1200/year!
Go on a spending freeze. In order to make your credit card balances go down, you need to stop making purchases that you cannot afford. A popular way to stop yourself from using your credit cards is to freeze them into a block of ice. This way you will have to thaw out the ice block before you can use the credit card, giving you time to consider whether or not the purchase is actually necessary.
Create a Realistic Budget. Go back and look at your last 3 months of expenses and take a median amount for each bill or expense for running your home. Don’t forget your mortgage or rent, insurance, electricity, hydro, vehicle expenses, fuel, food and personal items. Make sure that you take all of your expenses into account so that you do not run short before pay day. Find ways to shrink your budget such as clipping coupons to save on food and walking to work if possible to save on fuel.
Make all of your purchases with cash. After the cash is gone, you have to wait until pay day to buy anything more. The key is making it to the end of your pay period before you spend all of your cash. At pay day take out all of the cash you need at the bank and keep it in separate titled envelopes for each expense. Once the envelope is empty, you don’t buy anything more in that category until pay day. If you really need something and there is money leftover in another envelope, feel free to move it around to make it work until month end.
If you have more debt than you can handle and you would like to avoid bankruptcy, contact 4 Pillars Red Deer at 403-755-1757 for a free consultation. We will go over your current situation and discuss your options with you to help get you on the right track to becoming debt free.
