Alright. Maybe you have a debt problem. Maybe not. Who is anyone to tell somebody that he has a problem with how he is managing his finances. You could be starting a more thrifty lifestyle because of a change in the philosophy in which you approach life. Your spouse could have finally knocked some sense into you about the way you spend money. Or maybe… you really do have a spending problem that you have acknowledged, and now you are ready to take action to rectify it.
Whatever your situation, now that you have committed yourself to make changes to your financially trigger-happy habits, you should start taking a closer look at where exactly your money is going.
The immediate action to take is to start documenting your expenses. Very often, people go around spending very little for their living expenses and don’t know why the bank account is always low at the end of the month. This is usually caused by big ticket items that we forgot to remember.
Nobody has the right to tell you how to spend your money unless he is your father. Even then, that is only fine to a certain extent. But here are some ideas you can use to help you manage your finances better.
Pay attention to your credit cards
If you’ve always felt a reluctance to open up the envelope that contain your credit card bill in fear of what horrible stuff you might find inside, you are not alone. For a lot of people, the biggest monthly expenses are not the credit bills that come into their mailboxes. It is the interest that they are required to pay for the credit usage.
They pay the minimum required payments and get on to fight another month. The payments are only made towards the interest instead of the principal outstanding. So the debt gets rolled over month-by-month while never decreasing. At the end of the year, these borrowers wonder where all the payments have went.
Stop doing this. By making just the minimum payments, you are usually just paying the interest portion of what you owe. To start seeing a reduction of your debt, you need to pay if off rather than just making the minimum payments.
Small things add up big time
Everyday we make small purchases feeling that those expenses are small to make a significant impact on our expenses. Well that is not the case. Consider the afternoon snack you have each day or the cappuccino you takeaway on the way to work every morning. These little things can add up to hundreds of dollars each month. Especially when you have made a daily habit of spending on them each day as a habit.
There are many other little things that add up significantly. If you tally them up at the end of the year, you might be shocked to find that the amount of money you have spent on them could take care of your mortgage for 3 months!
Luxury
Enough. It is not cute to boast to your friends that your luxuries are actually necessities. It just makes you look like a fool. Unless you are a teenager trying to draw some attention from your peers, it is not cool to say that you need to consume fine French bread instead of the regular ones at the neighborhood bakery.
Do you really need to have dinners at restaurants that will set you back $100 each time? Or do you really need to subscribe to the full cable catalog of channels when you actually just watch a couple of them? And do you really need to drive around a big petrol swallowing SUV when all you need is to get from one place to another? Think these things through. You could be unknowingly be throwing money down a rabbit’s hole. What is stopping most people from downgrading their lifestyles is just a huge ego.
Watch out for impulsive purchases
The way marketers have with words gimmicks can sometimes make consumers buy products or services before (if ever) they even need them. Everyone have been a victim of sales, promotions and false scarcities.
Do you remember a time you bought something due to the attractiveness of a sales price thinking that you would eventually need to use it in future? Then you never got to using it? These things happen all the time. A simple approach of only buying things that you need now can solve this problem for you. Stop buying things that you need in future or things you think you need in future.
Refinance your home and car
These are 2 of biggest recurring expenses incurred by households. When housing payments are becoming unbearable, find ways to make lump sum payments. And when a car loan is too taxing, consider switching to a smaller one.
It is amazing how many households do not know that there is such a thing as a refinance. It can often help you save huge sums of money over the long term just from simple procedures. Money is the same from every lender. It makes absolutely no sense at all to pay more for a loan than you have to. So look out for savings you can make just by refinancing to a different lender. You might save thousands of dollars from one deft move. Thousands which you would have paid for no reason should you stay with your current lender.