It is a common misconception that only low-wage workers face difficulty making ends meet. For all earning a good amount of money, you can end up being broke, not to mention you keep frittering away money on essential things.
Before you fall into debt, you must take control of your finances. However much your earnings, you should be able to save for a rainy day and work on your spending habits. It does not allow an interpretation that you should completely stop spending on fun activities, but the goal is to be able to stretch your money when you want it to.
Based on the current economic scenario, you are more prone to end up with a debt spiral if you lose track of your outgoings. Management of thumb displays that you should bring it below your incomings.
Top 3 suggestions on how to avoid being strapped
Here are the suggestions to help you avoid feeling the pinch, especially when an emergency expense crops up:
Get into the right mindset
First off, you need to wise up to the fact that everyone’s financial situation is different, and you can move within the range of your finances. Just because your friend seems happier and livelier, it does not mean you will start feeling blue.
Instead of keeping up with the Joneses, you should find out what you can do by staying within your financial limits. You may not be capable of keeping up with their financial status. Still, as long as you meet all of your expenses, including unforeseen ones from your income, you are set to be called a financially independent person.
You need to be specific to alleviate your financial circumstances. Ask yourself what finances you want and what you can do to accomplish them. Try to set short-term goals along with long-term goals so as to stay motivated.
Create a budget and be accountable for each expense you incur every month. If your budget is broken in one month, try to reduce your budget next month so you get back on track.
Track your expenses
It is only possible to budget if you track your outgoings. You must be aware of where your money has gone, and for better understanding, categorise your expenses into essential and inessential.
As your goal is to lift up your financial situation, you should cut back on discretionary expenses. Find out how much money goes toward food, utilities, entertainment, eating out, and the like, and then see where you can cut back.
Food is essential, but some strategies like buying in bulk and as per your need will prevent blocking money.
Make a plan to get out of debt
If you are cash-strapped as a result of too much debt, you should come up with a robust repayment plan as soon as possible. The sooner you get rid of debt, the more money you will save in interest.
If you have instalment loans like personal and car loans, you should have enough money to pay down the monthly instalment. As far as it is about other debts like loans for extremely bad credit and no guarantor and credit card debts, just pay them off once and for all.
Talk to your lender if they can accept lower than the due amount. Contact a debt collection agency, as they can negotiate with lenders.
Avoid money traps
While budgeting and tracking your spending is intrinsic, it is essential to watch out for money traps. When it is suggested that you avoid them, you most likely think about payday loans, but the fact is that there are various types of other money traps as well.
Do not lend to other
Unless you are sure you will get back money back, you should avoid lending to others. People are good at breaking promises, so they should be a bit more careful. Even if you are to lend money to the needy, you should avoid it if you cannot afford to pay back your bills.
Understand how much it will cost you
If you are to borrow money, you should determine your affordability. Knowing the actual cost is impossible, but online loan calculators can estimate the estimated amount. Each loan works differently. Some require you to pay off in a lump sum, while others in instalments.
When you know how much it will cost you every month, you can stash away that much so you stay caught up on the repayment.
Offers and schemes are not always good
“Buy 2 get 1 free” and “Get 40% off” are some stunts marketers make to trick you into buying. Even if you do not need them, you buy those products because you can save some of your money. However, the reality is that you are not saving money but blocking your money.
Use smart techniques to spend less
More than just cutting back on discretionary expenses are needed to improve your financial situation. Here s what you should do in addition to it.
Compare brands when shopping
This is the best strategy to save money if you are on a tight budget. For instance, if you have got tomato ketchup from different brands, you should compare the prices and buy the least expensive one. Watch out for the deals and make sure they work in your favour.
Save money on energy
Keep lights and fans switched off if you are not in the room. Hang clothes on a cloth line instead of using a tumble dryer. If your bills are too high, switch to another supplier offering utility services at a lower cost.
To wrap up
To stop being broke, you should set financial goals and prepare a budget to meet them, track your expenses, make a debt repayment plan, avoid money traps, compare prices during shopping, and save money on energy bills.
Description: You can improve your financial condition if you are strapped for cash by budgeting, tracking expenses, cutting back on discretionary expenses, and avoiding money traps.