Money can be the source of a lot of fun and joy in our lives, but it can also create a lot of problems for us. One of the most important habits to build in life is good financial management to help you avoid debt in the future. When you consider just how expensive some things in life can be, it’s never a bad idea to have extra funds lying around for important things. For example, you might suddenly find yourself facing an expensive car or computer repair that isn’t covered by insurance or warranty. You might also have to spend your emergency expenses if you suffer an accident.
There are also long-term expenses that we have to pay for as well. For instance, a mortgage is usually the most expensive thing in our lives to pay for. Missing a payment could lead to you losing your home, so it’s important to always have more than enough to pay it off each month. Similarly, a car is another huge expense that you need to pay for over a long period of time. Again, missing payments could lead to your vehicle being repossessed which isn’t ideal.
As such, managing your money correctly can have a huge positive impact on your life. In order to do so, it’s important to build a solid financial foundation to help you develop better money habits. In this post, we’re going to take a look at some of the most important aspects of managing your finances and habits that you should focus on developing.
Keep track of all your incoming and outgoing
The key to getting your finances in order is understanding where your money is coming from and going to. To do this, we highly suggest that you start using some kind of budgeting app or system. Even something simple like a spreadsheet can work for this. Write down all of your incoming money and compare it to your outgoing. You should always have money at the end of the month. If you’re in the red, it either means that you had an emergency expense that month or you’re spending too much of your income.
It can be a bother to keep track of every single expense, but as long as you focus on building up those good habits it can become second-nature to you. You might find it easier to use a smartphone budgeting all so that you can record all of your expenses on-the-go. This is more convenient for some people as it beats opening up a spreadsheet. Apps can also give you more insights on your spending, such as the days you’re likely to spend more and when you spend the majority of your money. This can be helpful in determining where and when you spend the most money so you can cut down and avoid certain spending habits.
Learning to live within your means
It’s surprisingly common for people to live a life that is beyond their means. The most common example of this is using credit. Credit is a great example of money that isn’t ours, yet we still spend it fairly often. We can use it to buy something expensive such as a new computer or television even if we don’t need it. Many of us consider credit as a luxury finance option to spend on things we can’t afford, but that itself is a rather questionable way to approach our finances. In reality, we should never be spending money that we can’t afford. We should always aim to live within our means and that means avoiding anything that is out of our reach.
In short, try to avoid using credit as much as possible. Yes, it’s a great way to buy things that are out of your reach and you can often get some low-interest rates which make it more appealing. Unfortunately, it’s still going to be more costly than just buying something with your own money. Consider saving up for a few more weeks to buy something with your disposable income or try to live without those expensive items. Instead, try to save your credit card for expenses that can be considered an emergency.
Understand that you can get help if you’re already in debt
If you’re already drowning in debt from student loans, credit cards, and your mortgage, then you shouldn’t feel hopeless because there are many ways to get out of those financial pitfalls. For example, bankruptcy lawyers can be surprisingly helpful when it comes to getting you out of extreme levels of debt. The goal here is to restart your financial health so that you can start making better financial decisions in your life. Filing for bankruptcy won’t get rid of every single debt you face, but it can be an effective way to get creditors off your back and give you some room to breathe.
If you’re unsure about the financial options you have to get out of debt, it’s important to speak to financial experts to seek assistance. Thankfully, many of these specialists offer their services for free and make no commissions, meaning they’ll be offering you impartial advice at all times. However, bankruptcy isn’t the only way to get rid of debt. You can also consolidate all of your existing debts into a single repayment, or you could even get a consumer proposal to effectively wipe a large portion of your debts. There are many options available to those who are suffering from financial problems, so we highly suggest you get in touch with a specialist to help you out.
Where to go from here?
The best way to avoid debt is to prevent it in the first place. This can be challenging if you don’t have good control over your finances. We highly suggest that you pay more attention to your finances and start recording incoming and outgoing money to give you a better understanding of your situation. That should form the basis of good financial management and will help you develop better habits to avoid debt.