Debts will always be there. We can not avoid it and it will never disappear for as long as it remains unpaid. There are good debt and bad debt as long as we know how to control it. Therefore, the path towards a debt-free life would be to manage our debts wisely.
Below are seven highly effective ways of debt management:
Control the use of credit cards
Just control the usage of your credit card. Treat them like cash. Use it if you have the cash ready but if you don’t have the cash now to purchase something, don’t even think about taking the credit card out of your wallet!
I have 6 credit cards and I just keep in the drawer and only keep two credit cards – visa and master card in my wallet. Every month I will exchange with those in my drawer.
Keep track of your money flow
If you can’t track it, you can’t manage it. Develop a personal habit of recording all your expenses for the month. Some of your friends might laugh at you but just ignore them or do it quietly.
You keep all receipts and update in your computer or expense account book everyday. It is easy to do everyday then once a week as we might forget.
Add up your expenses and assess if you have over spend, by comparing it to your income. Analyze those items that are taking the most money out of your pocket and see if you can do anything about them. You’d be surprised how much you’re spending on those cigarettes, movies and “branded coffee”. The main thing is to never spend more than you make.
Only buy the essentials
The rule to manage your debt is to spend below your net income. Budget only to buy the monthly essential like food, clothing, home, life and health insurance and the likes are “need-to-haves”.
Do you need to spend more than a pack of cigarettes a day? Do you need to drink starbuck coffee all the time? You decide.
Go through your spending record and identify items that can be cut. Sacrifice.
Have monthly budget
One if the most effective ways of managing our debts ways of managing our debts wisely is through proper budgeting. A budget gives a “preview” of our financial position so that we can roughly estimate whether we would have a surplus or deficit. If our budget already shows a deficit, drastic action has to be taken – you could either increase your income or cut the “nice-to-haves”.
Look for cheaper alternatives
Revisit your monthly budget and see if you can use any other cheaper alternatives for the necessary items. For example, toothpaste – can we switch to brands which give better value for money?
Check its net weight and decide on purchasing the brand that gives you the same value for a lower price. Sometimes, cheaper may not always be better. What we should be looking out for is value-for-money.
Look for discount coupon and make use of that. Look for Mega Sale from any shopping mall as it is cheaper to do major shopping during this time.
Have another side income
If you don’t have enough to spend at the end of the month then consider work as part time to supplement your income.
That is the only way to have extra money for saving or for monthly expenses in order to avoid much debt. Consider part time home based business, internet marketing, multi level marketing (MLM) or a second job at night.
This will make you stay focus as you are serious in managing your debts.
Last but not least – treat yourself a nice reward
Managing our debt and getting out if it is hard but it doesn’t have to be painful. If you have done some of the above suggestion then perhaps you should reward yourself a well-deserved gift or treating yourself to a good hearty meal. By rewarding ourselves, we’d feel motivated to stay on track.
Don’t go and spend big money again as this will create new debt. Any saving from the budgeting will be good enough treat your self.
Hopefully this article will show you the effective ways of managing your debts wisely. We have to bear in mind that if we do not manage our debts wisely, they will manage us in return and it can be painful.
The road to managing your debt wisely would be a smoother one if we try not to think of all these as a scarified, but as delayed gratification.
To Your Millionaire Success
Michael Liew