One of the primary reasons why people end up in debt and strapped for cash is that they simply spend more than they have coming in. It doesn’t take a top mathematician to work out that if you consistently spend more money than you are bringing in then, sooner or later, you will find yourself in trouble financially.There are a number of aspects within your spending that, if you get them correct, will ensure that you aren’t overspending and putting you and your family at risk of financial meltdown.
It doesn’t have to involve a major lifestyle change because often the smaller, more subtle changes, done well, can make the biggest difference and keep you debt free.
It’s about sitting down, carefully looking at what your income and expenditure is, before then looking at where best to make cutbacks. It may seem an inconvenience but, in the long run, it will save a lot of heartache.
Work out what your monetary situation is
Primarily, the first thing to look at is what your income is. Take into account anything you receive regularly such as wages, any rent from properties and expected payments to give you a clear look at your income stream. Treat any one-off payments as a bonus and purely consider regular income to give you a solid, regular and dependable look at what you can realistically afford to spend each month.
From here you can then set out a workable budget which will help you to spend what you can afford, rather than regularly creeping into overdraft city. Gradually from your monthly income take off exactly what you need to pay off each month, be it rent, mortgage payments, travel costs or other regular expenditures. If, once you have taken off all the expenses of the month, you find that you are over what you have coming in then it’s essential that you look at where cuts need to be made.
If you still have a little bit of cash left over, don’t get complacent and think that you must spend it at all costs, if you’ll pardon the pun. Consider sticking whatever you have left over in a savings account so that it’s working well for you, as this can provide a cushion for future months if you find you have overspent.
Part of the budgeting process is looking at the month-to-month expenses as well as the longer-term ones a little bit further down the line. This can allow you to budget for a major expense so, if you are aware that you have a holiday or a car to pay for later in the year then you are able to cut back a few months prior to this. Don’t allow yourself to work in a bubble and concentrate just on month-to-month expenses because you could be caught out by a sucker punch later on.
Quite simply, take lots of care when it comes to what you spend each month. If you act sensibly, and realise that simply putting purchases on a credit card won’t solve anything, then you’ll be in a much better position. Take, for example, a recent uSwitch survey which found that many people are choosing to pay for their Christmas with credit cards, racking up problems for further down the line as a result. Indeed, four million turkeys will be paid for via a credit card this year while 59 per cent plan to buy Christmas with the help of plastic. Michael Ossei, personal finance expert at uSwitch, said: “The last thing people want to do is scrimp at Christmas, but it’s easy to get carried away and spend more than you mean to at this time of year.
“The high number of consumers willing to put themselves deeper in debt just to stave off the embarrassment of not giving presents sends alarm bells ringing.”
It’s essential that, all year round, you don’t overspend and instead stay strictly within your means.
That’s not to say you can’t enjoy yourself, and no-one should have to scrimp and save for their whole life, but there needs to be a limit in order for you to stay firmly in the black, rather than slipping into the red.