Getting out of Debt
Understanding how to manage money is something that is not taught in the classroom in most high schools and most parents, especially the ones that are bad with money, don’t take the time to teach their children financial responsibility. The good news is that bad money habits can be overcome with a little perseverance and an understanding of how to manage personal debt. Here are a few steps to help you manage your money and get out of debt. At https://www.drcredit.com/, we assist people with financial counseling, too.
Gather your financial information
The first and most important step to managing your money is to know exactly where your stand financially. To find out just where you are, as far as debt and living expenses are concerned, you must first make a plan, then gather together all of your relevant financial information. Information should include a list of income from all sources and a list of all expenses. Expenses should be prioritized with the most necessary or primary expenses coming first. Primary expenses include rent, mortgage, utilities, car payments, insurance or anything else that is a vital necessity. Secondary expenses include items such as eating out, cable TV, gym memberships, etc. The secondary list contains items that you can cut back on. Finally, make a list of all debts. This will include credit cards, personal and student loans, or anything else you have purchased on credit.
Create a budget and a plan
Once you have all of your financial information, you can now figure out just where your money is going. If you make $40,000 per year and spend $45,000, then you will always be in debt. Living on a budget requires consistency and will often mean cutting back on a few extras you may be used to. Cutting back does not mean giving something up. If you spend $50 per month for a gym membership, then consider a membership at the local YMCA or purchasing used workout equipment to use at home. If you love to eat out, then dine at lower priced restaurants less often. A budget should allow for all of the primary expenses first, then for money to pay toward debt, then for secondary expenses. Also, try to set aside one-third of your monthly income for emergencies. If you can’t afford to put aside a third, then rework your budget to come as close as you can. Emergency money should never be used for anything but unanticipated emergency cost such as car repairs or to pay bills if you suddenly find yourself unemployed. Once you have set a budget that addresses income, expenses and debt, then you only have one thing left to do and that is to stick to your plan. To effectively manage money and debt, it will take time, but be consistent.