Beat Debt Using Some Simple Money Management Techniques

With inflation and the cost of living on the increase

, family budgets have never been tighter. Taking the time to manage your money using some simple techniques can keep your finances under control and prevent debts getting out of hand.

Understand your budget

The first thing to get to grips with is your monthly budget. You need to understand where your money goes each month. The best way to do this is to write a list of everything you spend from your mortgage or rent down to meals at work and car insurance. Then compare your expenses each month to the income you have. When calculating your income, remember to include your wages after tax and also any other incomes you have such as benefits. An ideal position to be in is where your income is slightly greater than your expenses. You then have room to save. If your expenses are greater than your income, you need to revisit your outgoings to see if there are any areas you can cut back on. By making these cuts, at least on paper, you have a much greater chance of keeping control of your spending later.

Manage Your Money

Once you have a clear understanding of your monthly budget, you need to make sure you stick to it so that you do not overspend. This is not always easy but a technique that may help you is to keep a money diary. A money diary is a record of what you actually spend each day or week which you can then compare against your budget. It is extremely useful to keep track of things like food shopping. If you have budgeted to spend 300 per month on food, this is approximately 70 a week. Where your money diary shows you have spent over 70 in the first week of the month, you know that you must spend less the following week or you will overspend and risk going into the red.

Start Saving

There may be a number of things you will have included in your monthly budget which you do not actually pay for on a monthly basis. Good examples of these are car maintenance and household insurance. Where this is the case you need to remember to save the equivalent of what you have budgeted for these items. Over the course of a year, you will then collect enough to pay for them when they become due. If you have any excess income, it is also an extremely good idea to save all or part of this to start building up a financial cushion. When saving, the most important thing is to do it at the beginning of the month. Open a separate savings account and transfer across the money you have budgeted to save as soon as your income comes in. This way you will not be tempted to spend your savings money during the money.

What if my expenses are bigger than my income?

If your expenses exceed your income, the first thing to do is decide whether you can make spending cuts. If this is not possible, the reason why your expenses still exceed your income may be because you are trying to pay off debts. If this is the case, you many need to consider some form of debt management solution to help your reduce these costs and you should take further advice about this. Finding time to managing your money is often difficult with today's busy lifestyles. However, the rewards for understanding your budget and sticking to it are significant. Getting back in control of your finances, will help prevent you from getting into debt, prepare you for financial problems when they occur and allow you to plan for your financial future.

by: Steve Jackson

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