Have you ever found yourself in a situation where you are living week to week? Or perhaps you’ve managed to get yourself into debt with a mounting credit card bill or defaulted loan repayments. If these scenarios sound familiar then it’s time to have a good look at the way you manage your finances and start to learn from the mistakes you have made.
The first thing to do when you’re in a financial mess is to start tidying up. Close all unnecessary bank accounts, cancel any subscriptions and store cards and consolidate your debt into one place. Cut up your credit cards and go for a prepaid card instead. By opening a basic bank account online with any number of alternative banking companies, you will not only get online access to your money but you’ll also get a free issue prepaid Visa card that you can use and is accepted as readily as a credit card but with one important difference. The money you spend on this piece of plastic is all yours and will not send you into debt or overdraught.
Hold up a mirror
Most people get into debt by living a lifestyle that is beyond them. Whether it’s general expenses like buying high end drinks, eating out and using High St hair salons or perhaps it’s been as simple as a one off purchase like a car that you simply could not afford. For others it might be a gambling habit or a similar vice that needs to be addressed.
Look at yourself honestly and see how you got yourself into this financial mess . If it’s been a high flying lifestyle on a measly budget, then you will need to cut all unnecessary expenses and look for cheaper alternatives for essentials. Learn how to shop more effectively, get a low maintenance hair style, limit your nights out to once a month and make changes that will reduce your living costs.
If you have made a purchase with a loan that you cannot furnish, and you are unable to find ways to make your repayments, then simply sell the item and clear your debt. This is the harsh reality of your mistake but it will free you from the pain of debt.
If your habits are holding you back, then seek help. Continuing on this road will only lead to more debt. The first and hardest step can be recognising that you have a problem in the first place.
There are many websites and chat lines that can provide free financial advice and emotional support for what can be a difficult transition.
Find your feet
Get back in control of your spending by first of all making a tally of your monthly income and a list of your monthly expenses. Don’t leave anything out and be honest. Under estimating your actual living costs will only hurt you at this point. But being up front about the true cost of things like your food bill and petrol you will be able to then look at the big picture and know where you can trim the fat.
Once you’ve made a budget, set up standing orders for your fixed bills like rent, insurance, utilities and anything else. Make sure you have enough money in your account each month to cover these costs.
Then take a look at what priorities come next. Bills like food, petrol, entertainment and telephone are things that can be reduced to fit your income. Learn how to cook with cheaper cuts of meat, and learn to make more food from scratch. The more brightly coloured packages are in your trolley, the more expensive it will be. Reduce your driving and find other ways to get around perhaps more walking or cycling, or try and set up a car pool. Keep things like alcohol consumption and cigarettes down, these little luxuries can really add up.
Now that you’ve found your feet you can start building your self back up. Create a savings goal that you strive towards and let that nest egg be your fall back for when times are tough or unexpected costs arise. That way you won’t get into debt as easily and you’ll bounce back faster from a financial stumble. Once you’re nest egg is safely tucked away in a high interest account, start again with a new savings goal and you can start to afford the things you desire.
Born in London, William Masters writes for online banking system Eccount Money and a variety of different on- and offline publications across the United Kingdom. He has a reputation as a finance journalist with an expertise on a range of topics from international economics and personal finance to mobile banking security.