A Smarter Way to Manage Your Debts and Expenses

Let’s face it, managing money can be a daunting task. Especially when you’re an average middle class or working person trying to pay off debts and keep up with your daily expenses. You may have tried different strategies in the past, but still find yourself struggling or living paycheck to paycheck. The good news is that there are smart ways to manage your debts and expenses that can help you achieve financial stability. In this article, we’ll explore some of these strategies and how they can benefit you.

Create A Budget

One of the smartest ways to manage your debts and expenses is to create a budget. A budget is a financial plan that helps you track your income and expenses. Creating a budget may seem like a daunting task, but it is easier than you think. Start by listing all your sources of income, including your salary, bonuses, and side hustles. Then, list all your expenses, including your rent/mortgage, utilities, groceries, transportation, and debt payments. Don’t forget to include other expenses such as entertainment, clothing, and gifts.

Once you have a list of your income and expenses, subtract your expenses from your income. If you have a positive number, that’s great! You have extra money to save or pay off debt. If you have a negative number, it means you’re spending more than you’re earning, and you need to make some adjustments. Look for areas where you can cut back on expenses, such as eating out less (bag lunch vs deli), reducing your cable bill (cord cutting), or finding cheaper transportation options (eg public transport vs ubers). The goal is to balance your income and expenses and have some money left over for savings and debt payments. This is a critical step that requires some focus and discipline at times.

Remember, the key to creating a budget is to stick to it. Make it a habit to review your budget regularly – e.g. weekly and then monthly so that you can adjust it and your spending as needed. This way, you’ll be able to be conscious of both your income and expenses and stay on top of your finances and achieve your financial goals. Afterall, you can’t manage what you aren’t even tracking or thinking about!

Prioritize Your Debts

If you have multiple debts, it’s essential to prioritize them to avoid getting overwhelmed. Start by listing all your debts, including credit cards, loans, and any other outstanding balances. Then, prioritize them based on the interest rate and balance. High-interest debts should be your top priority, as they can quickly accumulate and become unmanageable. If you aren’t sure of the balances and interest rates on your debts, look to your bank statements and credit card statements as all the information that you need is there – if you still need assistance – call the bank or credit card company and ask them to help you find the information you need. Make sure you write down the relevant information so you can easily refer back to it when necessary.

One popular debt repayment strategy is the snowball method. With this method, you focus on paying off your smallest debt first, while making minimum payments on your other debts. Once you’ve paid off the smallest debt, move on to the next smallest debt and continue until you’ve paid off all your debts. This method can help you build momentum and motivation to tackle your larger debts as you feel a sense of accomplishment by eliminating the easiest one to pay off first.

Another debt repayment strategy is the avalanche method. With this method, you focus on paying off your debt with the highest interest rate first, while making minimum payments on your other debts. Once you’ve paid off the debt with the highest interest rate, move on to the next highest interest rate debt, and continue until you’ve paid off all your debts. This method can save you money on interest in the long run. Remember, in order to use this or any method you have to commit to paying an amount that is greater than the amount of interest your debt accumulates each month.

Whichever debt repayment strategy you choose, remember to stick to it and be consistent. Paying off debt takes time and effort, but it’s worth it in the end. By prioritizing your debts, you’ll be able to pay them off faster and reduce your overall debt burden. As your high interest debt burden is reduced and eventually eliminated, more and more of your income will be freed up for saving and investments that can lead you to financial freedom.

Look for Ways to Increase Your Income

If you’re struggling to make ends meet, it may also be time to look for ways to increase your income. There are many ways to make extra money, even if you have a full-time job. You can start a side hustle, sell items you no longer need, or take on freelance work. The internet has made it easier than ever to find opportunities to make extra money.

Another way to increase your income is to ask for a raise. If you’ve been at your job for a while and feel that you deserve more money, it’s worth having a conversation with your employer. It may be uncomfortable, but it’s essential to advocate for yourself and your financial well-being. Be prepared to make a case for why you deserve a raise and have a number in mind. It is often the case that a new hire into your position will command higher wages than you may be getting as someone who has been loyal to your company for a long time. Do some research on what others are getting paid with your skills and experience to buttress your case for a raise.

Increasing your income can help you pay off debt faster, save for emergencies, and achieve your financial goals. Look for opportunities to make extra money and be proactive in advocating for yourself at work.