The biggest reason why people faced a crisis on the economy downturned was the fact that they had been living beyond their means and relying heavily on credit. Now is the time to cut down those extra expenses and to learn how to live within your means. Here are a few simple steps that will allow you to do just that.
1) As the very start you need to know what your income is. They should include what your job brings you as a salary as well as what you earn from other sources of income such as interest on your savings etc.
2) You should always consider a part of your income that you should not touch. For example if you have investments that bring you regular and constant returns as interest you can have these automatically deposited in a separate accounts that you do not touch. You can let these funds build up as saving.
3) Start budgeting and planning. Busting is the number one important tool and it comes to managing your finances. The importance of a monthly budget cannot be understated. If you have been carrying on with your expenses without up financial plan and a monthly budget, then it is time you made one. Sitting down with the amount of money that you have available and figuring out every expense that you are going to make in the month presents you an extremely clear picture of where your finances stand.
4) Stop relying on credit. It is a commonly known fact that has been proved by research the will end to spend more when they are using their credit cards rather than when they pay by cash. Paying by credit card has the effect of dissociating the purchase with the actual cost because you do not have to pay right then. That comes later. Try and withdrawal cash from your bank or ATM to do your monthly purchases and stick to the budget you have planned. Having a certain amount of cash on hand will prevent you in going over the limit which is exactly what a credit card allows.
5) If you’re counting on making a purchase using your credit card that you will pay off in the next three months and it is better to save for the next three months and then buy it. This will allow you to save money on the extra interest that you will pay over the three months as well as reduce the risk of you missing a payment and incurring further charges which will increase the cost of the original purchase.
6) Start saving. Start working towards building an emergency fund that can be relied on during times of emergency rather than having to bank on credit cards. Ideally you should build an emergency fund that is equal and to your monthly expenditure and sustains cost for 6 to 12 months. This will come in handy during dire situations such as being unemployed. You can start gradually by building up a fund for two months and gradually going on to 3, six and 12 months.
7) Boost your income. You can figure out a way to increase your income by working overtime or getting a second part-time job. Every there something you can do over the weekend or couple of hours that will increase your disposable income.