Debt is an epidemic world-wide and is one of the reasons why the financial crisis that has hit the UK, Europe and the US won’t end until 2013, as some economists have observed. Even then, we will be recovering from the recession, which means that it will take several years for most people to put their finances in order and return to their previous lifestyles. Many people end up with little or nothing left over at the end of the day after paying their debt and end up buying groceries on their credit cards. If you have ever thought, “I’m working for the credit card company because they get all my money”, you are not alone. How can you make 2012 the year in which you get your finances in order?
Drawn up a Budget
Budgeting is not fun. Not only is it boring but it may also seem to be an unnecessary exercise. You may feel that you know what your basic expenses are. Some people are too afraid to budget because they prefer to stay in the dark as to how bad the financial situation really is. Still, a budget is a vital tool in making over your finances. You will be able to decide exactly where your money goes to. Of course, you need to commit to sticking to the budget.
Drawing up a budget is simple – list all your monthly expenses, no matter how small, and all your income. Then subtract the expenses from the income and see if you end up with a surplus or a deficit. A surplus is great – you will need to decide whether or not the surplus will be used for debt reduction or asset growth. A deficit is a challenge and you will need to address that by cutting expenses or increasing income.
Saving is Vital
If you haven’t already got one, start a savings plan now. It does not matter if you start by putting your extra coins into a piggy bank or by setting up a standing order for five pounds a month. Just make sure that you start saving. A small amount to start off with will encourage you to save even more as you watch your savings grow. As and when you can, put little extra amounts into this account until you have built up a healthy cash reserve.