These days it’s easy to lose control of your finances. The rising cost of food, utilities, and gasoline all eat into a persons budget. Then you have personal wants. This is the area where most people get into trouble, and it’s an area where you will find the most opportunities to take back control of your finances.
Listing Your Needs and Wants
Life consists of needs and wants. Sometimes the priority of these two expenditures gets mixed up and that’s when trouble brews. Every household has needs e.g., rent, food, utilities, but the temptation of wants is what can overload any budget.
Listing your needs and wants is the first step to forming a budget. Outlining a budget will give you exactly what you need to take back control of your finances. It’s easy to get out of control when you spend a littler here and there, then find out at the end of the month you’re short on money. But with a budget you know exactly what you will be spending before the month starts.
Now, if you need to take control of your finances this must mean your finances are out of control. An out of control budget probably means you’re expenses are more than your income. Anyone who runs a list of their needs and wants will find areas they can trim back in. You may find that the overall expense for eating out is much higher than you thought. Of course you won’t discover this without a budget, because the cost of each event doesn’t impact your budget compared to the total at months end. This is also true of other expenditures that fall outside the circle of needs.
Is Debt a Cancer to Your Finances?
One credit card, two credit cards, a department store charge card. Anytime you use credit it turns into debt, and debt carries interest charges; sometimes extremely high interest rates. Credit card debt is probably the number one reason for out of control finances. So, in this case credit card debt is the place to start.
The proper way to take control of this part of your finances is to payoff this debt. The most logical way to attack this problem is to prioritize your interest rates. Allocate as much of your budget as you can to paying credit cards. From the credit cards you have, pay the minimum payment on the lower interest rate cards, then apply the bulk of your budget to the highest rate card. Once this card is paid off, apply the same process to the next highest rate card. This is a smart strategy used to reduce credit debt, but it also has a positive psychological aspect to it. You’ll be much more enthusiastic in your goal to get out of debt, and you will be more apt to stick with the plan.
Make a budget and include a systematic plan for debt reduction, and you will find it won’t take long to take back control of your finances.