The country's current economic struggles have made bankruptcy, debt, and financial ruin commonly discussed topics on news programs, internet blogs, and even social gatherings. These issues have become discussion norms because of the increase in personal debt, and many people are unsure how they can take control of their finances. Debtors with sufficient income may be able to pay off debt through creation of a strict personal budget, and assuming financial responsibility will safeguard those who have no debt.
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The foremost step to getting your finances in shape is to compare your monthly income to how much you spend each month. Do you have a deficit? This is the case if you find that you are spending more than you are making. By taking an honest and detailed assessment of your monthly expenses, you can determine which expenses are fixed and necessary, and which are superfluous and disposable. Once you have created your expense list, you will be able to have a clear picture of what is causing your deficit.
Fixed expenses are those bills that you know you will be paying each month. Some examples of fixed expenses are mortgage payments, insurance premiums, tuition for you or your child, orthodontic payments, and prescription medication costs. Necessary expenses may not be consistent, but are still items or services that need to be purchased. Emergency room bills, oil changes, and the cost of a replacement water heater are potential necessary expenses that may be incurred during any given month.
Superfluous expenses are those that are for entertainment value or are not essential for general health and safety. If you record where every cent of your money goes for one month, you will be stunned by the percentage that fall into this category. There are the more obvious things, such as buying a new flat screen television or designer shoes, but there may be others that are so routine that you've tricked yourself into thinking they are far more necessary than they truly are. Manicures, twice-weekly rounds of golf, dining out, expensive data plans for the whole family, daily gourmet coffees, satellite television service, and magazine subscriptions are not essential to the wellness of you and your family.
It can be very difficult to give up things that you enjoy and look forward to, but the benefit far outweighs the sacrifice. For many people, cutting out their disposable expenses will transform their financial deficit into surplus. At this stage, you cannot let your exhaustive budgeting go to waste; use your surplus wisely.
Most financial experts agree that you should be depositing into a savings account every month, even if the amount is small. It is important to build up an emergency fund to protect your family in the event of serious illness or loss of income. You may also choose to put away money for your retirement or into college funds for your children or grandchildren. It can also be helpful to save before Christmas or birthdays, so that you can spend on your loved ones without risking your financial health.
If you currently have nagging credit card debts, put a portion of your monthly surplus toward paying those off. Credit cards have notoriously high interest rates, so it would benefit you to pay off the balance as soon as you are able. You may also want to reconsider the frequency with which you use plastic when paying for purchases. Some credit card companies offer reward points if you use them to pay for necessities like gas and groceries, and those points can be useful, but be wary of only paying by credit or debit card. It is much easier to part with money when you are not physically handing out your cash.
Put any remaining surplus toward repaying college loans, charitable giving, or into a vacation fund- whatever is applicable to your family's lives. Being financially responsible does not equal a life of self-denial; rather, it means making wise choices with your money, splurging occasionally and only when affordable.
If you are in debt, of if you have no debt and would like to keep it that way, the easiest way to accomplish your goal is to be disciplined in your spending. A few simple changes to your spending habits can reduce worry and help you take control of your finances once and for all. If, however, you are unable to remedy your situation through budgeting, it may be time to consider filing for bankruptcy. By working with an experienced lawyer, you will be able to take the necessary steps towards finding financial stability once more.
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