Becoming a money management expert will be helpful if you are considering a debt-free life. Money management skills are simple to learn and can help you to organise your finances more efficiently.
Learning money management skills
Money management is simply a way of using different financial methods to handle income and expenditure efficiently. Using simple tools such a financial budget, including a spending diary to see exactly where money is going, is one of the first steps. Looking at income and expenditure to see exactly where money is going and what can be cut back on should be a priority. One of the most important factors is to set a monthly budget and stick to it. This can be difficult in the beginning but can soon become second nature once the savings become apparent.
Cutting back on wasted financial outgoings
People who rely heavily on credit cards when purchasing items are simply wasting money on interest fees. Credit tools should be reviewed to see exactly how much is being paid annually in interest. There are some credit products that are unavoidable such as mortgages. But people who spend on credit cards every day when shopping for small items are simply throwing money into the lender’s pockets. Interest fees can take a large chunk out of an annual salary and debit cards and cash are the best ways to eliminate this expense.
Organise debt repayments
People who are paid a monthly salary should take the step of organising all debt repayments to leave bank accounts on the same day. The repayment date should be as close to the salary paid into the bank date as possible. This will limit the chances of spending on the salary before repayments are made to creditors. This method limits the chance of missing debt repayments and incurring late and missed penalty fees. Anyone who incurs late penalty fees every month is wasting hundreds of pounds in charges every year.
Financially live beneath your means
Living beneath your means does not have to mean living like a monk; it simply means becoming financially responsible. Living beneath your means instead of spending excessively will eliminate the need to borrow or use credit. It only takes a few months of responsible spending to provide results and have a healthier bank balance. This could mean cutting down on nights out, clothes shopping and unnecessary impulse purchases. Again, if this is adhered to, it should become second nature once the increased bank balance incentive kicks in.
Look at ways to pay off debts quickly
Most debts will take time to pay and will come with interest charges. It is important to prioritise interest applicable debts in order of importance. To clear debts efficiently, start paying debts that come with higher amounts of interest first. This means paying extra to clear high interest debts or finding ways to limit the interest amounts. Transferring debts to zero per cent interest credit cards with long introductory interest free periods is a viable solution to repaying debts without interest.
Ways to implement money management skills
There are plenty of ways to put money management skills into practice. These can include:
Ignoring easy credit payment options when making daily purchases. Economising in the home and looking for the best deals with services such as fuel bills.
Paying certain bills on time can actually bring discounts from providers.
Recognise that some purchases are simply unnecessary.
Stick to monthly budgets for a few months without fail to see how much money is actually saved.
Make a budget before shopping and stick to it to avoid impulse purchases.
Never incur missed or late payments charges on loans, credit cards and overdrafts.
Unfortunately, money management skills are not generally taught in schools. Many people learn these skills throughout their life; often only after debts have become unmanageable.