Going into debt by buying a depreciating asset like a car, or anything that doesn't produce an income (like borrowing for a holiday) is not always helpful in getting out of debt.
The following principles can help you manage your money and also lead you to financial freedom.
Create a budget and track your expenses: Creating a budget is simply developing a plan in which you tell your money what you want it to do. Tracking your expenses with a budget is like using scales. As it allows you to see how you are doing and motivates you to be more careful with your expenditures.
Create a budget and monitor your expenses
How much do you earn per month - $5,000.00 (b4 taxes)
After-tax income $4,250.00
Expenses:
Rent/mortgage $1000
Food $500
Utilities $150
Cable, Internet & Phone $90
Insurance $100
Gas/transport $100
Savings (10% of your net)
Proverbs 27
23 Be sure you know the condition of your flocks, give careful attention to your herds;
24 For riches are not for ever: and a crown is not secured for every generation?
2. Simplify your lifestyle – live within your means
3. Establish an emergency fund: An emergency fund is an account separate from chequing or long-term savings that is set aside specifically for emergencies. Some experts recommend beginning with $1,000 and building that to three months ‘worth of income. When you have this amount, you won‘t need to use your credit cards anymore. If you must use a credit card, such as when traveling or making purchases online, be sure to pay off the debt immediately.
Pay off your credit cards, use cash/debit cards for purchases, and use credit wisely: I like advising my clients to prioritize paying off the credit card with the highest interest rate.
Another suggestion is to pay down the smallest debt first, experience that victory, and apply for your payments from the first card to the second, and so on, creating a snowball effect to pay off the cards ASAP.
Canadian debts are at its highest in years because interest rate is at its lowest but banks will increase interest rate as soon as the economy starts to improve. So DEBTORS BEWARE
4. De-accumulate or sell possessions and assets that you no longer are using, that are beyond your ability to maintain, and/or that can be sold to generate additional cash.
5. Learn how to be a smart shopper: Limit the opportunities advertisers have to seduce you with their baits.
6. Use insurance only to protect against catastrophic losses: Consider auto and medical.
7. Get creative: Whenever an apparent financial need surfaces, determine a minimum of two, preferably three, price quotes and/or solutions on how to solve this specific need.
8. Practice long-term savings and investing habits: Saving money is the number-one wise money management principle everyone should practice. There are three types of savings we should have:
9. emergency savings;
10. savings for wants and goals e.g. saving for personal or children education, buying a car, furniture and,
11. Retirement savings.
12. There must be budgetary control
i. Plan you budget: it will keep you from overspending and debt trap
ii. Follow your budget: stick to your budget plan
iii. Prioritize your expenditures
Feel free to email me at info@margmortgages.ca or call 780 901 8060 with your questions. And subscribe to my blog for future updates. margaretadekunle.blogspot.ca
