How to control debt and become financially independent

I used to be an impulse spender and a shopaholic.  Believe it or not most of us tend to spend money on things we don’t really need and this can drag us into a cycle of debt where we try to pay off credit and store cards alongside large items bought on credit at high interest rates.  Once you’re in the mouth of this debt cycle it takes some strategic planning to escape, which is why I going to discuss something which just can’t be avoided. Finances.  Whether you love them or hate them you can’t live without having them in your life and when not properly managed your finances have the ability to take over your life, act as a persistent source of stress and in the worst case scenario break you down bit by bit.

Most of our debt arises from credit, the sudden illusion that we have more than we actually do in the form of credit cards, store cards and overdrafts to name only a few sources.  One of the best ways to avoid getting into debt is by resisting the urge to give into persuasive media efforts to sign-up for the latest credit card deal and walk away with pride knowing that although you may not be living large you are still living on what you have rightfully earned.  If you are tempted by impulse spending then create a consideration list, something which has you note down what you’re tempted to buy and go back to it in two weeks to evaluate whether or not you still want it – this is a great way to get control of your spending habits.

Make a Move

 First of all if you are in debt at the minute then you’ve got to make some changes – some of these I made and others have been made by friends, family, acquaintances and so forth.  Some may seem scary but making the move means that you can tackle the debt you already have without inviting more.

  • Cut up all of your credit cards
  • If you have a credit card have one with a low limit and use it wisely by paying it off in full every month
  • Pay all of your bills as soon as your pay cheque comes in – you can see then how much you have to budget.
  • Separate your spending into travel, food, entertainment money and so forth – give each category a monthly or weekly budget and stick to it.

Tools for Becoming Financially Independent

In my search for some fantastic resources I’ve found some great money management tools which as a collective tackle everything from repaying debt early to budgeting on a weekly and/or monthly basis. 

  • Money Dashboard – this is a wonderful tool which I advise anybody trying to get back on track again financially.  If you use online banking then this little resource brings everything together to help you manage all of your finances in one place and can provide some interesting insights.  A great alternative includes Mint although this is only available in the USA and Canada.
  • http://www.carloancalculator.org is a great tool if you’re tied to a car payment at the moment, this allows you to calculate a number of variables including if you want to repay early.
  • Quicken is a good paid software which includes packages for running a small business too (so you can track both your personal and your business finances).  The only thing is I would recommend trying a free service first if you are in debt and use the money you would use for a paid service to reduce any outstanding debts.

 

Finally … are you owed money?

It could pay you to review your bank statements and loan contracts to see if you are being charged for anything you don’t know about.  This happened to me when my Small Business Insurance policy, the company happened to be charging me twice for each monthly payment as the company set up two policies for the one business.  Often when we do make a big purchase there is some unidentified charge in there, the most famous scandal being the misselling of PPI.  This is quite common so have a look and see if you are owed any car loan rebates or any other refunds for expenses which you weren’t aware that you were paying for.  Becoming financially independent is all about knowing exactly what is coming in and what is going out – keeping track of every transaction can eventually pay off.

Laura is a passionate freelance writer, the creator of the blogs Living Minimalist and Sweeter Business and also the author of The Amazing Nine to Five.  Laura blogs daily on topics ranging from health and fitness, to finance management and business ownership

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