Debt seems to be a common 21st century ailment – not that debt is anything new but loans and credit cards are much more easily available now than they were in previous generations, and so many people are tempted into living a lifestyle that is beyond their means. Easy access to zero percent deals on credit cards are one of the most tempting forms of credit but they all eventually revert to a high interest rate – often long before the debt is repaid. Personal loans and short-term loans such as provident loans and guarantor loans are also easy to come by, even if you have a bad credit history.
But the amount of debt people have is not just about easy access to credit cards and loans, it can also be put down to bad spending habits – buying things we want rather than just the essentials we need.
However, learning how to budget effectively is the first step to becoming debt free but it will require steely determination. You will have to learn to avoid shopping unless absolutely necessary and that includes online shopping. Although, actually, doing grocery shopping online can actually help keep within your budget as you can check the total bill before your actually checkout. Something that’s hard to do in an actual store unless you are particularly good at mental maths.
Here are some of the best ways to create an effective household budget:
Use Cash for Variable Costs
First create a list of essential household expenses: mortgage repayments or rent, household and car insurance, healthcare, utility bills, loan repayments etc. then deduct these from your income. Whatever is left withdraw in cash from your bank account. This might seem like a risky strategy but having the cold-hard cash in your hands can actually be helpful in controlling what you spend.
Now label a bunch of envelopes with all your variable costs and place the right amount in each. Food, gas, sports and gym costs, clothes, entertainment etc
Cancel Unnecessary Subscriptions
Do you have subscriptions for TV channels you never watch or a gym you never go to? Cancel all those subscriptions you don’t use regularly. You might be surprised by how much you could save each month just by cancelling even one of those, especially expensive gym memberships – take up running if you want to get fit at no cost.
Open a Savings Account… And Use It
If you haven’t already got one then open a savings account now – the interest rates may not be very high at the moment but it’s all about getting into good saving habits. You can always shop around for a better deal once you have got into the habit of saving regularly but seeking the best deal is just a delaying tactic right now.
Every month as soon as you have been paid transfer a small amount, to start with, into the savings account. Once you are used to doing without this money you can start to more closely analyse your spending and see if you can increase the regular amount that you save.
Remember saving is a good habit and once you get into it you will wonder why you didn’t start sooner.