If you’ve just recovered from a stint in debt, have celebrated making that last payment and are ready to move on with your life, then it’s important you assess your financial situation to ensure you do not fall back into the red again and stay forever more in the black. Here’s how:
- Check what you have left
After monthly expenses it’s important to work out what you have left. Take some time to list what expenses you have each month and be honest about it – be sure to include things such as petrol and food to ensure you have a closely accurate idea of how much you have leftover.
- Create a budget
Now that you know how much you have left, it’s time to budget. Some of this money should go into an emergency savings account – just in case the car goes wrong or the boiler packs in – to ensure you’re covered. Set a certain amount to spend on food, budget for birthdays and fuel. Some people refuse to pay with their cards, instead they take a certain amount of cash out each month and only use that, claiming that having the physical money helps them spend less because they can actually witness it deplete.
- Cut back on the non essentials
Your little luxuries are costing you money – whether you pick up a cup of coffee every morning from the café on the corner or drink a couple of bottles of wine at the weekend – so if you want to ensure you stay in the black, try to reduce or cut these things out and keep that cash in a high interest savings account.
- Avoid taking out credit
Unless it’s a real emergency avoid store cards, credit cards and personal loans like the plague. Live to your means, find second hand alternatives to broken items and avoid taking out unnecessary credit that could quickly spiral out of control again. Besides a mortgage, many people can live without taking out loans their whole lives, simply saving until they can afford the thing they need or making do with a different brand.
- Track your finances
A simple note pad and pen will do but there are also lots of apps out there that can help when it comes to tracking your spending. Input everything you buy in these and you’ll be able to see where your money is going each month and perhaps adapt your habits next month to make it go further. Try the Spending Tracker app, it’s free to download and simple to use.
If, however, you are still struggling with debt it’s important you get a handle on the situation. Take this opportunity to confront your debts head on, work out how much you have left to pay and seek advice from an expert. If you have debts accumulating to £7,000 it’s a good idea to seek advice from Payplan about IVA’s – a solution designed to freeze debts and organise a repayment plan that works for you.