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Thursday, January 29, 2009

A few essential steps to live a debt free life

Proper and timely financial planning is the secret to a life free from debt. You have to maintain a strict money management policy and develop the habit of saving your money. We all know very well that proper and efficient management of wealth raises your money investment potential. At the same time, it increases your financial security, stability and reduces your chances of being overburdened with debt due to failure to repay your loans and bills. The best way to avoid the loads of unpaid credit and live a debt-free life is to understand the difference between desires and necessities (or wants). Our desires do not always develop in accordance with our financial condition; they do often outnumber or outweigh our true affordability, and we end up spending a lot more than our fixed budget. That means the amount of money we owe others also increases. We all, therefore, should try and develop this habit of saving our hard-earned money during the summer time, in anticipation of a bitter forthcoming winter. You should buy only what is necessary and should avoid impulsive shopping. A healthy habit of saving money should follow the ant model.
Here I would like to share with you all a comprehensive set of practical suggestions which shall save you from living a debt-stricken life and help you live tension freely.

• Proper Budgeting
Make a proper and systematic plan of your monthly income and your expenditure per month. This is essential to properly organize and categorize your finances. Chalking out a monthly budget helps to avoid unwanted loads of debt. This way, you will have a ready reference of your financial position, and a picture of your true affordability.

• Savings
Controlled spending and proper saving of money is a practical and old method of strengthening your overall financial condition and creation of wealth, used for a long period of time. As the old saying goes, a penny saved is equivalent to a penny earned. Savings allow you to look forward to a safe and stable future. Even if some financial emergencies and other unfavorable situations arise, these can be tackled successfully with a strong savings, which indicates that you will not need to carry a burden of debt to be paid back once that financial crisis is over. Your savings would help you stay away from taking loans.

• Search for utility gifts
Giving decent, valuable and meaningful gifts to near and dear ones on different occasions bears a good social response and conveys positive and nice attitude. But we need to pick up things for gifting which best suits our pocket. Means we should not get carried away by the urge to give costly gifts, and spend on gifting beyond our affordability. Remember: the depths of your feelings are not judged by the price tags of your gifts. You must take care to develop a habit to evaluate the utility value of the gifts, rather than their price tag.

• Control your spending
Try and develop the wise habit to restrict your expenses on various occasions within your financial capacity. Unbridled spending is the most risky way for your finance…it may anytime invite debt in your life. Prepare a shopping list of the necessary articles before you go to shop. Also, inside the shop, buy the things which you only need. Then step out as quickly as possible. Try to spend the minimum possible time inside the shop.

• Check your credit card use
Everybody knows that credit cards are the perfect ways of being caught into trap of debt burden in near future. So we should not use more than one credit card under any circumstances. It is a better option to shop with cash money. That helps actually to keep a constant track of your spending and restrict your expenses time to time, if necessary.

• Festive season warning
The festive season brings the requirement for socialization and entertaining people. While you entertain people at home, try to avoid wastage of food at any cost. You have to make sure that the menu is prepared beforehand. Festivals like Christmas, New Years Eve etc. involve a lot of expenses. Make sure you have advanced planning for such expenditure.


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