We live in a time where everything is fast-paced and throw-away. We focus on enhancing our current lifestyle rather than saving more for the future. Borrowing money in multiple ways, from credit cards and phone contracts to student loans and mortgages, has become perfectly suited to our ‘live for the day’ ethos. But what is the best way to keep up with it all? With lots of outgoings and a sole source of salary for income, it can often be tricky to manage your repayments. Here are some tips to stay on top and in the know.
Breakdown Your Outgoings
Yes, it’s time to make a notorious list. Many people avoid looking at their statements and analyzing their accounts because they’re afraid of coming across a nasty reality. But the better you know your habits, the more peace of mind you’ll have. Create your own budget if you can’t fork out for an accountant and list all of your debts including overdrafts, cards, student loans and even money owed to friends and family. Note down next to each of them how much you owe, how much interest they have and how long you have to repay them.
High Interest Equals High Priority
List the debts with the highest interest rate at the top of your list. This is because you should give these items priority. Why, you ask? Because these are the loans that are leeching the most money out of your pockets, so it’s important to pay these off as fast as you can to limit the amount you lose.
Consider Debt Consolidation
Many people have multiple debts and juggling all of the payments can create a lot of stress. There are numerous options out there to consolidate your debts and make them more manageable. For example, companies like Nemo Personal Finance offer secured loans to homeowners that combine repayments into a single, lower monthly sum. However, only switch to consolidation after careful research, as it can actually extend the amount of time you pay back your debt and also increase the amount you pay overall.
Be Smart, Live Frugally
In order to pay off your debts as swiftly and cleverly as possible, take a look into your investments and savings accounts to see if you can add some extra cash onto your repayments. It may be a sad fact, but the more you save, the more you have to spend. This spending means paying back your debts, not going on a shopping spree! Review your personal budget and see where you can cut back on spending to increase the amount you can spend on repayments. As long as you have the right amount of money in your account, it’s also worth setting up a direct debit so that you can be sure not to miss your payment date.
Financial freedom is not just about earning more and taking money matters off your mind; it’s truly achieved when you manage your money well and can fully understand your situation and goals to find growth areas, flexibility and fulfilment.