Debt is something that unfortunately you can’t leave behind in 2017. We normally have new year’s resolutions that relate to health, fitness or relationships. It is easy to forget that you should also set financial goals. For many, this may mean creating a budget, settling debts and increasing savings.
Your Personal Budget
A great place to start is with your personal budget. Your budget should include all monthly income and all expenses. Separate your living expenses into smaller categories for e.g. fixed vs variable or debt vs living costs, or debit orders vs cash expenses. How you decide to split them up, make sure it makes sense to you and you record everything.
Treat your personal budget as a mini business. Your business brings in money and then the money is allocated to certain business costs (your living costs) and the aim of your mini business is to make a profit (some sort of savings at month end).
Review Your Budget Monthly
The most important part of budgeting is the month end review. Just as a business would review performance, so should you. Investigate where you overspent and underspent and understand why. See which costs were unnecessary and focus on cutting those out for the next month. You should make time to review your budget each and every month.
A proper budget can prevent the need to use debt for living costs. It is easy to overspend and then use a credit card or store card or even a small loan to make up the gap. If this becomes a habit it usually has undesirable consequences. If you are starting to use debt each month to get by, you may be on a slippery slope. This is how big debt problems start and are often the first signs of over-indebtedness.
How To Know If You Are Over-Indebted?
Over-indebted means that your income is not enough to cover all of your debt repayment and living costs on a monthly basis. It means that you cannot afford your current lifestyle. If you feel you rely on debt to get through the month, speak to a debt counsellor. A debt counsellor gives you budgeting advice and looks at your credit report. They will advise you on any debt solutions you may need. Check that the debt counsellor is registered with the National Credit Regulator (NCR).