What can you do to straighten out your personal finances? It doesn’t have to be a hassle to get back on the right track, financially, in short order. If fact, if you simply take action now, you making those initial strides towards financial freedom in as little as two months. Consider the following points.
What people often fail to do is to develop a budget that is suitable for dealing with emergency situations. Generally, emergencies will not occur often but inevitably, they will happen. Unquestionably, the real work at avoiding financial and personal dangers is prior preparation. When you choose to use a reasonable budget, your first decision should be to establish a savings account or fund that is expressly organized to accommodate emergency amounts.
Naturally, the first step for ordering your financial life within the proposed two month is to have this emergency account or fund already established. You need to keep your eye on this emergency fund and make sure that it is growing each month. In fact, within a couple of months, you should have enough to deal with a small emergency if need be.
Be honest. You are probably curious as to why this approach does not involve starting with the debt reduction. Think about it, though. You realize that paying off debt takes a while and emergencies are not apt to wait for you to be in a better place financially. If something unexpected happens, you will find yourself in worse debt than before and all of your progress lost. Yet, with an emergency savings source, you will be able to cope with such an emergency while being able work on paying down your debt with available income.
Just because you are not exponentially increasing your savings during this two month timeframe does not mean you will not have enough money to use, if needed. You are going to be using the time to streamline your regular expenses by lowering them and taking the excess and diverting it to your emergency fund.
Making a genuine commitment to lower your spending, is essential to achieving definitive results during your trial period, and later on as well. The way to make the situation work the best is to balance your financial situation with the amount of debt reducing you plan to do in order to keep things reasonable so you are less tempted to quit. Do not think you need go too far with slashing your expenditures down. You will need to dedicate some time to locating ways to replace former expenses with more economical ones, while not forsaking the former ones entirely. Consider the example of dining out at nice restaurants. Sure, you may not be able to go as often as before but you are also not quitting the practice entirely so that you’re forced to eat the same things all the time. Then again, you could always buy foods like those that you typically buy out from the grocery store so you can indulge a little while also cutting expenses.
When you’ve made it two months or so, you will start focusing on debt reduction. A mentioned previously, the concept was to develop a savings system that helps you deal with unforeseen emergency circumstances while not resorting to costly personal loans or credit cards. You will probably want to start chopping away at your debt as soon as you can, but it takes sufficient income to make good on this plan. The most obvious starting point should be high interest debt. Credit cards are a major source as well as personal loans, like paydays or cash advances.
In most cases, the previous approach to paying off credit cards in order of interest rate levels is a sound one. At the same time, there are some would say it does not hurt to take cards with high minimum payments but lower balance and pay them off before higher interest cards in order to accumulate more funds to pay more on other cards