How to use credit without getting bogged down in debt
No doubt that credit is a strong tool when it comes to taking control. Also, a good practice is to manage your daily finances. Of course, it is demanding. But the results are truly rewarding.
Try to seriously attack each of these 3 steps below that will allow you to review your financial situation and determine your management aspects on which you must work.
Make your financial statement
When you evaluate the possibilities of your projects financial side , you need to paint a picture of your current financial situation.
Calculate your net worth
The purpose of this exercise is to help you make informed financial decisions regarding. For example, to replay your debts, buy a house, or trip to your strategies investment.
In fact your net worth is the difference between what you own, or your assets, and what you or your liabilities. Which can be summarized by the simple equation assets-liabilities= net worth.
Here’s how to determine your net worth
Make a list of what you own ( your assets)
List all the money you keep in checking account or saving account, the value of your personal property, real estate and investments on your behalf.
Make a list of what you owe ( your liabilities )
List everything you need to replay your creditors (lenders), including the balance of your mortgage, your loans, your credit cards.
What is your result?
If your assets are greater than your liabilities, your net worth is positive.
If it is the opposite, your net worth is negative and you are, as they say, “in the red”. You should immediately establish a plan to address your finances to avoid getting bogged down into debt.
Once you have calculated net, you need to calculate your income and monthly expenses by establishing a monthly average over the last 12 months. Go to step 2.
Make a monthly budget
It is impossible to know the rate at which your money flies to identify areas where you could save in order to invest in projects that are dear to my heart.
Your budget simply wants a detailed estimate your expensive with respect to your monthly income. You must determine the amount to allocate to each expense category and calculate your income and expenses
To help you
- Keep monthly statements of the last 12 months. you will need information regarding expenditure , bill payments and checks that you have issued.
- gather the bills you have kept because they allow you to keep track of your purchase in recent months.
If your income exceeds your expenses, consider the monthly surplus as the amount you could save up for an emergency fund or invest each month to reach your goals.
If your expenses are more than your income, you are in debt. In this case, two solutions are available to you to resolve the problem:
Reduce your expenses or increase your income. You choose!
- The second car is it really a necessity ?
- More than half of the closet time just last year ?
- Do you really watch the 107 TV channels which you are subscribe to ?
- I like this car, I want a more lucrative job.
- Fashion is my life, I found a second part-time job.
- TV is my hobby, I ask for a raise.
Pay off your debts
If you are one of those who have more credit purchases to the detriment of the savings, it is important to settle your debts first.
If you are one of those who have more credit purchases to the detriment of How do you get out of debt?
- Start out your final statements of accounts concerning your debts.
- Develop a list of all your debts, including:
- the balance of your credit cards;
- the balance of your lines of credit;
- the balance of your funds “buy now and pay later”;
- Unpaid accounts (telephone, electricity, cell phone, Internet);
- the balance of your auto loan and student;
- loans made by a friend or family member;
- advances on wages;
Do the math : List your debts, then make a plan to repay them.
- choose the order of payment of debt
There are 2 ways to repay your debts: eliminate first is smaller, or the most expensive in interest.
One way or another, you can make good resolutions at any time. Go ahead, go for the repayment of your debts priority!
Having decided upon a plan to repay your debts and have implemented, you will have, slowly but surely, more money to spend on your emergency fund.
In this regard, the emergency fund allows you to cope with unexpected that otherwise would control the use of your credit (fridge which makes the soul, unexpected repairs to be performed on a vehicle, etc.).. And remember, when you tap into this fund, do you have a duty to reconstitute as soon as possible.
Thereafter, you can simply use your credit wisely.
To do this, the temptation to pull out your credit card, ask yourself the following questions:
- Do i really need this article?
- Would I buy this thing if I had to pay cash?
- Am I sure I can pay off my balance at the end of the month?
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