Counseling for debt management and consolidation.

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Debt Management Part 3

Budgeting, that is a myth, or is it? But from our point of view, they do work. In many cases people tend to over-spend on their budgets and claim that it don't work; but it is okay if you do that because a budget acts as a guide and you just have to try your best to stick to it. During a crisis situation, if you have a budget to stick to, you will be surprise to find out how much it helped you by saving some money and prevent you from piling up new debts. This is all about managing debt and consolidation right? Without a budget you can never know what you are spending.

Step 3
To start creating a budget, you will need to know your income, your spending or spending habits and goals. The first thing you should do is to track your expenses and spending. Start tracking everyday and everything that you purchase, even if you spend a dollar on a candy bar, jot it down. There are a few ways which you can track your expenses, the first will be using software. There are lots of software out there that can do tracking pretty easily. If not, your spreadsheet in your computer is good enough. If you carry an organiser or PDA is even better, you can carry them wherever you go and start keying in those data. Receipts are old school but the easiest, all you need to do is collect every receipt of items that you bought and throw them in any box. You can even use a simple notebook to jot down stuffs that you purchased. Which ever method you use is fine, as long as you stick to the program you are going along well. It may be a mundane task on the second week when you track your expenses, but keep on doing it for a month then you will know where and when your money went, and that is IMPORTANT.The reason why we want you to keep track of your expenses and stick to a budget is because there are holes that you need to plug them and you don't see it.

Sometimes small holes can increase in size and sink the ship, I was in the Navy, I know. You have to spot the leaks and plug them. There are some of the areas we want you to look at, first is food. You will tend to spend too much on food, I have a friend who has the habit of eating, wherever he goes, he just have to munch something. Maybe it is time to go on a diet. Dining out often cost five times more then cooking it yourself, probably you are dining out too much; do yourself a favor, outside food may not be as healthy as you cooking it yourself. After a month of tracking, you will know where you stand. You will know where your money went and what you spent on. Sometimes you just don't know why you buy that stuff. For example, you always go to your favorite supermarket and spend $80 on groceries every week, you might think that's fine, a man got to eat right? But after you went through your expenses you found out the extra $20 you spent on magazines which you don't really need. Think about that, how often do you turn those pages and read every single article that's in it?

When I do counseling for debt management, one of the biggest problem that causes anyone to end up in debts is the real meaning of “wants” and “needs”. Like the example above, do you really NEED to buy those magazines, does your job requires you to read them or they are just plain desires that you want to be informed of the latest gadgets or latest models a car manufacturer has to offer. Whatever the reason it might be, you know it yourself and don't lie. Too many people spend too much money on wants rather than needs. You want to dine in a 5 stars restaurant, but you only need a well balanced sandwich, got that. Stay away from TV commercials, they are designed by clever art directors to entice you into buying things that you do not need, in other words, turning wants into needs. Trust me, I am one of those art directors and I always do a good job. You may need a car but do you need a sports coupe or a trustworthy station wagon? Please don't try to psyche yourself in this area telling yourself you really need something when in actual fact you Don't. So before you rush to buy the next best handphone that promise a lot of big features to play with, try asking yourself this question,” Do I really need all this extra features or just to impress my friends? Am I having problems with my current phone? That will be the acid test to tell you whether you really NEED to buy that handphone.

When it's time to stock groceries, shop with a list that you wrote it down and stick with it. And try not to shop on an empty stomach, you will tend to buy more than you need. Always try to shop alone, bringing kids along can destroy your debt consolidation budget, you know what I mean. Be careful of those coupons, try doing some mental calculations, do they really save you money or is it a trick to want you to spend more. Acquire a habit of comparison shopping, that will save you some money. Need some entertainment? Look up in the newspaper, there may be some free concerts near you.

So you saw a set of sports rims is on promotion, time to change your rims to those handsome ones? Be honest to yourself, no one really cares about what you drive or what accessories your car is fitted with, so wake up from your fantasy and stick with the debt management budget. Or maybe the ATM is too convenient, when shopping on a debt management budget say $200, when the total comes up to $213, are you paying the extra $13? We advise you to leave your ATM card at home and shop with the exact $200, this way, you will take out the extra items and balanced your shopping to $200 or lower.

Next chapter we will continue our program on budgeting, savings and investments. Click below to continue...

Debt Management Part 4

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