Prudent money management involves a lot of factors. So many that it is hard to tag any of the factors as being the most significant. But each one of us at some point or another don’t have the requisite cash at hand for the required tasks such as buying a new house, paying college tuition or in some cases spending the day at a mall.
As we all are aware, borrowed money never comes free. When you return the borrowed amount there is an additional amount to be paid, called interest. While borrowing at low interest rates can help you fulfill your dreams, a high interest rate can surely dent your finances. So it is always wise not to borrow money on interest at all and even if you do, make sure the rate of interest is as low as can be.
- Eliminating High Interest Debt: High interest rates are an absolute no no but sometimes carrying low interest debts cannot be avoided. To clear this debt without denting your finances make sure you also invest somewhere. If you are already stuck in a high interest debt cycle you need to make a few temporary financial adjustments until you have paid them off.
- Check Your Statements: Read your credit card statements carefully so that you can analyze your purchases. Thereafter you can regulate your purchases to your needs mostly and not your wants. Every bit of detail can be inferred from these statements. Even the number of dinners outside and the number of cappuccinos. Make sure to pay old debts and avoid new debts.
- Check Monthly Bills: Go through all your household essentials to check what is necessary, what can be done without and what can be downgraded. Check your TV, mobile, and internet packages to see if you need all those high end packages or you can do with any of the lower packages. The same applies for grocery, toiletries etc.
- Be Calculative: Add up all the money you can save each month and see how much of the credit balances you have been able to reduce. From that score make an estimate of how long it may take for you to be debt-free.
- Take an Aggressive Stance: Get aggressive with your saving plans so you take lesser time to be debt-free. Do every possible thing you can to save more and fast. Clip grocery coupons, change the thermostat settings, ensure lights are put out when not in use etc. When you are aggressive about savings, all of these little things make a difference.
Differentiate wants from needs. Make an effort to reduce your needs and eliminate as many wants as can be eliminated.
- Avoid Future High Interest Debts: Once you pull yourself out of the debt hole keep the rhythm going and avoid any borrowing on credit. Keep it going for a while and you may even have enough saved to indulge in something once in a while. But, spend mostly in moderation.
- Conclusion: High interest debts are of the worst kind but any debt is burdensome. Try to avoid any debt at all. As the overall debt and interest payment come down, there will be more to save and you can gradually build a cushion for yourself to fall back on in case of emergencies. Thereafter you will not have to borrow on high interest because you will have some ready funds.