Debt consolidation refers to debt refinancing that involves taking up one loan to service or pay offer many others. This form of debt refinancing refers to the finance process an individual with a high consumer debt seeks the money to settle off their debt and comes with its own advantages considering that the process allows him or her to secure a much lower overall interest rate for the entire debt load while providing the convenience of only servicing one loan.
While debt consolidation is something that you might need to consider when in deep debts, it can be rather demeaning to have to seek help when in debt. Considering the words of the wise who once said, prevention is better than cure, it is important that you start thinking of ways through which you can lower your chances of ever getting into deep debts by managing your money more wisely. Proper money management could help lessen chances of getting a high consumer debt that might require you to start looking for ways to consolidate it.
Below is a discussion of some of the things that you need to start doing if you are looking to improve how you handle your money.
Budgeting is one of the best ways to ensure that you are not spending your money on things that you have not planned for or things that do not matter at the moment. By budgeting, you lower your chances of overspending, allowing you to spend your money on meaningful and essential things.
Start by first of all making a list of the guaranteed amount you get as your monthly income – excluding tips, bonuses, and overtime; sources that have no guarantee.
Then start tracking all your monthly expenses. Develop the habit of keeping all your receipts as they could help you paint a better picture of how you are spending and on what you are spending your money on.
From learning how you are spending your money and on what, break down your expenditure to essential, non-essential and fixed expenses. Then start calculating how much cash you have left over after your essential and fixed expenses. From there on split the remaining amount into investment, savings and lifestyle/entertainment activities. This way, you can easily cap your expenditure by first catering to the most essential expenses before the non-essential ones.
Spending smart is key to proper financial management. It is important that you have a personal budget that you are already adhering to as it will help you know how you much you are spending and how much you have as spare cash. Once you have known how much you usually have left over, it is important that you commit to spending it wisely – no more than what you already. Consider spending this money on the things that are a priority to your life and think of cutting things that you do not really need.
When it comes to credit cards, only use them for bills that you know you can settle that month. It is advisable that you do not go spending wantonly just because you have a credit card as these cards tend to have extremely high interest rates and which will often be humongous over time. It is important that you use your credit card wisely – consider it to be an extension of your overall budget and not a separate budget.
Another thing that you need to consider doing in order to avoid getting into huge debts when spending your money is doing some research before you make any big-ticket purchases. Come up with a budget of how much you are willing to spend before taking the time to consider what it is you are looking for, how much it costs, and if there are better deals out there. This can help you avoid impulse buying and could make it easier to save tons of cash rather than going above and beyond your expenditure; which could push you to seek extra money to either buy the item or to cover your overspending.
By embracing positive money management habits, it becomes easier to avoid getting into deep debt. As such, it is important that you consider following some of the advice provided here and researching on more ways to spend money smartly and wisely.