5 Simple ways to break the cycle of debt and save your salary
As a working professional, managing your monthly budget and saving some part your salary for a rainy day in future is the ultimate goal for every office goer. But with lucrative offers surrounding us all over the internet and stores, you can often get overboard and end up over shooting your budget. The convenience of credit card also adds to the temptation of spending even beyond what you really earn through debt. And ask anyone who has ever dealt with debt and they will tell you, the task of breaking the circle of debt is one of the most difficult things to do in life.
If you are also stuck in the endless loop of credit card debt and want a way out, worry not! We have listed a few simple tips and tricks that can help you improve your financial habits and aid in keeping debt away from your life. So, let’s check these out!
The biggest reason you pileup huge debts is that you go on spending without actually assessing your affordability. Debts basically rise when you do not manage your monthly budget well and end up spending more than what you earn. This problem, especially for working professionals, stems from unsupervised use of credit cards and taking loans or advances from friends and family. But, no matter who lends you money, one day you will have to return and in majority of the cases, you will have to pay it back along with a hefty interest amount. So, instead of piling up debt, it is better to curtail your expenses within your monthly budget.
For instance, you might really like a new jacket for the upcoming winter season, but before you reach for your credit card to pay for it, always check if paying for it might destabilize your monthly budget. If you are using credit / loan to cover for such expenses, it would further add to your overall spending for the month. So, always check the final amount and where it is coming from.
Know the interest rates
As stated, anyone lending you money, be it friends or any other agency, will do so only to charge a hefty interest on it. That is how banks work and make their money. Almost any kind and type of debt will come with an interest rate. In case of banks and other financial institutions, you will also be charged for several other services. So, even if you have to take a loan or use your credit card, always do it after assessing the rate of interest and the final amount which you will be liable to pay.
For instance, a new mobile phone which costs around Rs 30,000 in the market can cost you around Rs 34,000 if you use your credit card and convert the transaction to EMIs. Moreover, in case you miss out on making any payment, you will further be charged late fees and other charges as well for that. Once you start defaulting upon your payment, getting out of it is a major challenge.So, assessing financial capabilities can help you to decide whether you’re able to take a debt at that rate of interest or not.
Review the credit statement
Your bank or credit card statement is your biggest friend when it comes to debt management. Your statement will give a clear picture of each and every transaction. It includes even the taxes and fines that are charged for the delay in the payment. Reviewing your bank statement would also allow you to understand your spending habits and help you to figure out ways to control and reduce such unnecessary expenditure.
So, next time when you are about to pay your credit card bill, take out the statement and check each and every transaction. Is there any cashback amount you were expecting this month, is there any unnecessary expenses or hidden charges that you were unaware of. If you find any such discrepancies in your bank statement, consult your bank representative immediately.
Prepare monthly budget
This goes without saying, planning your monthly budget is a must for anyone, irrespective if your status with regards to the debt. Spending money without preparing a budget is something that doesn't allow the individuals to figure out what rest amount is with them after the purchase ofessential and non-essentialitems. Despite begin stuck with the heavy debt, they fail even to pay the balance. In such situation, preparing a budget can help you to save the particular amount of money every month. It would be easy to get rid of debt, once you begin paying a particular amount of debt every month.
Minimise your expenses
Saving is the only thing that can easily help one to pay back the debt has been taken from credit or other financial services provider. For saving a particular part of income can be possible only through minimising the expenses. For it, you can prepare a list of essential and non-essential needs and prepare a budget to save a particular amount every month. Once you start saving a particular amount. It would be easy for you to pay the balance.
To sum up…
There are many ways for breaking the cycle of debt. Assessing affordability, knowing the interest rates, review the credit statement routinely, prepare a monthly budget, and minimise the expenses are the top ways that can help for breaking the cycle of debt. In this article, we have explained how you can get rid of heavy debt by adopting these simple tips.