How to cut unnecessary expenses

One of the steps to avoid debt is to cut unnecessary expenses. Why should you do that if you are not in debt? Because if you do spend money on unnecessary things there will certainly come a time when you will have no money and this expenses would have turned into habits.

And to finance these habits you will borrow money. And that is how the debt circle begins, that is how things start. And what defines unnecessary expenses? Is it the latte you drink on your way to work? Is it the dinner you have out three times a week?

Well I won’t tell you what is unnecessary and what not. I can live without coffee in the morning. But maybe you can’t. What I can tell you is that you must see the whole picture of your income and decide to take a small bit, let’s say 3 percent. If your monthly income is $1500 then 3% is 45 bucks.

So the first target for the first month is to save $45 and that is 1,5$ dollars a day. Saving is a habit just like spending. This is one way to adopt this valuable habit. What time do you leave home in the morning? Set an alarm at this time on your cell phone or even better put a memo on your front door. Before leaving take 1,5$ out of your pocket and leave it on the kitchen table. If you do not have change, leave the next bigger note you can.

Repeating this process for 30 days will finally turn it into habit. It does not matter what expense you cut. Your monthly expense budget is now reduced by 45 bucks.

Soon we will be talking on how we can work and build on this.

Want to get out of debt? Do not get into debt in the first place

Everyone is paying too much attention on how to get out of debt. However this is the final stage of the problem. Having to consolidate, rearrange, eliminate, fight debt is the first step to breath again.

This limits the people who maybe interested in this debt conversation. Is this right? Is this correct? Should only the already in-debt people be interested in debt analysis?

The answer is no. The very first step of in-debt people is getting into debt. If you can identify the procedure of getting into debt you can avoid it. And this sounds way better than having to get out of debt.

So what do you need to do to avoid getting into deep debt?

Firstly, the biggest debt danger is credit cards. In a perfect debt-free world there would be no credit cards. High rates, hidden fees, subscription costs make credit cars a very expensive way to borrow money. However, plastic money is a very popular and very convenient way to shop. So, if you can’t resist you should keep only 2 cards. One to use for these monthly installment shopping and one to use as cash .This second card should not have a credit limit more than half of your monthly income. This is because you must pay it to the full each and every month.

Step 2 into avoid debt is make a budget. Most people dive into debt mostly because they do not control their expenses. They do not know exactly what they earn and where this money is spent. Making a budget, that should be monthly-it works best of all, will give you a path, a scheme and at the end you will know where your money goes.

Having a budget, clearly written on a paper or a spreadsheet, allows you to identify unnecessary spending. Spending when you have the money is not wrong. However spending regularly on unnecessary things becomes a habit, that when the money is over will continue to exist and be paid with debt money. So the third step, to avoid debt is cut unnecessary spending now that you can pay for it.

Cutting unnecessary spending frees money sources. What should you do with this money in correspondence to avoid debt? Open a saving account, preferably in a different bank that the one you are having your salary deposited or your checking account. Make sure that you do not apply for a cash card. You do not need ATM for this money. This money must be saved. They will be your first weapon when a pressing cash emergency will push you towards debt.

A man I admire very much, Ramit Sethi, says “Increasing your income has no limits. Cutting expenses has” What does that mean? It means that you cannot infinitely cut expenses. However you can find ways to increase your income. Yes increase it now that you do not feel the debt threat, that you do not need it badly. You will do it calmly with no rush. Start creating side income by doing things you like. Home based businesses, internet entrepreneurships, online businesses are some of the ways that people use to get out of debt. Well start doing it before you need it.

To sum up, stop borrowing, make a budget, cut unnecessary spending,start saving, find ways to earn more. These are the steps to avoid getting into debt