How to Keep Track of Your Expenses and Avoiding Debt

In this post I want us to discuss how to keep track of your expenses and avoiding debt. It is my hope that this post will help someone avoid getting into a debt trap.

Debt has some sort of bearing on most people. Whilst the impact it has on an individual varies from one person to the next, it is fair to say that for many people debt is a part of their everyday lives.

For some, debt isn’t a cause for great concern as they are able to control and manage their debt and keep their repayments at manageable levels. For others however, debt can quickly escalate and leave not only their lives but the lives of those closest to them affected.

Whilst avoiding debt sounds easy in theory, the reality is that it’s easier to fall into debt than you might think. It is often assumed that people in debt are so because of irresponsible spending habits. While for some this may be true, for many others it certainly isn’t the case. For example, a change in circumstances such as illness or job loss may lead to a reduced income which obviously has an impact on a person’s ability to make payments. Despite their reduced income, a person’s expenditure is likely to stay at a similar level which clearly means that there is a short fall.

In cases like these, unforeseen circumstances can leave you facing unexpected issues with debt and repayments. It is possible however to try and prepare for the worst without having to sacrifice things like eating out or buying items that you ‘want’ rather than need. For those that are affected by circumstances outside of their control, there are things they can do ahead of time to try and ensure that should their financial situation change, they are better equipped to deal with their debts. Even those that consider themselves to be comfortable when it comes to their finances can stick to a few simple steps to secure their financial future and avoid falling into debt. As mentioned earlier, this needn’t mean living to a shoestring budget. In fact, many people would be surprised at how easily they could cut back on their spending and make their money go further.

Debt has some sort of bearing on most people. Whilst the impact it has on an individual varies from one person to the next, it is fair to say that for many people debt is a part of their everyday lives.

How to keep track of your expenses and avoiding debt

6 Tips on How to Keep Track of Your Expenses and Income

The following tips on budgeting are just a few ways in which it is possible to make maximum use of your income and protect yourself against debt:

Income doesn’t have to be spent

It’s amazing how many people feel as though their disposable income must be spent. Too often people decide to make a purchase because the money is there in their account at the time. Rather than putting the money aside in a savings account or ISA, they choose to make a purchase simply because they have the money available without considering whether the purchase is necessary. If it isn’t necessary, the money may be better served being put to one side; it’s always a clever idea to have some money set aside to cover unexpected expenses.

Track income and expenditure

It might sound obvious but failing to keep on top of income and expenditure can lead to falling into debt. Why not make a list detailing all regular incomings and outgoings so that you know exactly what your financial situation is. As well as including all regular expenditure such as food, cell phone bills etc., you could budget to put a certain amount away each month into an emergency fund. This way, should you be faced with an unexpected bill (a repair to your car for example), you have money set aside and the unexpected expense doesn’t hit your finances quite so hard.

Keep receipts for other purchases

By keeping receipts of items that aren’t considered to be a regular expense, you can really track how much money you spend each month. By doing this you may see patterns relating to your spending and you may be able to add some items to your regular expenditure list if you find yourself buying the same items month after month. Collecting all your receipts may also highlight the amount of money you spend on other items, some of which may not have been necessary.

Get the best deal

This is relevant to not only monthly outgoings but to one off purchases as well. It can be quick and easy to save significant amounts of money on regular outgoings. Simply switching your gas or electricity supplier is one way in which it is possible to save money. Other examples of regular expenses that can be reduced by shopping around are phone and internet bills, car insurance and credit card bills. Price comparison sites make finding the best deal on all of these items very quick and easy and the potential savings will surprise many. It is also important to shop around for one off purchases. Some items, particularly more expensive items such as TV’s and DVD players can vary in price greatly from one retailer to the next. Taking the time to shop around may take an hour or so but it can mean paying a lot less for an item than you may have done had you paid the first price that you found.

Don’t stretch yourself financially

There aren’t too many people that wouldn’t want to go on a luxury holiday or drive around a nice sports car. There’s nothing wrong with either. The important thing is how you pay for these things. If you have the money available and can afford it then why not treat yourself. If you are going to load your credit cards or take out a personal loan, then these things might not be such a good idea. However, tempting it may seem, it’s important to live within your means. If that means going without the holiday in the Caribbean or brand-new sports car then so be it. It certainly isn’t worth stretching yourself financially and jeopardizing your financial future for these expensive luxury purchases. This doesn’t mean you have to go without though. Why not holiday closer to home or purchase a used car rather than a brand-new vehicle.

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Pay Off Debt Or Invest? Which Is Better?

The above tips are easy to stick to and can help you make your money go further. Hopefully, these tips can help you avoid debt and allow you to live without the burden of financial worries.

For those that are faced with debt though, it is important to be realistic and face up to your true financial situation. It’s vital that any debt issues are addressed at the earliest possible opportunity and not ignored. The best thing to do is prioritize your debts and contact your creditors to explain your difficulties. It is also advisable to seek debt advice from professionals; it is often free and can help you create a plan to tackle your debts.

For many people in debt, a huge worry is not only how their debts will affect them at that moment in time. Many people worry that their credit history will be irreparable and that they will be unable to gain any credit in the future. This shouldn’t be your main worry when initially tackling your debts, but it is important to know that over time your credit profile will be repaired if you are able to make your repayments on time. There are ways of speeding up the process of repairing your credit profile such as credit cards for people with bad credit that are specifically designed to help people rebuild their credit score.

As mentioned at the start of the post, debt isn’t necessarily a bad thing when controlled properly and kept at a manageable level. As soon as your debt is no longer manageable it is important to take steps to address the issue. For the time being though, be sure to live within in your means and be responsible with your finances.