Advise on getting out of debt and saving money
Growing debt for anyone can become more of a concern if that amount just keeps on piling up and there seems to be no end in sight with being debt free. At any income level, if your spending habits get out of hand, and you are living beyond your means, then you can easily have debt that is out of control.
At any income level, you need to have a budget so you know exactly how much is coming in and how much you are spending on your fixed expenses, and most importantly your variable spending. Not keeping track of these for all parties in your family can potentially lead to a debt disaster.
Options for Reducing your Expenses
We designed a money management series to specially help people in these types of situations. Taking control of your financial statements is the first step towards lessening your debt levels. http://davidsklar.com/blog/budget-basics-overview/
Reviewing your currently monthly expenses is a good place to start to have an idea of exactly what is happening with your finances.
Your fixed expenses such as rent/mortgage for example will not be an easy change in the short term for many.
Mortgage / Rent – take note of your monthly rent or mortgage payments. For your mortgage payments, take note of your interest rate, if your mortgage term is coming up, you can look to shopping around for a better rate. If you are Renting, then look at getting a smaller place at a lower cost to help keep your overall monthly costs down.
Credit Card Payment – For all of your credit cards, this includes store credit cards as well. Take note of the amounts owning on each card and their interest rates. The interest rates for some cards could be much higher than others. The interest rates on some of your cards could surprise you. Try sticking to one credit card. Try to avoid having credit cards from your favourite stores, many times their interest rates are high, and if you keep a balance on them, all that savings you thought you were getting are now gone.
Loans (Auto Loans Etc) – for every loan that you have, take note of the time left on the loan, the interest rate and amount owed.
Your variable expenses will be one of the main areas that you may discover you are spending more that you thought you were, and there can be areas where you will need to curb your spending habits. You can expand the main categories below depending on your spending habits so you can get a better idea of your approximate spending in each area. You could discover you are spending too much each week/month on fast food, coffee or restaurants.
- Child Care
- Transportation expenses
- Other Variable expenses
There are always expenses in other areas that can pop up that can help pile up your debt.
If you are a home owner, then setting aside emergency money for possible unforeseen expenses is advised.
- Home Insurance
- Taxes – Property (for home owners)
- Auto Insurance
- Life Insurance
- Taxes – Income
- Expenses for Holidays and Birthdays
See our Setting up Your Budget from our budgeting basic series
http://davidsklar.com/blog/budget-basics-step-3-setting-budget/ for more detailed information and spreadsheet examples.
Tally up all of your monthly expenses. Add up all of your fixed, variable and other expenses. For some of the other expanses these may be a yearly/quarterly expense. In these cases, take an average.
Next you need to determine your average income per month (after tax income). This can be per person or per household depending on your current situation.
Tallying up all your expenses and sources of income into one spreadsheet can really be eye opening. If your expenses are consistently higher than your income per month, then your debt level will continue to rise. Look to areas where you could be overspending or areas that can be reduced.
Call the licensed professionals at David Sklar & Associates at 416-498-9200 for a Free, confidential consultation. During your consultation, we will review your financial situation, and discuss the options you have for getting out of debt and getting on with your life.