The steps to take in order to regain control of your spending and reduce your debt quickly
You may feel overwhelmed by debt. If you’re in debt, the burden of that debt can weigh heavily on you. It has a significant impact on your attitude and outlook on life. Stress and negativity like this have no place in your business, and neither does it in your personal life.
To help you get your finances back on track, we have a few money-saving tips to share with you.
You first need to learn your debt-to-income ratio
Your debt-to-income ratio (DTI) looks at how much you owe in monthly debt payments and how much you earn in monthly gross income. As long as you know your monthly debt payments and your monthly gross income, you can figure out your monthly payment (the money you make before taxes are deducted). To find your DTI as a percentage, multiply your number by 100.
You would ideally want to keep your DTI (which is calculated as a percentage) as low as possible. To put it another way, the better financial institutions like you the more close it is to 30% or less. When deciding whether or not to take out a loan or use a credit card, it is important to know your current debt-to-income ratio. You can use the percentage to aid your decision-making.
You will want to double your payments next
Pay down your debts one loan or credit card at a time, and focus on reducing the balance of one loan or credit card before working on the next. Use that credit card again and pay a little extra each month. Lowering your interest and a few extra payments each year can save you a significant amount of money.
Using a budget will help you stay on track and stick to your budget
If you don’t know where your money is going, it’s very difficult to know how to cut or control spending. You should try to track your spending for a month before making a budget. Review your budget on a monthly basis to identify opportunities and make changes.
Machines that automate tasks
The more financial tasks you can hand over to a programme, the better. Set up automatic transfers into your savings or investment accounts to automate your savings. Automate your bill payments and have automatic deposits made to your account. Payments going into and out of your account should also be tracked. As much as possible, you want to avoid fees for an overdraft. You can select your payments’ dates at some financial institutions and utility companies. This can be useful because it enables you to manage your cash flow more efficiently.
The final step is to build a buffer. Instead of building up an expensive savings account, save in a savings account only to be used in financial emergencies. When you end up exceeding your budget, use the cushion to make up for it and then begin your cushion-building process. To ensure that you have an extra $1,000 in your savings account should you need it, ideally you would have that much in your account already.
Never allow debt to discourage you. Your finances are under your control. First, begin taking steps to demonstrate your financial dominance over your bank.
Mansoor Suhail has been providing Accounting, Bookkeeping and Taxation services since 2001 in Toronto, Canada. He is fully competent in Canada and U.S.A tax filings and consultation. He can handle Personal, Small Business, Partnerships and Corporations tax issues with full confidence. He is also able to handle International tax issues for Foreign Students, Expatriates and Foreign Corporations.
