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5 Simple Debt-Busting Tips (Part I)

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by Bettina Buechel (subscribe)
I am a writing Novelist from Austria - www.bettinabuechel.com/entangled_souls.asp - I am living in South Australia since December 2010 and enjoy it a lot. Besides this I look after a small vineyard - www.lot333wines.com.au
Published November 3rd 2012
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In this article I want to introduce you to five short and concise measures you can apply to reduce your accumulated debt in a reasonable period. But in order to accomplish this effectively, you need a high level of discipline and responsibility. To anticipate: debt must not be generally poor. If you had to take out a loan for house construction or other major purchases, then this is perfectly fine and legitimate; debts that have grown out of nowhere and where you finally admit that you could draw no recognizable benefit are dangerous. Therefore, fight it early.


1. No More New Debt

Don't laugh. I am not joking. Imagine your debt is like a small dirt mound in the garden of your home. To get rid of this small hill, you have to gradually carry away it with a shovel. Now imagine if you added another four shovels after removing two or three. How long would it take until you have actually removed this small hill of dirt? You could not get rid of this hill in your garden in your whole life.

Accumulating additional debt while you're trying to get away from it makes really no sense, right? It not only makes no sense, it is fatal. From now on, make sure to spend only as much money as you have. Better you begin to spend much less now, as you have not attained your financial freedom.

2. Create a Budget

This is probably the most basic measure to get rid of your debts. Once you know your income and your expenses, then you can keep your spending under control more accurately. A simple budget shows how much money you earn each month, after deducting the expenses that you have. This gives you a good idea of where you can reduce your spending.

Budgets are normally conducted on a monthly basis, but perhaps it would be better for you to start with a plan on a weekly basis. Your budget could be established like this:

Income
Write down all your income sources.

Outgoings
Split your spending into the following three groups: planned expenditures, cost of living, and unexpected expenses.

Planned expenditures include payments for car insurance, gas, water and electricity bills, bank loans and mortgages. Living costs include costs for telephony, electricity, clothing, credit card payments and everything else, even the breakfast at your favorite coffee shop and the videos that you borrow for Saturday night. You must list all the costs you spend on your daily life. The unexpected expenses include all unpredictable costs, such as buying a new computer, furniture or other appliances, the cost of holidays, and special gifts.

Once you have all your expenses in total in front of you, you can compare them with your income. You are able to keep your money in control because you have all the numbers in front of you. Now you can decide for yourself what expenditures are unnecessary and which to remove completely to suit your budget better in the future.

Every little bit helps (photo from Wikimedia Commons)

3. Change Your Attitude to Money

It is not always easy to stand above it all. Always working on improve your financial situation for a more pleasant quality of life can be hard because sometimes we want to treat ourselves and can forget our good intentions. The savings-pants are pulled off and set aside.

Hold yourself to the commitment to save up and be proud of every little achievement of a goal. Your personal attitude towards money and your thinking about money and money management are the main characteristics to keep your assets in the future successfully. Find ways to change your attitude to money and you will lead the lifestyle you wish for yourself in the future. You can forego small things in the short term; go less out for dinner, save a packet of cigarettes or drive a smaller car.

All you need is the right plan and the right attitude!

4. Set Clear Goals

Each of us has his financial needs and dreams, no matter how old we are or what situation we go through. Our overall financial goals usually include our education, buying a house /apartment, buying an own car, pension plan or just cash reserves.

Continue your personal financial goals.

Start the process by taking the time to write all of your financial goals on a list. It's important that you are not restrained in the list of all targets. Each goal must include a clearly defined time frame and an exact amount of money, otherwise it is just a wish. The statement "I would like to retire early" is not a goal.

a) Set goals that encourage you to stick strictly to your budget.
b) Set goals for future holidays and other major expenses.
c) Set really big goals that define where you want to be in the future.

Now that you have defined and set your goals, you must single out the ones that you want really to achieve, those that you will do everything to achieve, that you are willing to cut your expenses in order to save money. Delete all others from your list.

Well, now you need to sort your list by importance. Since it will not be possible to focus on all of your targets equally, you must determine which objective is the most important thing for you. This one is placed at the top of the list.

5. Set Clear Actions

Now that you know what you want to achieve, it's time to work on the actions that will help you in achieving your goals.

a) Determine the amount you have to save each month to achieve your individual financial targets.
b) Transfer this amount at the beginning of the month on a specially opened savings account.
c) Protect the account with your bank, so you can only make payments but no withdrawals.
d) Set a date when you check your financial progress so you know in advance if you are on the right track or need to make special adjustments to your savings plan.

If you have set realistic goals and develop a plan of required actions, then you are certainly on the right path to reach your financial goals.

It is never too late to start. Do not give up!
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Why? Get rid of your debt
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Your Comment
Great simple strategies Bettina, thank you!
Amber
by Dorothy Oz (score: 0|5) 1837 days ago
handy tips! thanks for sharing :)
by Joy (score: 3|1881) 1829 days ago
Great info!
by Where I Holiday (score: 2|338) 1827 days ago
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