Yes To Bill-Free

Most average income families walk a fine tightrope when it comes to managing the household budget. Worldwide statistics show that only 3 in 10 people live within their income which is frightening. Many people rely on revolving credit in their credit cards, or on loans to supplement their incomes. Some people take loans upon loans which eventually lead to disaster. Banks and financial institutions own most people and throughout their lives the majority of people are never really financially free. To make it worse, many people do not want to face the reality of their financial situations they find themselves in.

The average American family’s spending profile is deteriorating rapidly but this is also true in many countries of the world. The reason for this is the increase in prices of food, fuel, education and debt repayments. The average income family will spend between 55–75 percent of their income on these 4 items and many dip into credit cards to manage it. When ever there is an increase in costs for any of these 4 items, it impacts directly on any household budget and the shortfall is normally funded with additional credit card debt, and loans which in turn leads to more financial stress.

How can you manage your finances?

The best way and the first step, is to know where you stand financially. You need to work out how much your current lifestyle is costing you and this is used as a base to identify how and where you can improve. You need spend time with your family and sit together to discuss where you stand financially and see where changes can be made to start alleviating your financial pressures.

Find out where you can curb your spending.

Curbing your spending normally requires a change in lifestyle. This may mean you and your family will have to sacrifice in certain areas and the best way is that you mutually agree on the steps you are going to take.

The following tips are some of the less painful ways to reduce spending:

Start by analyzing your existing budget

A perfect budget is difficult to find because invariably extra costs can pop up that you have not considered at any time. There are some static payments that you make each month that are set amounts and others like utilities that may only fluctuate a little. Your mortgage and car payments will remain the same as well as loan repayments and education fees.

Once you have analyzed your general spending habits you can develop a plan to manage and control your spending. In fact the entire family should have a personal plan because everyone is affected by your financial situation.

The solution often lies in cutting back on small things.

Always shop with a list when you go to the store and do not deviate on what you have to buy.

Keep a list on your fridge and write down when you need something that is finished. Never go shopping if you do not need something and when you go shopping take your list with you and only buy what is on your list. Ignore the special offers that are not on your list because this will lead to impulse buying. Where possible try and ignore brand names and choose in store brands which will be lower in price because they are not packaged in fancy wrappings.

Name brand products in any grocery store are normally more expensive than common store name brands. The quality of store brands is often just as good (if not identical). If you buy the store name brands you could easily save 15 - 25 percent of your grocery bill. On clothing the potential saving is much higher and the quality just as good.

Leave your credit cards at home when you go shopping

If you mainly use credit cards to pay for your shopping it is a good idea to get into a habit of leaving your credit cards at home and pay cash. It might be hard to begin with but you will soon see that it will start working out for you. Alternatively only use your credit card if the money is available in your account. You can also consider decreasing your credit limit on your card to fit your monthly budget in small bites.

If you really have to have something be patient and wait for the sale

Patience could save a lot. All the retailer stores have regular sales. If you wait for the item on the sale you can easily save 50 percent or more. Almost everything you want will come on sale and it is just a matter of saving your money and waiting till it does.

Use products completely before discarding them

A lot of money is wasted because we do not finish products. This is particularly relevant when there are children in the house. Whether it is food, toothpaste, make-up or other beauty care products or items used for a hobby, you probably have lots of unused or partly used items in and around your house. An easy way to save spending is to make sure everything us used up before the new item is purchased or opened. This simple method will not only help you to spend less, but also to clear out some of the clutter in your home.

Save money to Shop

It is good practice to save for items to be purchased. You will save money when you buy cash (preferably on the sale) and you will feel good about it. In addition it is good fun to be on the look out for bargains especially if the money is in your account.

Remember you are responsible for your own financial freedom.

Some sacrifices you make might be unpleasant but knowing up front how you plan your money normally brings with it financial freedom. Getting your budget back on track is like losing weight. It takes time and there is no quick fix. However your patience WILL be rewarded!

Some people see debt as a curse, and other people see it as a friend. It can be used to make you miserable, or it can be used to make you wealthy beyond your wildest dreams. The trouble is, how do we know what is good and what is bad?

Well it basically boils down to this. Good debt puts money in your pocket after you have paid for the debt (interest), and bad debt takes money from your pocket on an ongoing basis. In todays society, the world has gone through an explosion in bad debt. In the United States for example, for every $1 a person earns, they spend $1.20. In Australia things are getting worse too. We spend $1.02 for every dollar earned. Back in the 1980’s we would earn $1 and save 20c.

The single most influencing factor in this curse of bad debt is the credit card. It is so easy to get a credit card these days, and even school kids have them. Most people I know have several of them, and you know what, they max them all out. People get caught in this vicious circle of paying one card off with another, and still the interest bill compounds at an alarming rate.

It is not only credit cards that are doing the damage, it is also the ability to get three years interest free furniture and home appliances with no money down. This is a huge trap, and when people live beyond their means and do not have the means to pay back their debt in the given time they are hit with massive interest rates and so the cycle continues.

So that is bad debt, and I didn’t even include cars, holidays and clothes, all charged up on your card! You get the picture.

Now onto good debt. Personally, I love good debt, and any wealthy person will tell you the same thing. With good debt you can purchase income producing assets that put cash in your pocket, even after the interest bill is paid. Some examples of this include property, shares and stocks, and your own business. It even includes things such as art, wine and other rare collectibles.

By leveraging other peoples money to buy such things, you are after a time able to put yourself into a fantastic financial position, and you can now begin to pay cash for those bad debt items like expensive clothes and exotic holidays.

When I was at school there was never any lessons on good and bad debt, and I’m pretty sure they still do not teach effective money and debt management. It is unfortunate that in a society such as ours, that the government does not teach this to every man, woman and child as it has a massive impact on our lives. Just look at the sub prime fallout in the States to see how people who overextended themselves are now really in trouble.

There is a way out if you are in bad debt, and there are resources out there to financially educate yourself before you do get into any trouble.

We only have ourselves to rely upon to shape our financial future, and the longer we leave it the harder it gets. Eradicate the bad debt from your lives, and begin to live without that heavy weight around your neck.