Are your debts higher than your fixed expenses (housing, health, transportation, food)? Read below for Legendary’s tips for mapping your monthly income to keep up with your budget and not suffer from cumulative interest!
Organize a spreadsheet with all your debts!
To map your monthly income, and analyze how much your debts are consuming you, you need some planning. Why? With the help of the spreadsheet, you can classify your expenses by fixed – related to home, housing, health, transportation and debt – and variables, which are related to your lifestyle. For example, you can go to the movies twice this month, but next time none. This type of expense is variable.
Do you know the Total Effective Cost of each?
With the mapping of your monthly income and the financial planning done, you will have a clear view of your debts and fixed and variable expenses. With this you need to know how much is left to settle each outstanding financial commitment. Do debt installments exceed your income? If so, you should start by cutting the variables, as per the last example. Remember, this is to help you get your debts up to date and won’t last forever if you don’t have the discipline you need. For this you need to evaluate the Total Effective Cost (CET) and not just the interest rate.
You need to cut all your superfluous spending
Superfluous expenses are the variables and they are the villains of all financial planning. Because they are variable, we can’t always anticipate them, but we can avoid them. To do this, you must ask yourself two basic questions before purchasing any items that are not planned:
- From 0 to 10, what is the immediate need for this product? This is simple: if it is less than 5, the need is not immediate; if it’s between 6 and 8, you might consider raising more money and buying next month; Now, if you are between 9 and 10, there is no way to discuss the need, but at this point it is worth evaluating everyone to get the one that fits your pocket.
- Do you have the amount to buy it in cash or in installments? If in installments, how many times? Are monthly installments within your budget or do they exceed the maximum amount of your variable spending?
Have No Excuses For Using Your Credit Card
One of the main villains of the budget, if one does not have good financial management, is the credit card accompanied by the revolving interest. Why? If you don’t have discipline with your monthly income and can’t always pay the full bill, your debts can turn into an even worse snowball. So don’t use your credit card as an excuse to earn miles and save money on your next vacation trip or something.