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Not all of us have what it takes to spend within our means, and therefore before we know it, we are head over heels in debt.

However, there is a way around this problem. And, that is ’budgeting’, i.e. allocating budgets to all your important needs as well as those that are not on the top of the priority list. This way you would be able to make sure that all of your wants and desires are taken care of in order of their priority and nothing is ignored in the long run.

However, budgeting requires a certain amount of discipline and finesse. These are a few tips to help you learn this art:

1.     Track your Spending Habits

This step is a sort of ‘prequel’ to budgeting. Before you commence making a budget try and track where all your hard earned money is actually going, remember every single dollar spent has to be clearly noted down, because in the long run, every individual penny eventually adds up. An innate understanding of your day to day expenditures would help you come up with a budget that is based on optimizing your spending patterns. Make sure that before making a budget, you track your expenditures for at least a four week period.

2.     Set Realistic goals

When preparing a budget, think along the lines of a diet and exercise regimen. It is easy to make‘plans’regarding healthier eating habits and jogging four miles every day, but executing those plans means a harsh reality check. Even if you manage to do it for a few days, the chances are you will eventually stop. The same goes for your budget. If you curtail the expenses you incur on your hobbies and entertainment almost completely, the odds are you will succumb to your original spending habits in a big way. Try and cut down on your leisure spending by around ten percent per month (instead of going to the cinema three times a week, makes it twice).

Once you have successfully managed that, then make another cut of around the same percentage, and then don’t go below that for at least a few months.

 

3.     Say no to Credit Card Spending

The thing about credit cards is that they allow you to spend money that you don’t really have. Use them often enough, and they are a sure fire recipe for landing you into debt or worse and before you know it, you are more concerned with making minimum payments than with taking care of your actual day to day needs in an attempt to keep the collection agents at bay.

The simplest means of avoiding credit card debt is to refrain from using them in the first place. However, they are indeed handy things to have in case of emergencies. If that is what has happened, make the payment of these cards a first line priority so that you would not be caught in a vicious debt trap.

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