Balancing Saving, Spending, Paying Debt

Q.1. Why am I always in a debt situation?

First, you need to know exactly how much you’re spending and what you’re spending it on. Log your expenses for a month and then review them with the aim of establishing a plan to control those expenditures by establishing a budget. You may be making bad decisions about spending or not spending wisely. You may be mistaking wants for needs and spending beyond your needs.

Q.2. What are some ways of getting my spending under control?

You can look at strategies to reduce your spending on such things as groceries, energy, and clothes. In addition, you can get help for money management.

Q.3. How do I know if I am spending too much money?

There are a number of reasons people spend too much. Beyond the obvious need to pay bills, people sometimes spend money to reward themselves and temporarily relieve stress. They can’t resist a bargain even if they don’t need it. You need to monitor your expenditures and classify them as necessary or optional. In doing this you can determine your cash flow and make decisions on future actions. Make sure that you develop a plan according to your income.

Q.4. What should my priorities be when thinking about saving or paying debts?

The best thing to do is to pay off high interest debts first. This will reduce your costs and improve your financial situation. The interest rates on your debts are likely higher than you will earn on your savings, so while it is important to put some money aside for contingencies, you should focus on paying off debts.

Q.5. What do I need to know before I borrow money?

Before you borrow money to acquire goods you should ask yourself a series of questions: Do I need it? Is there something less expensive? What will the payments be? What is the interest rate and can I pay it off sooner? 

Q.6. How do I know how much it will cost me to borrow?

There are a number of calculators that can help you determine how much a loan will cost. One of the obvious costs is the interest rate that you will pay and that is affected by a number of factors including how much you borrow, the kind of loan, the term of the loan and your credit rating.

Q.7. What is a line of credit?

A line of credit is made available to you to use as you wish. You set it up once and never need to do it again. Unless there are mounting debts or other issues you will always be able to borrow up to your limit. You will pay interest on the amount you borrow. A line of credit is different from a personal loan because with the loan you get the full amount and start paying interest on that amount immediately.