When it comes to overcoming debt, few strategies are as effective as making and following a strict budget. If you’ve never done this, however, the task can seem daunting.
But by keeping a spending diary, you can ease into it. Here’s why this is a smart move.
IT’S SIMPLE—TRY IT FOR ONE WEEK!
While making a budget may seem complicated, keeping a money diary is a breeze. All you need to do is write down how much you spent and on what. Many people are familiar with the surprise of looking at their bank account and having no idea where their money went. If you have a regularly maintained diary, you’ll always know where funds were allocated. You can start by tracking your expanses just for one week. Each day, write down everything you’ve spent money on, from cost of daily transit, your cup of coffee, a meal or small errands! You might be surprised what kind of pattern evolves when you add it up at the end of the week.
Keeping a spending diary, even if it’s just for a month, will likely give you a lot of perspective on your finances, especially if you tend to avoid thinking about them normally. When the time comes to evaluate your spending habits, you’ll be able to figure out where most of your money goes. You’ll also gain a better understanding of your financial habits.
IT GIVES YOU MORE CONTROL
Knowing how much money you earn each month and what you spend it on is the first step toward making a budget and sticking to it. This is also a necessary step in ensuring that your spending habits are sustainable. For example, if you realize that you fritter away a lot of money on a hobby and use your credit cards and savings to help make ends meet, you may need to rethink your financial decisions. Your diary could help you notice signs that your debt is starting to get out of control, at which point seeking credit counselling may be a good idea to get your habits back on track.
IT HELPS YOU GET OUT OF DEBT
The most important thing when trying to get out of debt is information. You need to know how much to spend on necessities, how much you can allocate to paying back your debts and how much you have left over for hobbies and activities. Information is crucial to a good budget, and your diary is the best way to discover where you can cut expenses. Think about it, if you’re spending $4 a day on a latte, that may seem like a small expanse. But if you get one every day for a week, that’s $28. And if it’s a regular indulgence, you’re look at over $100 per month!
FIND DEBT HELP IN OTTAWA AND EASTERN ONTARIO
If you need help with budget planning and aren’t sure of what your options are to get your finances under control, the licensed insolvency trustees at D. & A. MacLeod Company Ltd. can help. Contact us today!