As the year draws to a close I always find it an ideal time to sit back and reflect on my life and draw up some New Year's resolutions for myself. This year will be no exception. In fact, my most important resolution will be to get to grips with my finances and pay down my debts as quickly as possible.
So in that boring period between Xmas and the New Year when pretty well all the partying has died down, I will be using that time to look at my finances and put together a plan of action.
Why Forward Planning is so Important
While loans and credit card debts are very easy and quick to build up, it will take me much longer to get rid of them and will require a lot of self-control on my part if I am to succeed in paying these debts down. That is unless I am lucky enough to win the lottery which is not likely.
A plan of action will help focus my mind on what I am trying to achieve over the longer term so that I don't quickly get despondent and give up trying.
Analysing my Budget
My first step in formulating this plan of action will be to take close look at my income and expenditure. As my income is fairly static, the most important thing I can look at is my expenses to see where I can make any cutbacks to my expenditure.
The first place I will look at is the direct debits coming out of my bank account. Do I need all of them or are there any non-essential ones that I do without. If so then I will cancel them immediately
You see, one of my biggest problems is that I am a sucker for the special offer, impulse buys. I am prone to signing up for things just because I get caught up in the sales hype, which does not do any good for my budget. So, while it will take a little will power, these are the first things that I will stop doing. In future I will only be buying goods or services that I actually need, and only at the time that I need them.
By the time I have finished I will then know how much I need to spend on essentials and what money I have left over each month. 3/4 of that extra money I will then pay into a savings account for emergency use, if ever it is needed; the other 1/4 will go towards helping me pay down my debts.
Paying Down my Debts
Starting with the smallest debt I will overpay on it using the extra money I have set aside in my new budget.
When the smallest debt has been paid off I will then take the same money and use it to increase the repayments on the next smallest debt until that is paid off.
By repeating this method I should have all my smaller debts paid off by the end of the year, leaving only my mortgage. And by using the money I used to pay on the other debts to overpay on my mortgage I can significantly reduce the term I have left to pay on that, until I am debt free saving me thousands of £'s.
I hope you enjoyed this article and found it informative.
