“Spending Diet or Spending Fast”- Either way a new concept to cut down your debt fast!

“Spending Diet or Spending Fast”- Either way a new concept to cut down your debt fast!

This is fairly a new concept applied by Anna Newells, a Denver-based blogger who paid off $23,605.10 of her student-loan and credit-card debt through this process within a couple of months. Sounds relatively unreal, but it can be achievable as long as you can differentiate your needs vs. wants.

Source

A real life experience of Anna Newells.
According to her,

“With the spending fast, I had no discretionary income."  This meant she would spend the money only on essential needs such as rent or mortgage payment, utility bills, groceries, transportation or vehicle costs.  If it was not absolutely necessary -- then she did not get it!   Clothes, coffees, dining out, movies -- forget it!  She did not get it!  Nothing!  Nada!

 With the spending diet, however, she gave herself a $100 non-need allowance per month, and would spend that on whatever she wanted. BUT the spending diet was way harder than the spending fast, she claimed. “Because with the spending diet, I would try to spend normally -- and then I would overspend!”

How can you apply these programs?

Let me give you an example. Your daily coffee from that high-end cafe is not an essential purchase. Seriously, ask yourself, do you really need to spend $5 to wake up every morning?  Instead, try making yourself a cup of green tea or black coffee or anything that suits your taste.

Always remember that your spending needs should only include necessary or must expenditures such as rent or mortgage payments, transport costs, groceries and emergencies. Always make sure you ask yourself, “Is this absolutely essential?” If it’s not, than you cannot spend money on it!  This takes discipline. Lots of it. Without discipline, you will never last in this program.  But if you do, the rewards -- paying off your debts - are huge!

Anna Newells’ tactics may sound too harsh for most us.  So here is one alternative version of spending diet program.

Give yourself a budget cap combining all of your essentials and non-essentials. This could be your monthly or weekly allowance depending on your pay day structure. You must survive within the budget that you give yourself every time. It is wise to start with the usual amount that you spend every week or month and then start to cut down a little portion from that budget as you progress.

For more money saving tips and financial advice visit www.prudentfinancial.net

Where to save money and start paying off your debts first?

When repaying your debt, first start with your credit cards and say no to minimum monthly payments. Then follow up with your car loans, personal loans and other kinds of debt.

Also, don’t forget to reward yourself after achieving your monthly financial goal, but remember the reward level must stay within your spending limit!

Overdue debts can lead to bad credit rating which will result having poor credit score, minimizing your debt will not only improve your financial condition but also your personal and family life.

LOTS OF LUCK!

Let us know if these methods can be helpful to manage your finance better. Are they practical? Are they durable?

 

 

 

Creating a Budget for the Holiday Season and Beyond!

The holiday season, with its gift-giving spree, can be an expensive time of the year. So, if you don’t already have a budget, it would be timely to start one.

A budget is a financial plan for monitoring how money flows into and out of your life. It shows how much you’re earning and how much—and on what—you’re spending.

It may reveal buying habits you're unaware of; it can certainly help you plan more effective ways to spend and save for what really matters to you. And it will prevent you from going into a dangerous bad-credit zone, which will imperil your credit score.

Use a budget worksheet

Track your income

First, use a budget worksheet (see link below). Here you will record all your income sources, including investment income and self-employment income.

If you receive a regular paycheck (with taxes deducted at source), then enter the take-home pay only as the amount. This is the amount that you will have to work with to cover your expenses.

Track your expenses

Then, add your monthly expenses—everything from groceries and gasoline to mortgage payments, insurance premiums and RRSP contributions.

(If you make only one annual payment for something, divide it by 12 months.)

Then sort these expenses into two groups: fixed and variable. Fixed expenses stay largely constant from month to month: mortgage or rent, car payments, cable and utilities. These expenses are a basic part of your life and seldom change in the budget.

Variable expenses include entertainment, eating out and, of course, gifts. These expenses will vary from month to month, and are where it’s easiest to make adjustments.

Income vs. expenses

Now, add up your monthly income and your monthly expenses. Hopefully, your income is greater than your expenses. If so, you can use the surplus to top up your RRSP contributions or to pay off your credit card balance.

But if your expenses are greater than your income, you’ll have to bring the two into synch—either by earning more or by trimming expenses. Definitely say no to payday loans and only making minimum payments on credit cards. This is a fast track to bankruptcy or a proposal.

If you have to trim, start with the variable expenses. You can eat out less and go to fewer movies and concerts.

Be sure to do a monthly review of your budget, to see if you’re “on the money.”

After the first month, check your true expenses against what you had projected in the budget. This will reveal where you did well--and where you may need to do better.

Budgeting isn’t complicated, but it does require careful attention to details. Even more important, living within a budget demands discipline and commitment. But it’s a good way to stay financially sound and to avoid a bad credit score! For budget worksheet, please go to: http://www.prudentfinancial.net/downloads/Prudent-MonthlyBudgetPlanner.pdf