Money Management Tips For Getting Out Of Debt

I would like to share with you some money management tips for getting out of debt. Debt is no fun, and the emotional burden that it can create in peoples’ lives can be overwhelming. Henrik Ibsen said it best, “Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.”

Have you ever wondered why so many people have outrageous debt? A large reason is due to the lack of having a well-disciplined budget and financial life.

Managing your money doesn’t have to be difficult. It’s about knowing how you are using your money. How would your life change if you were free of debt? Make a decision to get rid of it, once and for all.

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Below are 5 money management tips for getting out of debt:

1. Be Aware of And Accept Your Debt

One of the most difficult things to do when first getting on the debt pay-off journey, is to truly accept your debt. Oftentimes, the reality of debt is too painful to acknowledge or accept, so the natural response is to avoid that it exists. I speak from personal experience.

When I was in my early 20’s, I was in a lot of debt. I had to make sacrifices in order to manage my money more efficiently and become debt-free. It was the acceptance of my reality that allowed me to make a change in my life. If you are serious about becoming debt-free, you need to acknowledge its existence. Be proactive. Don’t live in fear. Instead, take action.

2. Decide To Change your Spending Habits

Making a decision implies that you are about to take action. When you make the decision to change your spending habits, you are halfway there to financial freedom! Saving money is about changing spending habits. What are your spending habits?

In order to become debt-free, you need to address the actual money management habits that you are struggling with, that led to the debt in the first place. Ramona Pearson, a certified public accountant and personal financial advisor said that “Money habits are formulated at a very young age for most people.” Take the time to figure out why you're spending habits are the way they are.

Sure enough, this is the reason why a lot of people that win the lottery end up losing it all. They don't take the time to develop the discipline in order to manage their money properly.

Focus on cutting your expenses or your overhead in some way. This will allow you to have some extra cash flow every month. Then, you can use that cash flow to start paying off your debt.

3. Track Your Expenses

If you want to free yourself from debt, you need to start tracking your expenses. The best way to work out what you spend your money on and how much you have left at the end of every month, is to keep a record of all your expenses.

According to Pick The Brain, for two weeks you should write everything down that you spend. Record the time, the place, and how much it costs. Doing so will help you identify your spending patterns.

If you haven’t done something like this before, there is a good chance that you will shock yourself. How often do you track your money? If the answer is never, it’s time to get out a calculator and start doing the math!

4. Don’t Spend What You Earn

Once you start making money, don’t be tempted to spend MORE money. This is where people get themselves into trouble. You have to discipline yourself to NOT engage in this behaviour.

In his book, Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!, Robert Kiyosaki said, “Invest in assets, not liabilities.” An asset is something that puts money into your pocket, while a liability is something that takes money out of your pocket. Which category does everything in your life fall into?

If you can’t manage the money that you currently have, then there is no point making more money. If you adopt the mindset that making MORE money will be the answer to your debt issues, you are wrong. This is a recipe for disaster.

5. Reward Yourself

Adjusting to a new style of living involves sacrifice. Breaking bad habits, especially when it comes to spending money, is hard work. This is why it’s important that you reward yourself when you have practiced self-discipline.

Be kind to yourself and engage in mini-celebrations, now and then. Why? Because the MORE that you acknowledge and reward yourself for your successes, the more success you will have.

Charles Duhigg, New York Times reporter and author of The Power of Habit: Why We Do What We Do in Life and Business, said “First, you have to pick a cue, like every single time that you get a pay check, you’ll move 5% of it into savings.” The key to making your habit stick is to give yourself a reward every time that you engage in a positive behaviour.

Debt is debt, but don’t feel that you have to punish yourself because of it. Honour the small achievements that you make every day, on your journey towards financial freedom. How you choose to manage and spend your money can have a profound impact on your life. I encourage you to follow these money management tips for getting out of debt.

Your ability to make good money decisions will end up shaping the direction that your life will take. Are you ready to be free of debt? Take control of your financial future now!