Friday, 22 January 2010

Reduce debt by reducing how much you spend

Sit down with a pen and some paper.

Write down a list of all your expenditure; mortgage/rent, fuel, mobile phone, clothes, food, etc.

Categorise them into:

Fixed (eg mortgage)
Essential but not fixed (eg fuel, food)
Non-Essentials (eg mobile phone, treats)

If you really put your mind to it you can make significant reductions in the essential but not fixed category. Heating, for example: During winter, do you have the heating turned way up? A lot of people go overboard with the thermostat, and turn their home into a furnace.
Reduce your heating bill by turning the thermostat down and adding a layer of clothing. Think of it as adding a layer of protection from the debt monster lurking in the corner.

Non-Essentials (also known as the Debt Creation category)
This is the category that has most likely contributed to your debt problem; so it makes sense that reducing the items in this category will reduce your debt. Before you begin reducing the items in this category, be certain that you haven't "mistakenly" ;) listed items in the second category that really should be in this one.

If you really cannot survive without your mobile phone, and you have a contract, then consider switching to pay-as-you-go.

Create a Budget and stick to it. Easier said than done, I know. Just try it.

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