The first step is to draw up a budget. List your fixed expenditures and other monthly deductions and tally these up against your income. If your expenses are more than your income, you need to plan how you are going to reduce them. If you have some money left over every month but believe you should be saving more, draw up a budget to stick to and gain control of your expenditure.
Some areas are easier to trim down on, so concentrate on them first. Remember, even the smallest adjustments can make a meaningful difference over the long term.
Once you have trimmed down your expenses, you can start channelling the extra money you have into paying off your debt faster, starting with those with the highest interest rates first.
Make sure your budget has a goal, whether it's to pay off your credit card debt or save money for a family holiday. Working towards a goal provides direction, makes it more fun and delivers a sense of accomplishment when the goal is finally achieved.
Be realistic. If you set too lofty a goal and reaching it results in deprivation on all fronts, the likelihood of your sticking to your budget is minimal.
Be honest about your debt obligations and your expenses so that you have a clear and realistic picture of your financial situation. Communicate this with everyone in the family so that they understand the limitations within which they must live. This will also prevent any feelings of resentment when they are refused money. Deliver on your promises and offer rewards.
Here are some of the possible areas where you can start cutting excess fat from your budget:
* Cellphone. If you know that you can and should be spending less on your cellphone bill, consider switching service providers or swop to a package that is more appropriate to your usage requirements.
* Entertainment. If you enjoy regular nights on the town, consider cutting down the amount of times a month you go out.
* Dining out. If you buy lunch at the corner deli or office canteen every day, think about rather packing a lunch to take to work.
* Groceries. If you're popping into a convenience store on your way home from work to buy bits and pieces for dinner, it is costing you more than if you made a proper shopping list and shopped wisely at a supermarket.
* Mortgage bond. Interest rates are on the rise, and if your bond instalment has become unmanageable as a result, shop around and see if you can lower your monthly repayments by refinancing your home at a more favourable interest rate.
* Credit cards. Abusing the credit facility on your credit card is dangerous because it can land you in serious debt. It is also more expensive in the long run because interest charges are usually high. Keep your credit card for emergencies only and make the decision to pay for goods and services with cash or debit card only.
* Insurance. By shopping around for the best insurance premium, you may be surprised at how much you can save. Budget Insurance and the South African Savings Institute