Breaking Bad Financial Habits

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Fixing a Bad Financial Situation

Is it any wonder that more people aren't drowning in debt? According to Credit Action, the total UK personal debt stands at £1,456 trillion. But there's still hope of tackling your debt if you're willing to break the bad habits that put you into debt in the first place.

The biggest reason many people struggle with money management is that they have too many loans – car, house, school, etc. Speak to a debt reduction expert and you'll be steered in the direction of a credit counselor. But before you consider paying a fee for advice, there are some simple steps and many things you can do to begin solving the problem on your own.

  • Review all billing statements as they are delivered.
  • Build a weekly routine to confirm you're sticking to your budget.
  • Establish a relationship with your banker
  • Keep detailed records of all financial communications.
  • Never make excuses for bad money management.
  • Follow your gut, if you think they're having you on
  • If alarm bells ring, act quickly.
  • Ensure your credit terms and contracts are clear and up to date.

Honestly Assess Your Situation

Evaluate your finances with a clear eye and avoid the self-deception that your situation isn't all that bad. Experts suggest that 20 percent of your monthly income be the maximum you pay for credit cards and other unsecured debt.

One other important sign of trouble is not having the resources to pay more than the minimum on credit card debt. An easy calculation to use is the ratio of debt-to-income - the lower your ratio the better. Add up all sources of income and payments for a month. (Living expenses are not included.) Use an online debt-to-income calculator or do the math. Here's how: Total Monthly Income ÷ Monthly Debt Payments = Debt-to-Income Ratio

Prepare a Detailed Budget

Don't make the mistake of thinking you will spend less by will power alone. Drawing up a plan will bring to light areas you may be able to change. For example, that morning Starbuck's coffee could be setting you back £3-£4 a day, a respectable amount of money over a year's time. A detailed budget will help you stay on task to lower expenses. Begin by making three lists: monthly income, necessary expenses and a wish list of things you don't necessarily need. To get a more accurate picture, write everything down for an entire month. The more details you include the easier it will be to spot areas for improvements. Check out this government site.

Make Money Saving Changes

It's plain old, common sense that cutting expenses is an important part of getting debt under control, but it's also easier said than done. While fixed expenses like your house and car payments will be hard to cut, limiting nonessentials will help with saving money. Brown bag your lunch, leave your car at home and jump on the bus, train or carpool with coworkers to save on transportation.

Here are more tips to begin breaking bad financial habits and improve your financial picture.

Cost cutting measures like these may seem inconsequential, but when added together you can make a decent dent and open up opportunities to use your money more wisely.

About The Author: Noreen Ruth writes for and several popular financial websites. She is interested in educating consumers about using credit responsibly and about legislative action that will affect their ability to borrow the money they need. She has contributed hundreds of articles to various online sites that provide content to educate consumers on credit cards, debt relief services, loans and other finance related topics.

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