How to Reduce Debt by Learning Your Money WeaknessesFeb 26, 2019
Your goal to reduce debt this year isn’t going to happen by chance. And, as winter shifts into spring, you’ll be left wondering where the time went when you could have been making progress all along. So, instead of making more excuses, why not use February to show your money some love and identify where you’re struggling.
What did you learn in 2018?
Before getting into weaknesses, let’s talk about your strengths. What were your best money moments of 2018? Did you earn a raise, save up for a major purchase, choose cash more often than credit? It’s important to look back on the decisions you were proud of so you’re able to carry those good habits forward into the new year.
How to identify your money weaknesses
Many of us have a good sense of what isn’t working financially, but changing those behaviours can be difficult. For instance, you may think nothing of the morning coffee or the work lunch you buy daily. However, over the course of a month, you’ve spent $300 and don’t know how to account for it. Sure, packing a lunch will take a little extra time out of your morning routine, but you’ll make up for that time by not hitting the coffee shop and you’ll have more money in your pocket. See where I’m going here? It’s all about identifying your money weak spots and finding a solution. Ask yourself these questions:
- Am I comfortable with the income I’m earning? If not, what else could I do to improve it?
- Am I able to cover all my bills and expenses each month or am I coming up short?
- Are my debts being repaid at a reasonable pace or am I using my credit cards more and more?
- Am I running out of money in between paycheques, but never seem to know where it’s going or am I setting aside a set amount for savings from each pay?
- Do I practice mindful spending – only purchasing what I need and what’s within my means, or am I prone to overspend on unnecessary items?
Your answers to these questions will give you a glimpse of your money personality. And if you’re struggling in one area or all 5, the good news is that you can turn it around!
5 Healthy money habits to adopt
As your financial journey progresses, you’ll begin to learn what works and doesn’t work for you. This is why it’s good to try a variety of money management strategies so you can find the right fit. Here are a few that are easy to follow:
- Set specific goals – Want to repay debt, save more money or spend less? Great! Now get specific by writing them down and putting them into practice. Use this goal calculator to start.
- Follow a budget – Can’t figure out where your money is going? You need to budget! Use this worksheet or download one of these apps.
- Get ruthless with your debt – Find a method to pay off debt that works such as the debt snowball or avalanche. Or, check out more debt relief options using this calculator.
- Save – For real! – Don’t just talk about it. Put your plan into action by setting up a savings account and depositing a set amount into it each payday. Set up automatic withdrawal so you won’t even notice.
- Learn from your mistakes – The journey toward a debt-free lifestyle or any financial journey isn’t always linear. There will be pitfalls and mistakes. Learn from them and keep moving forward.
Want to learn more ways to reduce debt and stay motivated? Follow finance blogger Kerry Taylor at Squawkfox. And, join our Twitter feed more daily inspiration #LeaveDebtBehind #DebtConfessions #DebtTips