Do you feel overwhelmed by debt, or feel that the debts will never go away no matter how hard you try? It may seem hopeless at times, but there is a solution. The problem with debt is that it makes your monthly expenses go up. Every time your credit card balance increases, the minimum monthly payment goes up. When you get a car loan, you now have a monthly payment that has to be paid every month in addition to your other expenses. The biggest benefit of eliminating your debt is that it lowers your monthly expenses so you can put that money to better use.

Know Where Your Money Is Going

You might feel like there just isn’t enough money coming in each month to pay for everything. To get to the point where you are spending less than you make is through keeping a budget. You may know how much money you bring home every month, but unless you keep track of how the money is spent, often what happens is that you wonder where the money went. Keeping a budget enables you to tell your money where to go rather than wondering where it went. You may feel like a budget limits you on your spending. In some cases it may, but the reality is that you have to make a plan so that the money you bring in covers everything you need. Living on a budget in most cases actually makes you feel like you have better control over your finances rather than wondering if there will be enough money at the end of the month.

The most important, but simple, concepts to follow in developing the habits that are needed in the early stages of your journey are these two things:

• Spend less money than you make
• Make more money than you spend

You might think these two things are saying the same thing, which in some ways they are, but the first focuses on making sure you control your spending and the other is a focus on controlling how much money you are making. This may seem too simplistic, but this simple principal is the most important one in making your finances work.

Making a budget is actually a freeing experience in most cases because it gives you better control of decisions that are made regarding your spending. You may decide that once you look at all of the numbers that you’re spending too much on one category or another. Once you actually see how much you spend on eating out in a month or how much that daily coffee at Starbucks is costing you for the month, you may decide that you would prefer to pay your debts off faster or do something else with that money that would put your future financial situation in a much better place.

To get you started in the budgeting process we have a detailed guide on creating and following a budget as many people don’t know where to start with budgeting their finances: The Ultimate Guide to Creating a Budget

Developing New Habits

The most difficult part of this stage is having to change the way you’ve been doing things. It’s all about overcoming old habits and developing new ones so that you can have better control of your finances. It’s like a lot of things in life such as exercise or what we eat. It may seem a lot easier to not manage these things, but the results from developing good habits in each of these areas has great benefits.

Just like those who get into a habit of regular exercise or better eating habits find the benefits once they’ve made the changes, when you’ve made the changes to your financial habits and develop better control over your spending you’ll quickly see how beneficial it is and will be glad you made the necessary changes.