Discover Debt Freedom!

Okay, it was painful but you did it. You sat down and wrote out a monthly budget. You even identified a few places to trim the fat so you’d have some money to put into savings each month.
But somehow it hasn’t worked out in reality like it did on paper. You’re still behind at the end of the month, and your credit card debt is growing instead of shrinking. What’s going on? Why is it so difficult to stick to a budget? This article examines some of the reasons.

Unrealistic Expectations
Perhaps you made your budget work by capping your monthly grocery bills at £80, or allotting yourself only £10 a month for gasoline for your car. While these figures might look good on paper, there is very little chance that you’ll be able to hold yourself to them in reality. Look over your new budget with a critical eye. Are there any items that don’t survive the “real world” test?

No Goal to Shoot For
Saving money for the sake of saving money isn’t much fun, especially if that cute little party dress at the mall is calling your name. It’s important to set a goal that you eagerly anticipate. For instance, ‘When all my credit card debt is paid off, my spouse and I will take a holiday’ or ‘When we have £3,000 in savings we’ll buy that new television we’ve been wanting.’ Knowing that every pound you spend takes you further away from that reward.

Poor Motivation
Have you been dragged into budgeting kicking and screaming by a spouse, a financial counselor, or a court? If so, you may be unconsciously setting yourself up for failure. (“See, I really can’t do it!”) Try to find some area of budgeting that excites you, like saving up enough money to go on a dream trip or paying off your debt. Take ownership of your decision to budget, and you will soon find it’s not as difficult as it seems.

Unexpected Expenses
You may have been following your budget perfectly until your daughter got her two front teeth knocked out at school. Then there were unexpected doctor’s bills, pharmacy bills, dentist’s bills, and so on. No matter how carefully you budget, you can’t always control what life throws at you. Many experts recommend setting aside money in a savings account worth three to six months of living expenses for crises such as these. If you don’t have that much socked away, deal with the unexpected expenses as best you can, and get back on budget next month.

Not Enough Money
Sometimes, no matter how you move the figures around, the cold, hard truth is that you simply don’t have enough money coming in to meet your monthly expenses. There are a couple of ways to handle this. The first is to find realistic ways to slash your expenses, such as trading in your large car for a smaller, less expensive model – take a look at Fish4’s used cars website for this - or buying only store brands when you shop. The other solution is to earn more money. If you’ve been with your current employer for awhile, you may be able to negotiate a raise based on your years of loyal service. If no raise is forthcoming, consider finding a job that pays better or temporarily taking a second job until your financial state is better.

A Good Way to Save Regularly
One of the best ways to save regularly is to put money into a regular savings account. These are typically linked to a current account from which you make a monthly payment into at the start of every month, and they can have very high rates of interest attached to them. For instance, Alliance and Leicester’s Premier Direct Regular Saver, linked to from its current accounts, offers a rate of 12% and you can put up to £250 per year into it. After twelve months you’ll have £3000 in your account, and then receive a £360 bonus as interest – excellent! For longer term savings and investments, it’s best to turn to the stock market, for which Legal and General has a number of good products.