If you want to stay out of debt, all you need to do is to practice some financial management skills. The bottom line of managing your finances is to help you live within your means. Given the debts being acquired left and right, this is a necessary lifestyle to have. But the question is, what are these skills that you need to learn?

First of all, you need to create a budget. Management begins by knowing what you have to control. In this case, you need to know your finances and that can be done through a budget. This requires you to identify both your income and expenses. Both will have to be monitored - especially the latter. You need to make sure that your money is going to your priority expenses. This includes necessary expenditures like your home payments or rent, food, clothing, education, etc. Anything that you can live without is considered as your luxury expense.

The whole purpose of your budget is to help make sure that your expenses will not exceed your income. Simply put, it allows you to live within your means. Since you know where your money is going, you can control whether you want funds to be directed to something else. Instead of paying for your gym membership, you can allot that money to your debt payments instead. Or instead of going on your annual out of the country vacation, you can settle for a cheaper road trip so you can afford that gadget that you wanted to buy.

Another habit that you need to develop is to think before making a purchase. That will help you become an adept manager of your finances. Think if a particular purchase is necessary for your survival. If not, consult your budget if you have extra to pay for it. If you have it, double check if that money can be used for something more worthwhile. If there is none, you can proceed with that purchase. It may be a lengthy process but that is smart spending for you. You cannot be good at financial management if you succumb to impulsive spending. That is what leads to debt accumulation.

The next skill that you need to develop is staying true to your debt payments. If you have them, you need to make sure that you commit to your payments. Otherwise, you may end up with an accumulating debt due to high interest rates and late penalty charges.

Lastly, being good at financial management means you have built up or you are in the process of growing your emergency fund. This fund can literally save you so you’d better start saving to grow it. When something happens to your main source of income, you can use this to help you and your family survive while you look for a job. It can fund any medical expense needed in the event of a sudden illness or accident.

Financial freedom takes commitment, discipline and self control. You need to be determined to be good at financial management. This is an effective way if steering away from very destructive debts.

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