31st Oct 2007
Money management techniques
As I mentioned previously, one of the most important things in my view to handling your debt is money management. Most of us work hard to pay our bills and although we may not have much left over we still feel that its our right to have a little enjoyment in life. Agreed everyone deserves some enjoyment but when you are in debt there is a careful balance you must perfect between wants and needs.
I decided to keep it simple for everyone I will produce step by step blog posts advising you what to do. This post will be step 1.
You need to sit down and work out your debt to income ratio. Chances are you’re saying to yourself ‘what on earth is a debt to income ratio?‘ but don’t worry because I will explain it. The basic principle of the idea is to compare how much you owe against how much you earn. For example if your monthly take home wage was £1,500 and your monthly debt repayment (such as mortgage, loans, credit cards) was £500 then you will device your take home wage by your debt total.
Example:
Monthly debt payments: £500
devided by
Monthly take home: £1500
= Debt ratio of 33%
Write this number down, this is the number you will be trying to lower or at least maintain in the future! If you want, you can go into more detail and work out the exact percentage each loan, mortgage etc is and aim to lower those. You can consider paying larger amounts on high percentage debts in order to lower them for the future.
[…] your money can be a very hard task even for the more responsible of us out there. There are many money managment techniques which can help you manage your money better such as a budget sheet or a debt ratio.. both these […]
The are a lot of debt solutions out there for people who have a high debt ratio