How to get out of the red and save money: reset your accounts to save and invest

Spending more at the end of the year is fairly common, but it is necessary to get financially organized so your budget doesn’t suffer. Getting out of the red and raising money is possible, with focus, organization, and good investment decisions.

According to the Credit Protection Service, more than 62 million consumers have lost control of their debts and have overdue bills. This amounts to more than 40% of the country’s economically active population! A lot, right?

The good news is that if you do some minor financial planning, you can get out of debt and start saving to get a good start in the coming year.

How to get out of the red and save money: practical tips

Everyone knows that banks and financial institutions offer “simple” solutions to help get out of debt. 

However, these solutions, such as an overdraft or a loan, may become even bigger problems down the line. With the very high-interest rates, your debt will only grow and sooner or later it’ll spiral out of control

This is why we listed some steps for those who seek to organize their finances in a healthy way. Check these tips out if you want to get your finances in order sooner than later:

1. Map all your current debts 

Seeing that settling your debt and crawling out of a financial rut is the goal, the first step is to recognize the problem. This includes understanding what your circumstances are and how committed to getting out of the financial chaos you really are. The next step will be taking an action!

A good starting point should be a complete mapping of all your debts. The focus is on figuring out how much you owe, to whom, for how long, and the deadlines for paying the money back.

Add up all the debts and figure out the state of your finances. Most of us are scared of that, but in reality, it’s the only right way to start your journey toward financial independence.

2. Create an initial financial plan 

After analyzing your debts, it’s time to draw up a financial plan. You need to come up with a strategy to get out of the red and make money, right? Well, let’s start simple then!

You can start by identifying how much you earn per month and what you spend on fixed and variable bills. That way you’ll know where you are spending your money and why you are in debt.

Your financial plan should also include the amount that will be saved every month to get out of the red. In reality, it’s all basic math and shouldn’t be too complicated.

Your plan should also include goals and objectives you want to achieve, both long and short-term! Some may be paying for that electricity bill that you think about every night before you sleep, or that credit card debt that simply won’t go away…. Everything has to be well-defined and documented.

Therefore, the more efficient the planning of personal finances, the faster your debts will go away!

3. Swap the debts! 

During debt analyses, take the opportunity to analyze every debt thoroughly. As the amount of resources you’re working with is limited, ideally you should prioritize the accounts that must be paid first.

In strategic terms, it is best to pay off the debts with the highest interest rates first. This prevents them from rising too high. You may even be able to negotiate the debt or even take out a loan with lower interest rates to pay it off. The strategy depends a lot on the specifics of your case, but with some research, you might find a better option than the one you’re currently paying off…

4. Negotiate conditions to get out of the red 

You already have a defined plan, you know which debts to prioritize, and now it’s time to look for solutions on how to pay them off. A good way out is to try to negotiate with creditors. Often when negotiating the price of the debt, it decreases or has less interest.

Organizing your finances is important because it allows you to find how much you can effectively allocate for payments.

You should also take note of your family budget because you shouldn’t commit to negotiating and then fail to comply. You cannot run the risk of further increasing their debts and losing credibility with creditors.

5. Build an emergency fund

There are several reasons why someone can get into debt and have trouble balancing their budget. Considering that unforeseen circumstances are one of the reasons for this situation, it is always a good idea to set up an emergency reserve fund.

This is a way to protect yourself from unexpected problems, such as losing your job or renovating your home. As a result, you are less likely to go into debt to offset these contingencies.

In addition, as the reserve requires economy, being able to create it demonstrates that you have succeeded in controlling your budget.

Make sure a portion of your income goes to the emergency reserve fund. Being consistent in your contributions is key. 

Oh, and the best thing is – you don’t have to throw all your money in! Usually, smaller daily payments do the trick!

6. Start making investments

Investment is a great option for those who want to get their finances in order. 

A healthier financial life requires a lot of organization, as well as a solid income to handle all the expenses coming your way.

Investing the money you save is the best thing you can do with it. After all, inactive money loses purchasing power with inflation.

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