You can’t effectively manage your finances until you know what all your incoming money and outgoing expenses are. Your income is simply how much money you’re bringing in each month. There are 3 types of expenses: fixed, variable, and periodic.
Fixed expenses are costs that don’t change month to month, like your mortgage, car payment, and insurance premiums.
Variable expenses are consistent in the frequency of payment, but the amount may change. An example of a variable expense would be a utility bill, which you know you pay each month, but the amount you owe varies based on your usage during the billing period. A grocery bill is another common variable expense.
Periodic expenses are the toughest to account for, because they’re not consistent. It could be a cost that’s regular but infrequent, like annual taxes, or something completely unexpected, like auto repair or a medical emergency.
It’s important to sit down and work out all the details so you understand how much money you have to work with, where you’re spending it and in what amounts, and where you can cut back. By building out your budget, it’s easy to spot opportunities to save extra money and pay off debts.
Self-discipline is key to ruling your financial future. Whether that’s saying “no” to new debt, putting off an unnecessary purchase, picking the right kind of loan, or choosing how to pay down your existing debt, remember that you are in control of the financial decisions you make. Nobody is going to do it for you. You must take charge.
Sometimes, it helps to have a little accountability and extra support. But sometimes, you’re better off if you take care of things on your own. Credit counseling and debt settlement firms are certainly an option as you try to manage your debts, but usually the answer is simply being fiscally disciplined and determined—and that’s free.
The best way to build your credit and get out of debt is pay on time consistently. By being responsible with your finances, you can get yourself out of debt—and stay out. You can ensure that your payments are on time and avoid any late fees by setting up automatic payments with long- and short-term loan providers.