Moneywise24 Personal Finance

I found myself in a typical situation yesterday, one that I have been trying to avoid since 2009. I was going over my checking account balance, and discovered a missing 100 Euro amount. Something wasn’t right, I felt like someone had stolen it.

I took a good look at my finances, and found an incredible amount of 100 Euro booked to the category ‘to go products’; I use this category for all unnecessary food and beverage items, which are bought quickly when I am going from A to B. Back in 2009, I just bought an item when I felt like it. I might have bought a coffee to go, even knowing that I’d be home in 2 minutes. I still do it every now and then, but usually only in the morning on my way to work, knowing that I’ll be traveling for an hour or so. But now, 100 Euros extra! An yes, having taken a quick glimpse in my ‘to go products’ category, I find the criminal: Starbucks.

I have to admit one thing though: Starbucks has launched a great and unique concept. They actually manage to sell qualitative, but overly-priced food and beverages. I am not sure about pricing in the States, but at Starbucks a muffin costs nearly as much as a sandwich at the bakery store. And I know a muffin will only compensate for that hungry feeling for 30 minutes or so. Still, their concept is so good, that it keeps drawing me inside when I pass. Yes, the frappuchinos are great, and so is the white coffee mocca, although I don’t want to know how many calories are in there.

As a rule of thumb, I always eat something when I go to the supermarket; it prevents me from buying all that food that I don’t need, and I can’t eat it all before it goes bad anyway. Now, I have to eat and drink before I leave the house, because Starbucks is waiting for me around the corner.

My action for change: every time I think about buying something at Starbucks, resist the urge and put 3.50 Euros to the side. When it reaches 100 Euros, invest the money.

Once I think about it… even if I’d spare myself 3 coffees at Starbucks each week, that would be 546 Euros per year that I could invest. At an annual rate of 8%, that is 66,801 Euros in 30 years, or by the time I retire.

Possibly Related Posts:

• Markets Plummet As The Fear On Europe’s Debt Crisis Dominates
• Rising Stock Markets, But With Caution
• The Benefits Of Periodical And Automatic Investing In Mutual Funds
• The Top Reaon Why You Should Pay Yourself First
• Passively Investing In Turbulent And Insecure Times

Being in debt has become quite normal in today’s world: people buy real estate and take a mortgage, a loan is taken in order to buy a car, a television or the newest Playstation is quickly bought with the credit card, and this month’s phone bill seemed to bit slightly higher than usual. Actually, debt does not have to be all that bad… if it planned and under control.

And this is where problems arise. Often, debt is not under control. It seems to increase, a second credit card is being applied for, and it seems like a never ending story, until at a certain point the debtors want their money back, and then…

uh-oh.

The worst that can happen is when the complete existence of a person is about to collapse completely; real estate is confiscated by the bank, credit cards are being blocked, in many countries debtors have a certain right to claim a part of the net salary of the individual directly from the employer, and the story goes on. The worst that can happen is to file for a personal bankruptcy. However, if you have not yet reached that stage, perhaps there is still something that can be done.

A few simple things might help to reduce debt. Reducing debt is never fun, but it is the price to pay.

Track your income and expenses

The very first thing you need to do is to track your income and expenses by the cent; it will make your cash-flow visible, and it will allow you to plan and make a budget. Assuming that you have money to spend, the easiest way to keep book is by using Excel, or another spreadsheet program. For each transaction, you will need to need to make an entry in your ledger, so that by the end of the week or month you can it all up. You can then compare the totals of your expenses with your income, and also with the budget you created.

Save where ever you can

Rigorous expense reduction is the next step. Here, you need to know the exact difference between needs and wants, and it is absolutely essential that you concentrate on what you really need for a living, and how you can make substituations in order to live more cheaply. For example, you may want to investigate how Skype could help you as an alternative to stay in touch with friends, you may want to use public transportation more often, or you may need to give up your daily visit to Starbucks.

Hire a debt consultant

In many countries, there are debt consultant who are either subsidized or fully paid by the government. Find out if this is the case, and hire someone who can help to get you out of debt. Firstly, this person will give you a very precise picture of your current situation. But more importantly, he is also an independent consultant, who is able to engage in negotiations with debtors if applicable. By hiring a debt consultant, debtors will see that you are willing to do everything to reduce and pay off your debt, and thus they are more likely to engage into an agreement.

Do not create new debt

Don’t overdraw your bank account, don’t take any new loans, and destroy your credit cards. The last thing you need is a new loan of any kind.

Assess your income

If being unemployed or having a very low income is one of the reasons for being in debt, you may want to assess your current position; what do you have to do in order to get a job, or a better paid job? Do you need education? More experience? Or perhaps there are already some opportunities for the taking. Pursue your career if you can. Browste the job postings, and build on your network.

Reducing debt is not an easy task, especially in a world where money seems to play such an important role, and where companies want to motivate us to spend more of it via sophisticated marketing strategies. However, being debt free is something to look forward to, and in the end: there are any more important things than money alone.

Possibly Related Posts:

• How Much Tipping Is Accepted in Europe?
• 3 Easy Ways To Save Money During A Weekend Trip (to Prague)
• The Top Reaon Why You Should Pay Yourself First
• One reason why you should not pay your bills immediately
• How to Save Money on Lodging with Couchsurfing