First Steps: From Zero to Hero

The first step to gaining control of your finances is to get out of debt. Here are some practical tips to go from red to black.

By Melanie Lee

Face the music.
At some point, you need to face the harsh reality of the extent of your debt. Ignoring unpaid bills and avoiding creditor calls is no the way to deal with the issue.  Consolidate your bills and work out how much you owe in total.  An honest assessment of the debt situation is the start towards a debt-free life!

Get your facts straight.
Be fully aware of your resources.  Take note of how much income you have available each month, as well as how much you spend on household and personal expenses.  Do remember to provide a buffer amount of money for emergencies, as well as the amount of money you can realistically set aside each month for repaying your loans.  If you realize that you are spending more than you are earning, then you need to cut back on your expenditure.

Change your attitude.
Racking up a huge debt usually occurs over an extended period of time, which means that your approach to handling money needs transformation in order to for bills to be cleared.  Find a source of motivation to control your spending e.g. I want to save up enough money for my children’s education.  From there, cut down on non-essential purchases of things like clothes, CDs, DVDs and books. Before you buy anything, always ask yourself, “Is this something I really need?”

Prioritize whom to pay back first.
The rule of the thumb is: pay the largest amount you can on loans with the higher interest rates such as credit card bills.  However if you’re not sure how to allocate repaying your various debts, you can receive credit counselling from organizations such as Credit Counselling Singapore (http://www.ccs.org.sg/) – such organizations can even help you with coming up with a debt repayment plan.

Set a spending limit and track your expenses daily.
This is probably the most painful, but most necessary stage of reducing debt as putting a cap on your spending is what will keep you in check.  Try to plan your purchases within this spending limit – this process of consideration will inevitably lead to more prudent use of your money.

Pay in cash.
There’s something about the act of counting notes from a purse that helps women register clearly that they have spent money, as compared to merely whipping out a credit card.  At the same time, you won’t rack up more credit debt that will in turn reduce the amount of interest you would have to pay back.