Many of us out there find it a chore to make a note of our everyday spending. Over time, as our financial responsibilities grow, it is little surprise that many of us find our debt spiraling out of control. Credit cards are readily available to most of us today, and spending on credit cards is no longer seen as borrowing money. Most of us have credit cards as a form of lifestyle, earning points and other benefits on the different rewards offered by each card.

However, the fundamental concept of credit has not changed. We are still spending money we do not have now, hoping to be able to pay back later. But with more and more credit cards, it becomes a nightmare to keep track of our spending. At the end of the month, we suddenly find that we have spent more than what we can pay and debt begins to build.

If you are beginning to accumulate a debt or you are in debt, the first thing you should do is to stop spending on unnecessary items right away! But solving your debt problem is not just about paying them off. This is the one of the most serious misconception that people have about debt and people pay off their debt only to fall into another one.

Falling into debt is not a one time problem. The real problem lies with a lack of system for personal financial management as well as diligence. Without solving the root of the problem, you will always fall back into debt and face another round of stress in trying to pay them off.

So how should you begin to cultivate good personal financial management?

1. Solve existing debt issues

The first thing you should do to bring yourself back onto the right path is of course to solve existing debts. Immediately stop buying on credit, especially for anything that is unnecessary. This will prevent more debts from accumulating. Sort out all the outstanding debts and see which require you to pay first, negotiate for extension on some if possible. Prioritise your debts and pay off those which are due first followed by those which are highest in interest rates.

2. Start a personal accounts book

Make it a good habit to record all your everyday spending. It may seem troublesome in the beginning, but once it has become a habit, there’s nothing so difficult about sitting down to record your spending for the day with 15 minutes at night. With proper records, you can quickly monitor all your spending from multiple cards at a glance, therefore you can forestall and potential over spending before you actually do.

3. Collate all your liquid cash in a single current account

Instead of paying your credit card bills from various accounts, collate all your cash into one single current account. Use this one account for all daily transactions and paying of bills. It is the best way to have an overview of all your cash flow and to control it.

4. Cut down on the single biggest spending

Categorise your spending into several board groups like food or transport, etc. This should be easily done if you have been keeping records of your spending. Look for the group that constitute the largest amount in your monthly spending. Try to reduce the amount you spend in this group. It is easier to reduce spending significantly by targeting a large amount. A small fraction saved from the large amount will be a lot more than trying to scrimp from various small spending amounts.

5. Pay yourself first before spending

Set a savings target for yourself and plan how long you should take to reach this amount. Every month when you get your pay cheque, take out a portion to pay this savings plan first. Then with the remaining amount, spend within your limits. With a savings amount, you have a buffer to rest upon even if there is an unexpected high amount of spending in a month.

When all the above is done, you should have paid off existing debts, set up a system to monitor and control your own spending and have slowly began to build up some savings. Once you have mastered the basics of personal financial management, you should be debt free, at least more so than before. However, being debt free is not sufficient.

There are many other things to be considered in financial management, such as insurance coverage and retirement plans. But first, be disciplined and work towards being debt free for good.