, Contributor

Shari Small

One has to be prudent with the handling of finances. Even very experienced players in the game of budgeting, have to be careful when making financial decisions. For those persons dealing with the daily task of maintaining shoe-string budgets, where one wrong move could spell disaster, proper planning is essential and could be the difference between prosperity and financial suicide.

Minimise/eliminate credit card debt

While we can all attest to the need for acquiring credit cards, we need to avoid the 'swipe and go' technique, which sees you usually spending more than what was originally intended. If you are regularly faced with high credit card debt, that is usually a strong indication that you are living beyond your means. Credit cards should not be seen as available funds that may be used to cover monthly expenses. If you find yourself using the cash advance on one card to pay off another, then you're spending money you don't have. Major cutbacks are necessary at this point.

Prevent the escalation of fixed-living costs

Far too often, people complain about not being able to afford some of the basic essentials, needed during any given month. However, a closer analysis of what these basic needs are may reveal that they are not so basic after all. Many times we hear of the struggling young professional who lives from pay cheque to pay cheque, while maintaining that they only purchase 'necessities.' The list of necessities might range from:

$30,000 for rent

$7,000 for groceries

$7,000 for utilities.

While these figures may seem manageable on their own, they are often combined with figures of:

$25,000 for car payments

$10,000 for entertainment.

When faced with the overall figure of $79,000, it quickly becomes difficult to maintain. Further trimming is necessary in a case like this one.

Don't borrow your way out of debt

If your plan at the end of this month is to borrow some money from a friend to pay a bill owed to another, stop and consider your options. This might be the start of the revolving loan syndrome that sees you constantly shifting the debt around, rather than eliminating it. There are healthy ways to reduce debt such as obtaining a debt consolidation loan. You may also consider another option of tightening your belt a bit further this month, and actually pay the debt out of pocket. Try tracking your expenses for three months to ascertain your spending habits. This will aid in the development of a budget that leaves room for debt repayment and investing.

Start an emergency fund

Unforeseen occurrences can happen at anytime. It would, therefore, suit you to prepare for the inevitable. Having sufficient cash in a flexible accessible account is one way of doing this. You could also consider reserving an amount on your credit cards as a temporary supplement to an emergency fund. This, however, should be considered as a last resort. These options can assist in withstanding some forms of financial setbacks such as sudden illness, loss of job or car trouble.

The tips listed above are not exhaustive but should be merely considered as a few ways to guard against future financial problems. Financial suicide can be avoided by implementing an effective and efficient method of money management.

Begin today by tracking your expenses for three months, and see where some expenses can be eliminated or reduced.

Shari Small is an Investment Adviser at DB&G's Kingston branch. To further discuss investing and the many options we have available, contact her at info@mydbg.com or toll-free at 1-888-CALL DBG.