The days of living from pay cheque to pay cheque should be long gone. But if you’re drowning in debt, it’s easier said than done, isn’t it? How can you claw your way out? I know I have touched on this subject before, but after speaking with a group of potential investors I recognise that I cannot say enough about managing money prudently. Debt often overwhelms people, and it’s so easy to mount and so hard to get out.

The first step is, of course, to recognise that you must start spending less than you earn. Living above your means is a phrase people don’t like, but we can’t sugar-coat it: This is what got you in debt in the first place: Your costs surpassed your ability to cover them. In other words, your liabilities are more than your assets.

The good news, though, is that there is no better time than the present to assess your financial situation and lay out a plan for success.

Know the true state of your finances

Figure out your net worth. If you were to sell everything you own — cash, investments, real estate, your car, even jewellery — and then use the proceeds to pay off everything you owe, what you’re left with is your net worth. If your net worth is positive, then you are not in fact drowning in debt, and all that is required of you is to move some things around to get on a firm financial footing, leaving you free to better organise your affairs going forward. If your net worth is negative, however, this means you’re, in fact, in poor financial health and you need to devise a plan.

Visualise to conceive it

If creating a financial vision board sounds a little too New Age-y for you, go old school and simply create a bulletin/chalkboard that you fill with images and ideas, visual reminders about your financial priorities. This will help you to focus on achieving your goals. Don’t simply commit them to memory. The act of writing down your objectives has the ability to help you bring them to fruition if you keep checking on them. If you are confronted with your commitment to pull yourself out of debt and begin generating wealth, it will be very difficult to fill your online shopping basket with more outfits that you really don’t need.

What’s your spending mantra?

Credit cards, like the proverbial “lying lips”, are a very present help in the time of trouble. Having one (or several) isn’t licence to flash them about recklessly. A credit card isn’t free money; tell yourself this constantly when you’re tempted to use one for something non-essential. Every time you use your card you are actually borrowing money from the bank. It is recommended that you only spend what you can replace in short order. Keep credit use below roughly 30 per cent of total credit available. So, use only when absolutely necessary, and only if you can pay off the total balance each month. There’s nothing like accumulated interest and minimum payments to keep you indebted. Be selective about the cards you use; they must incur some additional benefit, like cash back, travel miles, insurance, etc.

Re-examine your budget

Any financial advisor worth their salt will encourage you to make a monthly budget and stick to it. This is absolutely essential to help you eliminate unnecessary spending. An area of the budget that often gets overlooked, however, is leisure. Yes, you must be laser-focused on saving and keeping debt at bay, but you must not seek to completely eliminate spending on downtime. When you feel you’re in a financial straitjacket and not enjoying your life and reaping the rewards of your hard work, that’s when backsliding is prone to occur. Apply the 50/30/20 rule to your budget, with 50 per cent of your income going to expenses, 20 per cent allocated to savings, and 30 per cent to something that makes you happy ( getting my nails done makes me very happy), like a socially distanced trip to your favourite water park, for example. If you are not here yet, do not panic; at least you now have a goal and something to work towards.

Check out www.jncb.com/wellnessblog/2020/08/03/lets-talk-about-budgeting/NCB-Budget-Tool.pdf to help you along.

Understand your savings categories

Savings are a must. Be clear, however, on the distinction between a dedicated savings account as against money thrown into an account that you dip into occasionally. Is this dedicated account separate from your emergency savings fund? And if so, what constitutes an emergency? Certainly not for a pair of kick-ass shoes that are on sale online. Emergency savings, FYI, should be there for: job loss, car issues, medical emergencies, home ownership/repairs, natural disasters, and such. Consider putting in place a standing order to transfer funds to your savings account as soon as your salary hits. If you never see it, it’s harder to spend it.

Aim for physical fitness

You’re probably wondering what this has to do with anything. I’ll tell you. Everybody talks these days about COVID-19 weight gain; the opposite has happened for me. I’ve actually lost weight. I know, right? Exercise is my outlet, and so I get up and run a 5K every morning, then do some resistance training. When I do this, I fire on all cylinders; when I don’t, everybody knows. The truth is, the habits and discipline associated with an exercise regime translate to good money management. Financial goals, like exercise goals, are easier to reach with discipline. Something about working up a head of steam ramps up your mental focus and your financial game.

Start investing now

Congratulations! You’ve begun to see your way out of debt and can now turn your attention to the real work of wealth creation, which involves getting started on the exciting world of investment to include real estate, stocks and bonds, portfolio diversification, exchange traded funds, and so much more, which allows your money to create more money for you.

Monitoring your personal finances can seem overwhelming, but it is a habit that you can cultivate and which requires commitment and discipline. Begin to do it now. Once you have mastered it, teach your siblings, children and friends. It is the only WAY to create generational wealth.