Budgeting for debt means you methodically eliminate your debts by planning for it.
Budgeting is often given a wrong meaning. Many people view it as something that puts a stop to every fun thing in life. They mistakenly think that a budget restricts you from eating out or shopping. In short, you’re devoid of any enjoyment if you follow a budget.
However, it’s not like that. At all.
Actually, budgeting helps you to spend money on the things you want. It helps you to take control on your finances and get your financial life on track.
Budgeting For Debt
First, let me ask you a simple question – What is budgeting?
Do you know the answer? Well, it’s quite simple. Budgeting is a list of your spending; that is, the complete list of items with the amount you spend.
A realistic budget is what you can follow almost effortlessly and still save a substantial amount every month.
It can’t happen overnight. Some months of effort will help you create the perfect realistic budget for you and your family.
Now, it’s time to sit with your budget worksheet.
Calculate Your Income From All Sources
It is easier for you if you earn only one paycheck. But, if you have multiple sources of income, then you need to take into account your overall income.
Plan All Of Your Expenses
While planning your expenses, first of all, list your needs. It is a good way to manage your needs within 50% of your income.
Next, allot 20% of your income to save. If you don’t have an emergency fund, devote 10% of this amount to the emergency fund and remaining 10% to repay debt.
About 30% you should allot for your wants but when you’re paying back debt, you can use this amount to repay debt quickly.
How Budgeting for Debt Works
When your intention is to budget to pay off bills, you need to pay extra attention to your budget plan. It is almost the same, just you have to set an amount that you’ll save and use to repay your credit card debt and other bills.
Here are some tips to do so:
Change Attitude And Separate Needs From Wants
Often we can’t distinguish between needs and wants; but, when our objective is to budget to pay off credit card debt and save, we should include our needs and not wants in our get out of debt budget worksheet.
So, first list all your needs and decide an amount to put towards paying off bills, then set an amount to fulfill your wants.
Assess Your Budget And Mark Things You Can Do Without
For the time being, you can decide to have the cleaning service twice a month instead of every week or you can cancel your gym membership and enjoy a run at your nearby park.
Likewise, assess where all you can save.
Plan Your Debt Budget
Calculate how much you need to put towards paying off debt within a certain time. Treat that amount as your necessity and plan your budget with the remaining money.
When you get extra perk at your workplace, include that amount to pay off debt. This will help you get out of debt quickly.
Tips To Repay Outstanding Debt
Check out these tips to repay outstanding debt:
Choose A Debt Repayment Plan
You need to choose a suitable debt repayment plan to pay off your debts. One way to do so is to make minimum payment on all your bills and choose a debt account where you’ll pay extra.
It can be the debt with the lowest balance or one with the highest rate of interest. List your bills from the lowest balance to the highest or from the highest interest rate to the lowest one.
Once you repay one debt, use that extra amount to repay the next one in your list.
Consider Debt Settlement To Repay Debt Quickly
If you want to repay debt quickly, you can opt for debt settlement. By choosing this method, you can solve your debt problems by paying less than what you owe.
You can enroll in a debt settlement program or negotiate with your creditors on your own to reduce the outstanding balance.
Practice frugal living
Frugal living helps you to save a decent amount every month. Start couponing and use your coupons to get your grocery at discount rate. Make your own coffee and carry it while you drive to work. Do this and calculate how much you’re able to save after a month.
Get A Part-Time Job To Earn Extra Money
One of the ways to repay debt quickly is to earn extra cash. You can opt for a part-time job. You can also browse online to look for opportunities to earn extra at your leisure time.
Also, revisit your budget from time to time and make changes as required.
So, follow all these things and plan a realistic budget to repay your debt as fast as you can.