If you’re feeling overwhelmed by debt, try a few of these budgeting tips in order to regain control. Once you have taken a few steps to get out from under your debt troubles, you will feel much better. Even small steps make a difference. It’s also a good idea to consider asking for help from a debt counselling agency like Debt Rescue.
Face Your Debts
Your largest debts are likely to be credit card interest rates. This is – believe it or not – good news for you, because most of the purchases made on credit cards are discretionary. Look at all your credit cards and take on the one with the highest interest rate charges first. Use a 0% interest rate balance transfer deal if it will help – but take care to ensure you are aware of the fine print. Channel any and all spare money onto this card until it’s completely paid off – then cut it up.
Get Your Expenses Under Control
Go through all your bills and statements and list out your monthly expenses. Put a line under the ones you know are not essential – like takeaway coffee (apparently giving this up entirely can save you up to $1000 a year), and store-bought lunches ($4000 a year). Decide to skip a few of these a week and redirect those savings into servicing your largest debts. In fact, see if you can cut all your non-essential expenses to the bone for a few months until your debt is handled. You can always re-introduce some of your favorite ‘vices’ once you are on top of your debt – and you can get there.
Create A Household Budget
You will probably need both a debt reduction plan, and a household budget for when your finances are back in the black. Without a budget, you might end up overwhelmed again, so take the time to plan a little around what you intend to do with your incoming money, and set some limits around your outgoings – and stick to them.
While it might be a stretch to say that budgeting can be ‘fun’, it does encourage your creativity. Consider themed dinner nights at home as a change from going out to dinner; invite friends, have them each bring a plate – and stay in. You’ll save on food, drinks, transport, etc. Consider borrowing free movies from your local library instead of the DVD store, or paying for a download. When it’s vacation time, think about low budget options like camping rather than an expensive trip to Seaworld.
Once you have built a little debt-reduction momentum, don’t stop. The more cards you pay out, the more spare funds you will have to pay the other debts down faster – you will be amazed at what you can achieve with a little self discipline and focus. Once you’ve cleared all your ‘bad’ debt, consider redirecting some of those freed-up funds into a savings account, or into your mortgage. Possibly even an investment account. Without debt, your financial possibilities multiply exponentially.
Feeling trapped by debt can become debilitating if you let it. The first step is to take back some control, and getting on top of your budget is a good way to give this back to yourself.
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What are your favorite budgeting tips? Share them in the comments box below.