How To Budget Your Way Out Of Debt Starting Today
Getting Debt Free, Starting Today
In today’s post, I am going to share you with you my favourite tip for getting out of debt.
Budgeting is the best way to get yourself out of debt, especially if you don’t have a way of earning additional income.
By creating the perfect, realistic budget plan, you can dramatically lower the time it takes to get out of debt. You can focus on clearing it without risk to yourself. You don’t have to change your job or create a whole new income stream (although this is definitely a whole other way of working your debt quicker!).
In this post, I am going to show you the budget plan I use to get out of debt. You’ll be surprised how simple it is, and how much of a difference it will make!
I started off 2018 in just over £20,000 debt and I am looking at less than £10,000 to pay and should be debt-free by the end of the year. I cannot tell you how amazing this is going to feel!! I want to share my tips to help you because I know the stress and worry debt causes.
I hope you find this useful, please let me know in the comments below if you like these kinds of finance-related posts!
*Brief disclaimer – I am not a financial advisor, nor am I qualified in any kind of financial or legal position. If you require professional advice, please seek it as soon as possible.*
The Budget Plan – Where To Start
It might seem like an overwhelming task, but creating a budget plan is the best way to get debt-free.
It is also a lot simpler than you might think!
To get started, you need to have your banking app handy, or at least a list of the bills you have to pay each month, and the amount your salary is each month.
I find a clear double page in my notebook, and then write all of the bills I have to pay each month first, on the left-hand side of the page.
I’ll have my house bills here, such as rent, council tax and insurance. I’ll also have my personal bills, such as phone contract or car payments. Use your banking app to make sure you get the exact amounts. If this isn’t possible, try and over-estimate to make sure you are allocating enough.
More is better than not enough.
In this area, include any payments that you are already making towards your debt. If you are paying the minimum amount, then put the average amount this has been. If you have a set fee, then you’ll, of course, know what this is.
Leave a space and then write down all of the things that you need to spend money on, but that isn’t a direct bill. This would be things such as food, petrol, and other essentials that vary. Be as honest as possible here; use your banking app again to make sure you get an average figure that is realistic!
There is no point in creating a completely unrealistic budget! No-one is going to see it, so you’re just covering up the truth to yourself for no real reason.
You will feel much better if you are honest about your current position, get everything out in the open and be able to create yourself a realistic plan that will actually get you out of debt.
Once you have all of this information, you can then see the rest of the money that you have leftover.
Using The Budget Information To Clear Your Debt
At this point in the budget, you will be able to see how much money you have left.
On the right-hand side of the page, figure out a budget plan of how you are going to utilise this money.
My advice is this: use this money in three ways.
- Set an amount aside to put towards fun things/socialising. This should be a small amount, that enables you to have some kind of enjoyment in your life! It’s an important factor and shouldn’t be ignored. Maybe £10 a week for the cinema or a coffee and cake.
- Put a set amount towards savings. It’s important to create an emergency fund that will protect you if something bad happens.
- Pay the rest towards the debt! If you have more than one loan/credit card then decide whether to put it towards one of them, or spread it across all of them.
When it comes to paying off more of your debt, then this is a personal decision, based on your own personal circumstances.
I would advise hitting the debt in order of the most pressing one first. If you have a high-interest rate on one loan, then I would say go for that one with all the spare funds you’ve got.
If you have a time limit before your 0% interest rate runs out, then get that one paid off as soon as you can.
Make choices based on the long-term, not just the short-term. Get advice from your bank or a financial advisor. You might even be able to visit the Citizens Advice or the National Debt Line if you’re from the UK.