Setting A Budget to Get Out of Debt

Jun 15

Setting A Budget to Get Out of Debt

When you’re still young and feeling frisky, spending money you don’t have and buying things you don’t need and can’t afford for some reason seems smart. However when the bills come due and the money dries up the fun has stopped. You need to make a plan to pay off these bills and get out of debt. But what is the best way of doing this? How does one set up a budget to get out of debt?

Here are four essential tools for debt management and debt elimination.

Prioritize Your Debts: First things first; you need to know how much you owe and to whom. By prioritizing your debt you are saying which bills are going to be paid off first. The logical thing to do would be to pay off the most expensive debts first. What does that mean? Go over your statements for your credit cards and find out what your interest rate is on the accounts you have.

The balances with the highest interest rate (34.9%, 29.9%) are generally the ones you want to pay off first. If you’ve got epic interest payments that are eating up most or all of your minimum payments each month, call the card directly; explain that you’re trying to pay off your debt and see if they can’t lower your interest rates. Most cards will do this for customers who aren’t excessively truant with their bills.

Analyze Your Life: Part of your debt management plan needs to be a change in how you got to being this way in the first place. Is it your penchant for venti, quad-shot, extra-cinnamon, iced caramel macchiato which got you into this quandary? Do you have a weakness for fancy shoes? Weekend trips to Atlantic City? Whatever the spending is that got you here, curtail it; at least until your debt management is put more fully under control.

Low-Hanging Fruit: Another tactic to get your debt management under control is to pay off accounts with smaller balances first. This may seem antithetical to the first rule but if you have some accounts with low balances, paying those off and closing the accounts provides a feeling of accomplishment which can be helpful.

Stick to It: You must stick to your debt management plan and see it through.

Debt and debt management is a problem for many people. Follow these steps to attain debt utopia.