Budgeting Your Way Out of Debt
Although the concept of budgeting may seem daunting or unpleasant, it will help you assess your financial situation and examine your spending habits. A budget is an imperative tool in addressing financial issues, successfully planning for your future and maximizing how you allocate your cash. Regardless of your background, budgeting will benefit you by providing you with great insight into your finances. If you are facing serious debt, the first thing you must do is establish and commit to a monthly budget to curb excess spending.
How Should I Budget?
Different strokes for different folks, there are numerous free and paid budgeting tools available. Depending on what you’re comfortable with, you can easily download a template online, purchase a notebook, use free tools from your banking institute or utilize a mobile app. Below is a list of some popular budgeting resource.
- Banking institute: Most banks have automated tools that are attached to your accounts. These tools pre-populate your actual finances within a budget. An example of such a tool is Wells Fargo’s My Money Map.
- Mobile apps: There are numerous free and paid mobile apps that work in a similar way as the free banking tools. Some of these apps are very powerful and may have more features. Here are a few of the more popular products – Mint, You Need A Budget (YNAB) and MoneyWise.
The key to budgeting is to understand your spending habits. Below is some insight on what you are trying to accomplish:
- Control spending; spend less than you earn
- Identify and eliminate wastage (cancel rarely used memberships, downgrade certain services, curb reckless spending etc.)
- Use excess money towards eliminating debt, creating savings and investing
If you are a very organized person with great discipline, you may be able to get by without following a strict budget and an occasional audit of your finances will be good enough. For others they may need to stick to a strict plan to stay on top of things.
When Budgeting Isn’t Enough
If you are still experiencing financial issues after cutting spending and following a strict budget, it may be a good time to contact your creditors.
Contact your Credit Provider
If you are having difficulties keeping up with the monthly utility bills, credit card bills, or loan payments then the first thing you need to do is contact your service provider or lender to discuss your situation. You need to remember that you are not alone and that there are many other Americans facing similar problems and they are accustomed to these calls. The sooner you take action, the easier it will be to manage your situation. If you are proactive, then you can prevent a small problem from escalating beyond your control. Many companies even employ specialists who are dedicated to helping their customers assess their financial situation and determine what actions can be taken. These specialists will work with you to alter your loan payments where possible and help you to develop an affordable payment plan. The options available to you depend on the cause and estimated duration of your financial hardships.
If you don’t feel comfortable contacting your creditors or have tried and are getting nowhere, you can enlist the help of a professional to work on your behalf. Financial counselors provide a free service and are experts in assisting people with financial matters.
Remember, you are not alone during your financial hardships. There are free and confidential services available to help you gain perspective and explore the options available to you.
- Financial Counseling – Several community organizations and government agencies offer free services to help you with financial hardship.
- Legal Advice – Many of the same community organizations and government agencies also provide free legal advice regarding your finances and available options for becoming debt free.
Make a Commitment
Establishing a budget is the first step towards a financially secure future, but it requires dedication and a commitment to monitor your spending habits. Once you have a realistic outlook of your financial situation and goals, there are many options available to help you regain and stay in control of your finances. Small, positive adjustments to your financial habits will have a huge impact on your future.