Practical Budgeting Tips to Help Reduce Debt
A surprising number of people are battling substantial debts, and figuring out a way to get them paid off isn’t always easy. Typically, the best approach involves sound personal finance skills, as this prevents you from having to seek out other financial products as a potential solution.
While every person’s situation is different, there are certain pieces of advice that apply universally. If you are looking to reduce your debts, here are a few budgeting tips to get you started.
Stop Using Credit
Often, people who are in tough financial situations rely on credit to make it through the month. But typically, this approach just makes the problem worse. If you are serious about reducing your debt, the first step is to stop adding to it. Yes, it can be hard, but it really is the best way to get started.
Create Weekly Meal Plans
Food costs can easily spiral out of control if you don’t have a plan. One way to combat this is to create a weekly meal plan, including for meals away from home, and to stick to it. Set a weekly spending limit and use local store sales to help your money go further. This means you’ll have to adjust the menu based on whatever options are least expensive, but it is a necessity when paying off your debt is a priority.
Don’t spend any money eating out, as this is an unnecessary luxury when you are trying to get your debt under control. Instead, focus on meals cooked at home and pack lunches for work or school.
Review Your Regular Reoccurring Expenses
Your utilities, rent or mortgage, car and home insurance, cable, and phone service are all regular reoccurring expenses that should regularly be examined to see if better, less expensive options are available. You can start by calling your current providers and see if rate reductions are possible or if another product can save you money. Then, contact competitors and see if they can beat those prices.
At times, you may need to cut back on certain services, especially if you don’t use everything you are paying for or don’t need that package size. For example, if your current cell phone plan has unlimited data, and you only use 1 GB a month, a different option will save you money.
After you get these costs down as low as possible, list them on your budget to see if you can make those payments along with your required minimum debt payments and food costs. If so, you can then take a look at how to tackle your debts.
Focus on the Highest Interest Rate Debt
If you want to make progress more quickly, then you need to concentrate on your highest interest rate debt. Begin by creating a list of everyone you know, what the current interest rate is, and the required minimum payment. Consider the minimum amount, as it stands today, what you will pay the lender monthly going into the future, even if it decreases over time (as many credit cards do). This approach simplifies your budgeting, so you don't have to adjust your outgoing payments every month.
Then, identify your highest interest debt. This is the one that you should send any additional funds to (in addition to the minimum payment) whenever possible. That way, your payments save you more money in the long run, since you’ll pay less interest over time.
If you are already utilizing the above tips but are still finding it hard to balance your monthly budget or just can’t get ahead – there are other options. Professional assistance may be in order and there are both paid and free services for this. Results will always depending on individual situations and the ability to follow the plans created by professionals.
Learn more about different tactics and service on debt relief here. Whilst debt can be a stressful and difficult situation to overcome, with the right plan or assistance – it is achievable.