Learn how to budget and eliminate your debt. Budgeting can be fun. Really! It’s not as hard or as much work as many people think and debt elimination is so fulfilling!
Do I Need To Budget?
Budgeting is for everyone no matter how much you make. Even wealthy people can use a budget and live thriftier, giving them more room for charity or investments. Lower-income families need a budget to make ends meet without having large debts or harassing collection calls.
(This post may contain affiliate links. If you make a purchase from one of my links, I may receive a commission or credit at no additional cost to you. For more info, please read my Affiliate Information Policy.)
Learn to budget and plan for debt elimination. Be a pro at your finances. #Budget #Debt #FinancialFreedom Share on XWhat Is A Budget?
A budget is a spending plan. You need to know all your income sources and everything you spend money on to create your budget. Once you know where your money is coming from and where it is going out to, you will have all the information you need to start spending money on the things YOU want to spend it on.
When working on your expenses, start with the absolute necessities: housing, food, utilities, and such. Read more about the different types of income and expenses here. A huge part of this planning is to record everything you spend. This can be tedious but is so necessary. It is possible you have a lot of money leaks that you don’t even think about such as convenience store stops or fast food.
Involve your family in your plan. Even children need to understand why you are creating a spending plan. Good financial skills are a valuable life lesson.
Your spending plan may vary from one month to another, so you need to review it each month. We plan for Christmas, birthdays, vacations, and other non-monthly expenses by estimating the annual cost and putting aside 1/12th of the total each month. I also have an article about Christmas presents.
If by chance you spend more than you bring in, you have no choice but to cut back on something or get a second job. Here’s a small post of recommended budget guidelines.
What Are Your Financial Goals?
One of our goals in budgeting is to pay off debt. At one time we were deep in credit card debt. That is SO stressful. We were doing so many things wrong! We didn’t make financial decisions together and spent more than we made. I was laid off from my job and suddenly we were down half our income.
We had to make drastic changes which took a lot of willpower! It took a while, but we were able to pay off large credit card bills and start a savings fund. Even now we try to live frugally. We don’t do without things and we travel often, but we budget for these and only use credit cards for the month – paying them off each month. We use the cards to collect miles and cashback. Cashback cards can be a good thing if you only charge what you can pay each month and do not carry a balance forward.
Paying off debt is such a good feeling! Our goal now is to pay our mortgage. We don’t spend all we make (by sticking to our budget 😊 ) and any leftover money is applied to our mortgage. As we say in the South, “Good Lord willing and the creek don’t rise” we will own our home in three years or less. That is worth taking lunch to work and not eating out as much as we once did. We rarely go to the movie theatre although I am a movie popcorn addict! It is just way too much money. Instead, we take advantage of TV movies. Our DirecTV is one thing we splurge on, so we take advantage of it.
Speaking of eating out, a money-saving tip is to use a meal plan. We plan our evening meals a month at a time, leaving one day a week to eat out. This saves on groceries and stress!
How To Pay Off Debt
If financial freedom is what you want, getting out of debt must be a priority. There are two major theories on paying off debt: snowball or avalanche. A snowball payment method applies extra payments to the loan with the lowest loan balance. The avalanche method applies extra payments to the loan with the highest interest rate.
The snowball method gives you some quick wins that give you “instant” gratification. With this method, you are paying your debts from smallest to largest. As you pay one, you take that payment amount and add it to the next smallest debt. It is nice to have fewer monthly bills coming in the mail!
With the avalanche method, you will save money in the long term because you are paying the highest interest rate first.
The answer to which one to use is Either One! They both have good and bad points but each one will accomplish your goal of being debt-free!
You may have tried budgeting and debt elimination in the past and failed but you can start over! Just have a goal that will keep you motivated.
To start your budget process, a simple notebook will work, or if you know how to use spreadsheets they work very well. I also have some printable budget sheets in my Esty store. You can print them as often as you need. Use as a full financial tracker: income, savings, debt, bills, and other expenses. There are 6 pages detailing over 80 expenses.
However you budget or pay off debt, don’t give up! It is worth the work.
Janet
Check my article on Frugal Living.
When my hubby and I got married we initiated a budget plan. It has really helped us throughout our marriage and definitely keeps us on track.
Thanks for your comment! That is so important when starting out and many people just don’t do it.
This is all the more important lately with prices going up, inflation going up, many people losing income. It doesn’t bode well, especially if you already have pre-existing debt.
“Good Lord willing and the creek don’t rise” – I like that expression! I hope you can call your house fully your own in less than 3 years and all the hard work will be well worth it.
Great tips, Janet!
Thank you Caz! I appreciate your comments!