Making a Budget to Get Out of Debt
Friday, March 5th, 2010For people who have been living under loan debt for a long time this could be the worst time to be worrying about where you are going to be getting the money to pay it off. As people lose their jobs left and right, it can be harder to live on the money you have now. This is why I suggest making a budget and sticking to it. This is a very easy process and it can help you pay off your loans faster.
The first thing you will want to do is grab a copy of your bank statement and become familiar with what you are spending each month and what you are bringing home. Your ideal budget should give you 60% of your income for the essentials such as groceries, utilities and housing. If you are spending a lot more on this, you may want to look into why. There are many easy ways to bring some of these things down, such as buying raw ingredients and using them to cook more often, or turning off lights and appliances when you are done in a room. This may not lower your expenses down all the way to 60%, but it should help out some. From what you have after that, try to set aside 10% of your income for paying back loans . Knowing that you are setting this money aside and that you are not allowed to touch it can help a lot psychologically in not spending that money on the fun stuff. The next 10% is set aside for short term savings for irregular expenses such as gifts for people, property taxes, magazine subscriptions, etc. Anything left over can be spent on fun stuff such as movies and going out to eat.
If you spend your money wisely you can get out from under debt fast. That does not mean that problems won’t emerge and you should be prepared with some extra savings to take care of them right away.