Any form of debt relief, whether it’s debt consolidation, debt management, or a debt settlement involves a person’s ability to budget. It’s all too apparent that a lack of budgeting skills is what gets many individuals into trouble with their finances. From a psychological perspective, it has a lot to do with good consumer spending habits and self-control.
If you lack either of those skills or neglect to learn them, you can easily be overwhelmed with debt that could take years to get out from under. It has been estimated that only about 1/3 of all U.S. adults are proficient at creating a personal budget and sticking to it. This is not to say that you can’t enjoy the money that you worked so hard for. You just have to use some common sense and be a little smarter with your spending habits. This is where the dreaded budget comes into play…and it should be accompanied by a good calculator for debt consolidation estimates and savings.
The Importance of having a Budget
In the simplest of terms, a budget has two basic objectives – 1) to help you financially balance your earnings with the money you spend and 2) to exercise better control over your money. Sounds simple doesn’t it? You can plan more effectively for the future when you know what’s coming each month and what’s being spent or going out. It will enable you to save and spend with a purpose. This will not only give you more freedom financially, it’s a key component of any debt relief program.
Basically, you’ll be able to spend more money on necessities without frivolously buying items that you really don’t need. The bottom line is that budgeting provides clarity on how your money is being spent and that in itself will keep you on the path to achieving those financial goals you’ve given up because you got overwhelmed with debt. Once you’ve learned how to budget more effectively, you’ll be able to start saving for more important and long-term goals like a home, new vehicle, or even an emergency fund.
5 Steps to better Budgeting
There is nothing that makes a person feel hopeless as much as being overwhelmed with debt. Here are 5 steps that will enable you to budget better:
- Assess your current finances and organize your debts
- If possible, consider getting a debt consolidation loan or negotiate with your creditors to lower the amount of interest you pay each month
- Lay the foundation of your get-out-of-debt plan by creating a challenging, yet realistic monthly budget
- Once you’ve established your budget and get-out-of-debt plan, STICK TO THEM
- Start setting your financial goals and keep track of your debt repayment progress
Most importantly, be frugal in your spending and by all means be patient. Remember, it takes time and effort to become debt-free. However, that means that you need to start the process of debt consolidation and relief as soon as you can start. Not only will it help you pay off debts but put you back on the path of financial stability.