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How to Budget – Income Management through Budgeting can help pay off Debt

February 7th, 2006

How to Budget – Income Management through Budgeting can help pay off Debt

Every little bit counts

There are two ways to get more money to pay off debt, one way is to stop spending as much and the other is to make more money.  The reality of what got a person into debt in the first place was likely due to a lack of budgeting each month.  Even if a person did make more money it still does not guarantee that they will live within there pay check.  Sometimes unfortunate events like medical bills can creep in,  but with budgeting in place it can help to prevent you from coming up short for these unexpected events.

 

Budgeting help is available through financial planners.  If you have a hard time coming up with a budget on your own, you could seek advice from a financial planner to help make a budget for you.  This will not mean that you won’t have to do any work in helping to figure out the budget, but it may help you make the right decisions along the way.  It also does not mean that you will not have to make an effort to change the situation you are in, consider the financial planner as guidance.

A budget sets limits on spending and also encourages planning too.  People that do not sit down and calculate there living expenses may be in for quite a shock.  By understanding were the money is being spent, it may help to trim expenses here and there to make a few extra dollars to pay off a debt on a credit card.

 

Not only is a budget good for knowing how much you spend, it also sets you up for starting a savings account in the future.  If you don’t have 5 – 6 months of living expenses saved up, it is unlikely that you are in a secure financial state.  It is the lost job, the unexpected medical expenses that often sneak into the picture and put us behind and into debt.  By being proactive for these events you avoid the downward spiral of getting in debt.  As many have experienced first hand that once you are in debt it is difficult to get out of debt.  That is why every dollar does add up, no matter how little.

The more debt you owe, the more interest you are paying, and this increases your living expense.  There is something awful about credit card debt, and now with the double minimum payments, it is really causing a lot of financial stress on families across the country.

 

To make a budget you should take notes of every bill that you pay in a month.  And all the purchase you make at stores and eating at restaurants.  If you have quarterly expenses like property tax, or heating expenses, you should find the yearly amount and divide by 12 months to find an average monthly expense.

After you look at the totals, ask yourself if the car insurance is at the best rate it can be at and if you can shop around for a discounted rate.  If you have a higher deductible on car insurance you can lower your monthly fees.  You could possibly be over insuring your home and your vehicles.

Drive older cars instead of buying a new one, that way you won’t be creating a new debt.  If you have an older used car, insurance rates can be less, registration can be less, and you don’t have a monthly payment if it is paid off.

 
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By Nicole Wilson
Best Syndication Staff Writer

Books on Lending

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Copyright 2005 Best Syndication                                            Last Updated Saturday, July 10, 2010 09:47 PM