How to Use a Budget to Eliminate Debt

Sometimes debt is necessary to get the things we need. Other times it helps us obtain things we want. But all too often, consumers get in debt over their heads, and they have trouble paying it off. If we catch a debt problem early, we can often handle it on our own. This is much better than having to go through credit counseling or bankruptcy. We can often make simple adjustments to our budgets and use the money we save to pay down our debt. Read on to learn how to use a budget to eliminate debt.

Difficulty: Moderate

Instructions

Things You'll Need:

• A budget

1. Make a monthly budget if you don’t already have one. Include all of your monthly bills, as well as any other regularly occurring expenses. That means your daily latte, lunch if you eat out when working, entertainment expenses and anything else that you spend money on each month.

2. Look at your budget and determine what you can live without. Maybe you could settle for coffee with flavored creamer made at home instead of those expensive lattes. Perhaps you could cut back on your entertainment expenses or pack your lunch.

3. Adjust your budget accordingly, and reallocate the money you save to go toward paying down your debt.

4. Decide in what order you want to pay your debts off. All other things being equal, secured debt should be paid off first. But if you have unsecured debt with high interest rates, you can save yourself a lot of money by paying it off first.

5. Pay the minimum payment each month on all but your top priority debt until it is paid in full. Then move on to the next one on your list until they are all paid off.

Tips & Warnings

• Once you’ve paid off a credit card, consider canceling the account if you have others. Too much available credit is one of the biggest reasons that consumers get in over their heads.

[brandy1123]

on 9/19/2008 good advise