How to Make a Budget When You’re In Debt
For this post, we’ve teamed up with our partners at Fairstone
Everyone can benefit from a budget, especially individuals who are trying to pay down debt. A budget is an important part of your overall plan to get out of debt and can help you stay debt-free in the future.
Our partners at Fairstone have helped millions of Canadians pay down their debt faster with a consolidation loan – check out their top tips for creating a budget that will help you get out of debt:
List your income and expenses
Go through your debit or credit card transactions for the last several months to gauge how much money you’re spending in different areas. You can always adjust these numbers later – you just need a rough estimate as a starting point.
While you’re listing expenses, identify any late or unpaid bills, deadlines and make note of any interest rates on your credit cards or other loans. If you’re making a monthly budget, don’t forget about expenses that are on a less frequent basis (car maintenance, property taxes, gifts, etc.) – you can lump these in a miscellaneous category for the month.
Ask yourself: “What can I spend less money on?”
If your goal is to pay down debt, it’s important to allocate as much money as possible towards debt repayment (within reason). Are there some expenses you can eliminate completely? Trust us, you’ll learn to adjust without your food delivery service or music streaming service for a few months! Or perhaps, you can reduce your spending in some categories – try pre-planning your meals and commit to making a list before heading out to the grocery store, or give couponing a try.
Simplify your debt repayment schedule
Are you dealing with multiple payment deadlines a month? A debt consolidation loan can help you combine multiple bills and loans into one simple payment a month. Plus, debt consolidation can help you pay down your debt faster saving you hundreds to thousands of dollars each month.
A debt consolidation loan is especially helpful if you’re trying to tackle credit card debt. Why? Credit cards are a type of revolving debt. If you’re only managing to cover your minimum payments each month, it can take you a long time to pay down your balance. Since a debt consolidation loan from Fairstone is an installment loan, you’ll benefit from a structured payment schedule.
Be realistic about your goals
The key to a sustainable budget? Making it realistic. Sure, you can say that you’ll only spend $25 a week on entertainment. But, are you really going to stick to it? It’s okay to have some areas of your budget that are a “splurge” – just make sure it’s important to you. If you really value going out to dinner with friends, you should try to fit it in your budget even if that means only going out every other week, or asking your friends to meet up at a more affordable restaurant. Otherwise, you won’t stay motivated to stay on track with your debt repayment.
Look for opportunities to increase your income
You can only eliminate so much spending from your budget. If your budget is still feeling tight, try to find opportunities that will help increase your income so you can allocate more money towards debt repayment. Whether that means you get a part-time job, freelance, have a yard sale or something else altogether. If you need more ideas to earn extra income on the side, Fairstone lists 10 of them in this article.
The last and most important tip? Hold yourself accountable to your budget. Once a month, cross-reference your actual spending with what you have outlined in your budget. And, don’t get discouraged if you spend too much in some areas. Your budget will need to be revised as your priorities and financial goals change over time.
If you’re interested in learning how debt consolidation can help you pay down your debt, you can visit Fairstone.ca for a free loan quote. You’ll find out how much money you could qualify for, and what your payments might be all without impacting your credit score.
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