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Learning to Budget and Eliminating Debt as Quickly as Possible

most are keen to repay debts as quickly as possible

If you have consumer debt (and who doesn’t nowadays?), repaying it can seem to take forever. Although most people who have any form of debt are usually keen to repay it as quickly as possible, pinching pennies to do this can seem like a losing battle at times.

In cases where you aren’t going to be penalized for repaying your consumer debt early, you may be wondering how you will be able to do so without feeling frustrated. Below are some handy tips that will help you on your way to becoming consumer debt-free.

Do Away with all Non-essential Items

Reducing or even eliminating luxury buys such as expensive coffee, cigarettes, alcohol, branded clothing, costly nights out and holidays away and using the funds you would have spent on them to repay debt can help place a large dent in the amount you may owe on credit cards or store accounts.

While you are in the process of eliminating your consumer debt, the only expenses you should have include a rent or mortgage payment, a reasonable grocery bill, transport expenses and utility accounts such as gas or electricity. This will enable you to put as much money as possible towards getting your debt repaid quickly.

eliminate luxuries such as expensive meals

Stop all Unnecessary Subscriptions

These days, the line between wants and genuine needs has become extremely blurred in several households. For example, while a Netflix subscription is nice to have, it is by no means a genuine need.

Items such as magazine or newspaper subscriptions, gym memberships, book club memberships, expensive meals out and other luxuries should be eliminated as far as possible until such time as your debt has been repaid. Although you may be thinking about how deprived you’re going to be until you’re debt-free, it’s important to remember that the feeling of not owing anyone anything will be well worth it in the end.

Compile a Budget

Although the thought of compiling a budget may seem overwhelming or just plain boring, this is an essential step towards becoming consumer debt-free because it will allow you to determine exactly where your money needs to go each month.

To put a budget together, you will need bank statements from the past 2 – 3 months, as well as copies of any recurring bills you pay such as electricity, gas and any other statements from credit cards or store cards.

When putting your budget together, you will need to be completely honest regarding where your money is going. For instance, do you really only buy lunch ‘once or twice a month?’ After examining your bank statement, you may find that you are buying meals almost daily during the week or purchasing more than ‘just one or two’ magazines.

Once you have gathered all of your statements, it’s time to list every single recurring monthly expense. This will help determine how much money is required to meet your financial needs each month.

What to do if Expenses Exceed Income

read your bank statements carefully

Most people end up accumulating consumer debt because their expenses exceed their income. If your expenses are more than the money you are bringing in, you only have two options – you will either need to reduce your expenses accordingly (discussed above) or find a way to increase your income.

When reading your bank statements, be sure to look for charges that are either not familiar or that you may have cancelled previously. There are several unscrupulous companies out there that will continue withdrawing funds if they think you aren’t going to notice, especially if the amounts are relatively small. If you notice any unauthorized charges being debited from your account, you will need to notify your bank immediately.

Increasing Income

If you have already slashed all unnecessary expenses, reduced your grocery expenditure and cut back on everything else possible and your essentials still cost more than you earn, your only other option will be to increase your income. This can be done by either searching for alternative employment or taking on additional employment outside of your regular working hours.

A few popular options for part-time employment include delivering pizzas or other fast food, performing early morning newspaper deliveries or driving for a lift-sharing service such as Uber or Lyft. You may even be able to earn a little extra cash by looking after friends’ and families’ homes and/or pets while they are out of town – many people have been able to build such a decent reputation that they end up making a full-time living from it.

Once you have been able to increase your income, it’s essential that additional funds be put towards debt repayment. This will not only enable you to become debt-free as quickly as possible; you could potentially end up saving thousands of pounds in interest and other additional charges over the long term.

Please note: The content provided in our blog posts is for informational purposes only, and does not constitute lending advice, nor does it claim to portray the actual lending experience accurately.