Debt Management Through Budgeting

A Credit Article Contributed by Brandie King

Debt Management Through Budgeting: Introduction

When you are looking for a debt management program you might not think of budgeting as being a tool you can use. Think again. Budgeting can help you to see where your money is going and to reduce the amount of your expenses, which will in turn free up some extra money for you to pay off your debts. The hardest part about budgeting is sticking to your budget and having the willpower to use the extra money you find to actually pay off debts.

Debt Management Through Budgeting: Step 1

The first step in setting up your budget is to make a list of all of your income. Only include your take home income on this list, nothing else matters. Include recurring income like money from your job, child support, anything that comes in on a regular basis.

Debt Management Through Budgeting: Step 2

The second step is to make a complete list of your expenses for each month. To do this, sit down and make a list of all recurring expenses, necessary expenses, unnecessary expenses, anything and everything that you spend money on every month. One of the best ways to get a complete list is to carry paper and pen with you everywhere you go. Whenever you spend any money, whether it's cash, credit card, or check, write it down on the paper. Even that morning newspaper and doughnut needs to go on this list.

Debt Management Through Budgeting: Step 3

The third step is to reduce and eliminate any expenses that you possibly can. Could you get a better interest rate on your mortgage, and thereby reduce the monthly payment, by refinancing your house? How about selling that second car? If you pay for call waiting, caller ID, or voice mail on your phone each month cut those extra services off. Cut off the subscription to premium channels, such as Cinemax and HBO, that you pay for each month on your cable TV bill.

Stop going out to eat as much, reduce your trips to the movie theater, quit the impulse buying. If you've had your utilities for at least a year, call your utility companies and talk to them about setting up a budget payment. This will allow you to know exactly what those bills will cost each month. The list of ways to reduce and eliminate expenses goes on and on.

Debt Management Through Budgeting: Step 4

To complete your budgeting debt management plan, you need to try to reduce those monthly credit card bills and get them paid off. First, you should contact your credit card companies and talk to them about reducing your interest rates and monthly payments. Then you need to make a list of all of your credit cards and loans, along with their monthly minimum payments and their interest rates. Pay as much as you can on the card with the highest rate, and the minimum on all others, until it is paid off. Then move on to the card with the next highest rate. Keep going until they are all paid off.