Only 32% of American households set a monthly budget. A solid budgeting plan helps ensure you build a financial safety net for emergencies and unexpected expenditures.
If you’re already in debt, it’s vital to begin taking the proper steps toward financial security. In this budgeting 101 guide, we’ll go over how to budget your existing debt and plan for your financial future.
How to Budget Debt
Budgeting debt feels like climbing out of a deep hole. But no matter how much debt you’re in, there are steps you can take to help ease your debt. Take the following measures once you start your journey towards paying off your debt.
Start Making Big Payments
If you have the capacity to do so, stop spending with your credit card immediately and focus on the debt you’ve accumulated. The more let your accumulated debt sit, the more interest it will accrue.
Instead of spending, pay off big chunks of your credit card balance as soon as possible. Paying off big chunks will positively impact your credit report and reduce interest payments.
Consider a Balance Transfer
If you have high balances on multiple credit cards, consider bundling your balances together on one or two cards. Clearing out high-interest rate credit cards and moving them to low-interest rate credit cards will help you save money.
Some balance transfers give 0% interest rates for a specific amount of time, saving you even more money.
How to Avoid Debt in the Future
Once you’ve begun chipping away at your debt, it’s time to start implementing a reliable budgeting strategy. Staying on top of your finances ensures you won’t accumulate debt again.
Make a Budget Calendar
Bills tend to fly under the radar if you’re not keeping track of them. By creating a visual representation of your budget via calendar or planner, you’ll always stay on track of your budget.
Add to Your Savings Automatically
It takes a lot of discipline to add money to your savings account manually. But if you set up an automatic deposit into your savings account, it’s much easier to accumulate savings. Consider putting a portion of each paycheck into your savings account.
Learn How to Invest
Investments are a great way to earn passive income if you know what you’re doing. Take some time to learn about investing and get advice from a professional before you commit.
Once you understand the process, funnel your earnings into a savings account to build your net worth. Check out The Jerusalem Portfolio to learn more about investments and bonds.
Use a Budgeting Tool
Budgeting apps and software help visualize your financial health. Some tools give deep insights into your spending habits, which will help you control your spending.
Budget Debt to the Curb
Debt is not a life sentence if you work hard towards better financial planning. If you budget debt with these tips and stay positive, you’ll have a solid financial standing without debt standing in your way.
Want to learn more about financial planning and budgeting? Check out our blog and read our other posts about investing, business insights, and financing.