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How to Take Control of Your Finances, Pay off Your Debt, and Get Ahead

It sadly seems to be human nature to go into debt. In fact, at a certain point in our lives, almost every person finds themselves in debt. And once you’re there, it’s not easy to get out of it. It also doesn’t help that our society is set up for the average person to live in debt for most of their lives. We must take a loan to go to school, get a house, or even purchase a car in most situations. So, it’s crucial to understand how to manage your debt. But don’t worry, there is hope! As someone who has had experience getting out of debt in the last few years, I am here to discuss paying off your debt. Read on to hear all about how budgeting can help you take control of your finances.

Knowing What You Make

This might seem incredibly simple, but this may be the most important step in getting out of debt. It’s important to know how to manage your finances. How can you go about doing that? The first step is to understand what you make after taxes. Write that number down and begin a budget in Microsoft Excel or a similar program. At the top of your new budget file, write down how much you make each month after taxes. You should absolutely not be spending more than this number every month, and if you are, you really should cut back. In fact, you should cut back as much as you can anyway in preparation to get yourself out of debt so you can successfully pack back what you owe monthly.

Writing Out Your Bills

Next, in your document, create a column where you can write down each of your bills. Go down the column and write out everything you are required to pay monthly. Begin with rent, then add up your utilities, your car payments, your insurance, and every bill you get in the mail and are required to pay monthly. Once those are all there, be sure you have also added any credit card payments you are required to pay monthly if you are in credit debt.

Now, also put in this column your monthly food spending. On average, how much do you spend on food every month? If you’re not sure, it’s time to begin calculating that. You can guestimate for now, but after a few months, you will begin to see that average. Every time you spend on food or lifestyle going forward, keep track of in a note on your phone so you can see what you are actually spending in each of these areas. It’s important to try to stay UNDER your average every month, so cut back where you can on food. But don’t guess. Actually keep track of your spending. Food and alcohol spending are always a major area most people can cut back on to save money to pay off their debt.

Next, give yourself a monthly spending budget for frivolous shopping, and make sure you never go over that amount. Write that number here, as well.

Cutting Back

Now, total up all your monthly bills including your average food budget and monthly spending. If all these bills are less than you make each month, then you are in good shape to get ahead. If you make less than your bills each month, eek! It’s time to start cutting back, and you should start thinking about additional means of income to help increase your monthly income otherwise you may never get ahead.

Even if you are saving a little each month because your bills are less than your income, you should still try to cut back a bit so you can make larger payments on credit cards and other areas of debt until you get out of it. The larger the payments you can make on your debt each month, the sooner you will get out of debt.

Food and frivolous spending are the two areas that you can cut back on the quickest. Perhaps, you make your own coffee at home instead of going to Starbucks. Or you limit yourself to one meal out per week and buy cheaper meals you can make in bulk at home during the week such as pasta or tacos? Or you can limit yourself to 1 fun item per month with your spending and no more than that. Sorry, no more shopping sprees until you are out of debt! 

If you’re not sure where to cut from, perhaps you can speak with a debt specialist or money management team who can help you find areas of your life to cut back.

All in all, getting out of debt isn’t as hard as you think it is. By understanding what you make, understanding what you are paying each month, and keeping track of all your spending, you can save more easily and get out of debt in no time.

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