Times are tough and the COVID-19 pandemic has left many people financially struggling. During times of economic unsteadiness, it is more important than ever to get out of debt and use your money wisely. Many people who struggle with debt will find one way out is to create a budget and stick to it. There are many factors that contribute to debt and you may find tackling your situation takes a multi-focused approached. Here are four ways to boost your budget and get out of debt.
Create A Budget And Stop Overspending
Creating a budget is the first step in getting out of debt. Unfortunately, budget setting won’t do anything if you don’t stick to it. Overspending will sabotage your budget and lead to debt. In fact, it’s likely that your financial problems can somewhat be attributed to overspending. It’s okay. It’s happened to everyone at some point. Overspending is easy to do, especially if you have credit cards, fall into depression, or have a hard time saying no when you see something that you want to purchase and simply don’t want to wait until you have the money for it.
It’s important to realize that most overspending occurs with credit cards and this is one of the fastest ways to get into debt. Credit cards should only be used for large purchases that you can safely pay off within 90 days. Avoid the temptation to use credit cards to buy everyday items as this will quickly lead to debt and you’ll most likely purchase things you want, as opposed to using your credit card for necessities. Click here to learn more about how to best consolidate your debt by fine tuning your budget.
If you’ve never made a budget, you can find some tips on the FTC website. The FTC recommends you make a list of all your bills and include your receipts for things like groceries, entertainment, daily expenses, and more. There are many items that you may purchase regularly, but not think that the cost adds up to a significant amount. Take assessment of every purchase you make and document it, as this is an important part of creating an accurate and effective budget. Make a list of the things that you want versus the things you need and buy accordingly.
Once you determine the exact amount you spend per month, calculate all the money you have coming in. If your output is more than your input, it’s time to make changes and see how you can reduce the amount of money you have going out.
Get a Side Hustle
Sometimes it isn’t enough to cut corners, double down on your overspending, and reduce your monthly bills to get out of debt. You may find that getting a side hustle not only helps you stay on your budget, but gives you that little bit of breathing room in order to pay down your debt, stick to your budget, and have a little left to save. Not only can you make extra money with a side hustle, but you may want to look over the items you have and see if there is anything you can sell. Remember that list of wants versus needs? It may be time to part with some of those things you purchased because you wanted them but didn’t actually need. Use the money from those items to pay off your debt and make sure to stick to your budget. There are many side hustles you can choose, but if you turn one of your hobbies into a side hustle, you’re more likely to stick with it.
Choose Your Bank Wisely
Credit unions are preferable to banks. If you’ve dealt with a financial setback, you may have faced hefty overdraft fees and steep interest rates on loans. Check and compare your bank’s current rates and fees with those of your local credit union. You’ll most likely discover that a credit union is far superior to your bank in fees, rates, and more. You may even find that credit unions don’t charge some fees your bank charges simply to have an account. Because many credit unions provide free services that banks charge for, you’ll automatically save money simply by making the switch.
Use a Debt Calculator To Pay Down Your Debt With Minimum and Maximum Payments
Once you have your budget set and are following it, it’s time to pay down your debt. A debt calculator is an excellent tool that can help you determine how much you can pay to get out of debt by your preferred date. Set a realistic goal for paying off your debt and then enter the numbers and determine how much you can afford to pay to make your timeframe. You may also find that you can pay the minimum on some debts and the maximum on others in order to meet your goals.
Everyone runs into financial difficulties now and then but by setting a budget, getting a side hustle to increase your income, switching from a bank to a credit union, and using a debt calculator, you can pay off your debt and get your finances back on track.