Managing Your Debt: Learn How To Budget

Long before teaser rates, 0 percent balance transfers, and "12-month Same as Cash offers," Ralph Waldo Emerson wrote, "A man in debt is so for a slave." It's harsh, but true. Poor debt management can undermine your household finances quickly and thoroughly. It's time to take charge of your money now, before it takes charge of you.

Paying down debt

You may already be familiar with some common debt solutions. Examples include debt consolidation plans, bad credit mortgage refinance loans, and lower-interest balance transfers. These programs can be helpful, but you must be diligent about managing your spending, as well. If you consolidate debt but continue to spend, things will only get worse.

These are the tenets of successful debt management:

1. Create and stick to a budget.
2. Pay down high interest debt first.
3. Pay more than the minimum payment.
4. Remove all credit cards from your wallet and spend only cash.

Budgeting Your Expenses

Learning how to budget is a major step to control spending. Most debtors are challenged by this discipline, but it's an essential art form worth mastering. Here are some tips on how to begin.

1. Track your spending. Write down all expenses for one month.
2. Analyze this! Once you have these figures on paper, analyze areas where you can save money. Cut designer coffees, happy hour drinks with co-workers (unless they're two for one), or eating out. Sometimes, a slight change in your routine can save you thousands of dollars over the course of a year.
3. Set spending limits. Setting limits requires you to prioritize. Calculate what you need for the essentials, usually food, shelter and transportation. After these are covered, set aside necessary amounts to meet your debt repayment and/or savings goals. Your last priority should be non-essential spending.

Make a specific plan to pay down your debt, and/or build up your savings, over a certain time period. Put more money towards your higher interest debt first. Whenever possible, pay more than the required minimum payment. This will pay down debt faster and save you on interest over time.

It won't happen overnight, but you can break out of the shackles of debt. Stay focused, and your debt-free future will be here soon.