Free Debt Management Tips

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5 Tips For Getting Your Debts Under Control

This may come under the category of “pretty darn obvious” but the best debt management tip of all is to not get into debt in the first place. Debt can have a horrible impact on both your finances and your health. The stress generated by having to cope with debt can cause heart disease, indigestion, fiber myalgia, high blood pressure, arthritis, a spastic colon or migraines. If want to avoid this and get your debts under control here are 5 tips that can help

#1. Figure out how much you owe

This may also seem obvious but the best first step is to sit down and figure out exactly how much you owe and to whom. Don’t be one of those “see no evil” monkeys. You can’t hide from your debts so there’s no point in trying to ignore them. List your debts with the amount you owe, the name of the lender, the due date, the interest rate, the minimum monthly payment if appropriate and the last time you were able to make a payment. While the results of this exercise might scare you it’s absolutely necessary you do it.

#2. Determine your spending

The second best debt management tip is to sit down and figure out where your money goes. This could be as simple as drawing a vertical line down the middle of the page and then listing all your recurring expenses on the left side and your discretionary ones on the right. Your recurring expenses would include things such as your utilities, insurance premiums, rent or mortgage payment, auto loan payment, cell phone bill and the like. Your discretionary spending will consist of categories like food, clothing, entertainment, eating out, your cable bill (yes, that is a variable) and so forth.

Next, add up all your spending and compare it to your total monthly income. We’ll be shocked if don’t find you’re spending a lot more than you earn, as this is why you’re piling up debt.

#3. Budget your discretionary spending

Yes, here comes the B word. If you truly want to manage your debts you need to make a budget. This should be pretty easy. Since there is not much you can do about your recurring expenses all you need to budget is your discretionary spending. You already have a list of them so revisit that list and start making cuts. Some of the easiest places to make them are usually in entertainment, eating out, and clothing. If you really sharpen your pencil you might also be able to cut your food cost. The object of this exercise is to get your spending down to the point where you can start paying off your debts.

#4. Get some good help

The good news is that you don’t have to do this budgeting thing all by yourself. There are a number of free apps available that make budgeting practically painless. One of the most popular of these is Mint. It will track your spending for you, help you organize it into categories and even send you an alert via email if you overspend in any of them. Other popular budgeting tools include You Need A Budget (YNAB), GoodBudget and Mvelopes, which is a modern-day take on the old envelope method for budgeting.

#5. Create your plan

You can relax as you’ve done the hard work. All you need to do now is make a plan for paying off your debts. There are two ways to do this. First, there is the snowball method. This is where you go back and reorder your debts with the one that has the smallest balance at the top down to the one with the largest. You should find it easiest to pay off the one with the smallest balance so focus on it. When you’ve paid it off you will have extra money to begin paying off the one with the second smallest balance and so on. Of course, you will want to continue making at least the minimum payments on your other debts.

A second way to repay your debts is to reorder your list with the one that has the highest interest rate at the top down to the one with the lowest. Many experts feel this would be a better solution, as it would save you the most money – though it won’t get you out of debt as quickly as if you were to snowball them.

Regardless of which of these options you choose you need to commit to sticking to it. This will require some self-discipline but if you can do it you will ultimately be debt-free – and how good with that feel? Of course, while you’re sticking to that plan is crucial that you not take on any new debt. That will also require self-discipline but will be worth it when you’ve eliminated all your debts and now have money to spend on the fun things in life like a vacation in Hawaii, a cruise, a ski trip, that hobby you’ve always wanted to pursue or whatever it is that would make your life more enjoyable.

This Week’s Free Debt Management Tip: You Got To Have A Budget

You say you don’t have a budget? Then answer this question. Would you drive your car blindfolded? Or would you go sailing without a rudder? Trying to manage your finances without a budget is much like these two examples. If you were really lucky you might be able to drive blindfolded without having an accident or get where you wanted to go without a rudder but that’s what it would be – a lot of luck.

Where you’ll likely end up

If you try to manage your personal finances without having a budget where will you end up? It will be in debt. Why is this? It’s because if you don’t know how much you’re spending in any given month you’re likely to spend more than you earned. And every time you do this it means pulling out that old credit card and adding on more debt.

It doesn’t have to be mind numbing

Why don’t many people have a budget? It’s because the whole process feels like it would be totally mind numbing. You’d have to track all of your spending for at least a month, divide it into categories, set a spending limit on each, continue tracking your spending to make sure you stay within your budget … and on and … on ad nausea.

Fortunately, it doesn’t have to be this awful. There is one way to develop a budget that’s much simpler. Just add up all your bills from the past month, especially your credit card bills, and write down what they total. Then next to this number write down how much you earned this past month and make sure it’s net and not gross. You’ll probably find that you spent more than you earned, which is why you’re adding on debt. Now, go back to that list you made of all of your bills and check to see where you could make cuts. The areas where most people find they can spend less is clothing, food, eating out and entertainment. These are all called discretionary spending as how much you spend is, well, discretionary. So all you would have to do is make up your mind to spend less in those areas. Instead of eating out three times a week you could decide to eat out just once. Maybe you don’t need to go out for drinks with your friends quite as often and maybe you don’t really need to buy a couple of new sweaters or a new jacket this month.

Take advantage of today’s technology

A second way to make budgeting much less mind numbing is to take advantage of the technological solutions available today. If you have a smart phone that’s about all you need to make budgeting practically painless. There are many apps available for both Android phones and iPhone’s. The most popular of these is Mint. It will calculate your average spending by category making it very easy for you to create a budget based on your spending patterns. Mint will also show you how much you are spending on what on a year-to-year or month-to-month basis. You will be able to see exactly how much your spending decisions affect the amount of money you have left over at the end of month or year so you’ll immediately know what you could do today to save more tomorrow.

Other options

In addition to Mint there are a number of apps designed to make it easier to budget and to handle your personal finances. A second popular one is Level Money. You connect it to your bank account and it will then calculate automatically your income and recurring bills and then suggest what you should spend daily, weekly and monthly. It will also tell you how much money you should be saving every month and will then subtract that from your monthly budget. You could even set up its auto-save feature so that if you any cash left over from your budget at the end of the month will roll over in to your savings account.

Another popular app is Digit. It will help you save money that you didn’t even know you had. It does this by automatically scanning your income and your spending patterns and then transfers a small amount of money that it thinks you don’t necessarily need into a separate account. The best part of Digit is it will help you find and save money you would have spent otherwise.

The best part

The best part of these three apps and many other similar ones is that they’re free. So you have nothing to lose by trying one. For example, if you were to try Mint but found it to be too time consuming you could switch over to Level Money or Digit to see how they feel.

Don’t just sit there

The important thing is to do something – whether it’s just roughing out a budget or getting an app for your smart phone. Like it or not having a budget is really the only way to put a rudder on your spending to get it under control and start saving money.

Links To The Best Free Budget Worksheets

When was the last time you tried to make a budget and stick to it? How long did your budget last? Do you call it a budget or a spending plan? How can you plan a budget if your income changes from month to month? This applies to me as I am self employed and don’t know how much money I will make each month until the end of the month.personal budgeting worksheets

So what I do is calculate my income and expenses after each month and get an idea of how much I should be spending on certain items and see other areas where I should try and cut back to lower my expenses. They key is creating a personal budget you can live with. Yes you can even include spending for fun stuff and entertainment. You cannot cut off everything you like in your life because that will make it harder to stick to a budget.

But there are merits to having a budget and there are plenty of resources for free budget worksheets. Below are some links to the best free budget worksheets from Dave Ramsey of the Total Money Makeover and Gail Vaz-Oxlade of Til Debt Do Us Part fame plus another site that offers free printable budgeting worksheets.

You don’t need a bunch of different places to look as they are all pretty much the same.

Here are Dave Ramsey budget spreadsheets:

http://www.daveramsey.com/tools/budget-forms/

Dave has a Quickie Budget, a Monthly Cash Flow Planning worksheet and a Irregular Income Budget which is for self employed people like me where your income fluctuates from month to month.

Here is the Til Debt Do Us Part budget binder:

http://www.gailvazoxlade.com/resources.html

Gail has her most requested articles along with several interactive worksheets that can help you manage your finances better such as her interactive budget worksheet and her own up to your debt worksheet which will show you how fast you can pay off your debts in 12, 24 and 36 months based off your monthly payment and their interest rates.

And one more free printable budget worksheets:

http://www.dollartimes.com/download-and-print/

You can use these templates for personal budget planning. These free budget worksheets will allow you to see how much you can allocate to your debt management plan each month and see how quickly you can become debt free. You will be able to see areas where you are overspending when you think you are underspending and vice versa. Take a few moments to print or fill one out and see how much you are taking in compared to how much you are spending and see where you can cut back and use that to pay off your debts faster.