How to prepare a unique budget and an effective debt payment strategy
Are you trying to pay off debts? Do you have a realistic budget that you can follow with ease? Well, if you haven’t tried one or have failed in your attempts, here are some unique ways to plan a budget. Also, check out how you can plan an effective debt payoff strategy.
Unique ways to prepare a realistic budget
You can’t plan a budget overnight. Trial and error will make you perfect. However, here are some budgeting strategies that you can take the help of.
The 50-30-20 budgeting strategy
This budgeting strategy helps you to meet your necessities and save without compromising on your enjoyment.
In this strategy, 50% of your monthly income is dedicated to meet your necessities. Then, allot 20% of your income toward savings and paying off debt. Now, the remaining 30% of your monthly income is for your wants.
Now, you can designate a lower amount to satisfy your wants. Also check out how much you can save from this amount.
The bare bones budget
This is an effective budget plan to save a significant amount to repay your debts. To plan this budget, first of all, list your needs and wants. Then, plan a budget based on your basic expenses, that is, your needs.
Basically, the basic budgeting strategy is more or less the same for everyone. It includes a home to live, clothes to wear, food according to taste and health condition, and transportation cost to travel for basic necessities, along with proper education.
If not for a longer period, you can try this strategy for a few months to save a significant amount.
The cash envelope system
This budgeting strategy will help you if you tend to spend more than what you’ve planned on an item. To follow this, allot specific amounts for your list of items and put that amount of cash in separate envelopes. Do not use cash from other envelopes.
For example, you should use cash from the grocery envelope to shop your grocery items. You need to manage your spending in this way.
When you’re following this strategy, make sure you designate a definite amount toward savings at the beginning of the month.
Effective strategies to plan debt repayment method
The first step in paying back debt is choosing a debt relief strategy that’ll work for you. Here are two ingenious debt relief strategies that you can choose to repay debts.
Combine consolidation and settlement
It is not necessary that you’ll have to opt for either consolidation or settlement. You can plan a debt reduction strategy of combining both the methods.
How will you do it?
Just list your debts and select which of them you can’t repay in full. You can negotiate with your creditors or collection agencies to settle those debts. And the remaining ones that you can repay the entire outstanding balance, you can consolidate those debts.
Doing so, your credit report and score won’t be hit that much since you’ll be paying back some of your debts in full.
Focus on paying back one debt and then move to another
Yes, targeting one debt at a time can help to pay it back early. You can follow the debt snowball or debt avalanche method or a combination of both.
To employ any of these methods, first of all, list your debts with the interest rate and the outstanding debt amount.
Then, instead of targeting one debt at a time, you can target two debts at a time. This strategy is more applicable if you have quite a few credit card debts to pay off. The steps are quite simple.
First of all, select two debts, one with the highest balance and the other one with the highest interest rate. Then, make minimum payments on all other debts. Then, pay a little extra on the two debts you’ve selected.
Doing so, you can stay motivated as you’ll repay the debt with the lowest balance fast. Also, since you’re targeting the debt with the highest interest rate, you’ll also repay it pretty fast. Moreover, you’ll save on the interest payments since you’ll repay the highest interest rate debt relatively faster.
If your debt has already passed the SOL (Statute of Limitations) period, then the creditor or collection agency can’t file a lawsuit. So, in this scenario, you can decide not to pay back your debts. However, paying back a debt is always a positive item for your credit report that will make you creditworthy for your future creditors.
So, don’t waste any more time! Plan a realistic budget, choose an effective debt reduction strategy, and be debt free!
Author’s Bio: This article is written by Catherine k. Burke and she loves to write about the financial problems of life. She motivates people to face a difficult situation positively to get a better outcome.
She is associated with http://www.onlinepaydayloanconsolidation.com/