An increasing number of families are looking to find their way out of debt. In the United Kingdom, the average household owed £58 540 in June 2018 according to statistics from The Money Charity. For most of them, having a household budget is key to getting their finances on track. Whether it is to make home improvements without breaking the bank or to amp up your retirement savings in a bid to achieve your retirement goals, there is no question budgeting is a handy tool to have. The overall goal is to track your income and spending but a budget can also be a great debt management tool and foundation upon which to build a debt management plan. Check out a few ways your budget can help you and your family get your finances out of the red.
Plan Your Spending – And Visualise It
One the first tips to get started on getting back on track is to get into the habit of planning your spending before you actually do. For your food shop, utilise comparison tools and price checkers before going armed with a shopping list and meal plan. Each year, families in the United Kingdom toss out approximately £700 worth of food. The same concept applies to other purchases including credit purchases.
Tricks such as maintaining a below 30 percent utilisation ratio on credit cards can positively influence your credit standing with borrowers, according to credit experts such as Experian. In addition, taking the time to plan your credit means doing the research on lenders and their terms before choosing one. Think of what you seek from your credit card and what its intended purpose will be. Is it purely for financing a large purchase or are you looking to improve your credit score? If you are looking for fast credit card approval, knowing the terms and criteria that lenders pose helps.
Put Away Each Month – Automatic
While it may seem a bit contradictory making saving a priority each month when looking to get out of debt, there is a very good reason behind this. Often when emergencies or unplanned expenses pop up and we are caught unprepared, the reaction is to turn to debt and in some cases expensive debt such as credit cards and payday loans carrying exorbitant amounts of interest. All this does in the end is push you further into the debt spiral. Being prepared means should the need arise, you can comfortable take care of expenses without affecting your debt-or your credit rating.
Get A Debt Repayment Plan – And Stick To It
A debt repayment plan may be one of the most useful tools you employ in your journey to financial freedom. Just like a budget, a debt repayment plan allows you to use the power of visualisation to help you plan your steps towards repaying your debt. Once you have seen all your debts together, you can then make a suitable plan to tackle your debt. A common way is to repay those carrying the highest interest charges first. It also acts a motivator as you achieve mini goals along the way and witness the progress.
Account For Everything – Including Your Income
For this to work, you must be prepared to be realistic. Spend one month recording your spending habits and then review it at the end of the month as you prepare your budget for the next month. You will be surprised at how easily you would be able to spot any unnecessary purchases in your budget once it is recorded and staring at you. Even a daily latte costing £3 can save you £21 weekly or £93 monthly. Plugging that extra money into a debt repayment can get you out of debt faster.
In your pursuit to become debt free, budgeting can become your best friend. Incorporate these these tips into your budget and you will have a solid foundation for a debt game plan. Before you know it, you can be well on your way to financial freedom.