More Than Money: Fearless Foundation Action Plan – Budgets for Getting Out from Under Debt

Leonard Raskin

The obvious reason to budget is to gain control over your expenses. What many people don’t know is that budgets are also one of the best ways to become debt free.

Because budgets are, by definition, a tool for planning your expenses, they help you avoid overextending yourself and teach you how to live within your means. Plus, budgets enable you to pay off debt faster through planning.

But why should we strive to be as debt free as possible? We’re certain we don’t need to explain the downside of debt in general, but in today’s uncertain times, controlling debt is more important than ever. In fact, living debt free has almost become a new way of saving – of putting money in the bank.

Of course, certain types of debt like home mortgages, or a loan that puts your kids through college are generally considered normal and necessary, but excessive debt – the kind accrued because of unplanned purchases or unexpected expenses, typically lead to serious problems. Having more “bad” debt than you can handle has a way of depleting money fast, creating stress, grief and depression along the way.

So, the question is: How do you reduce debt using a budget? Here are our top suggestions:

The Budgeting Woman’s Debt Reduction Regimen

Step One: Find Secret Savings in Your Budget 

There are certain items in your budget under fixed expenses that can be changed or negotiated for instant savings. One is your credit card interest payment. If your interest rate is too high, switch to a credit card that offers a better deal. Or, call your current credit card company and ask for a lower rate for period of time. Another secret savings area is insurance. Look for lower rates online or talk to your broker. Often you can get a lower rate if you have all of your insurance with a single company. Also, consider raising your deductibles. Yes, you’ll pay a higher out of pocket cost when you use your policy, but your actual annual expenditure may be lower overall. Once you’ve found all hidden savings in your fixed expenses, look at your variable expenses. This is where you have the most control. Consciously choosing to decrease the amount spent on items like clothing, entertainment, etc., means more money toward paying off debt. Plus, it just makes common sense to pay off what you already owe before making too many new purchases.

Step Two: Use Your Budget to Prioritize and Pay Off Debt Aggressively 

Compare the importance of each debt you have in relation to the others. What you owe your bank, for example, should be a higher priority than what you owe a relative because if you default on a bank loan, you’ll pay dearly in interest and penalties, while your parents will likely understand. Your credit cards with the highest interest rates will also be higher priorities. In short, priorities are those debts that will hurt you the most the longer they are left unpaid. After you’ve prioritized your debts, get aggressive about paying them off, starting with your top priority. Make line items in your budget for each debt repayment and as you find more ways to save, increase the amount you pay each month.

Step Three: Trust Your Budget to Stay Out of Trouble 

A budget will only help you get out of and stay out of debt if you follow it. Once you’re debt free, you can give yourself more flexibility in relation to spending and savings, but while you’re working on paying off debt, follow your budget as strictly as you can. After all, you created your budget to help you manage your financial life. You spent time and energy on it. Trust that the budget you created will get you where you want to go if you follow it.

Don’t forget to download your copy of The Wise Women’s Budget Checklist from our website.

This checklist is part of our Living Balance Sheet® – a comprehensive tool that’s available to all our clients. To explore working with us on your budget and more, give us call at 443-212-1122.

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To Getting Wiser,

Leonard Raskin
Women Getting Wise on Wealth from Raskin Global
443-212-1122

Be sure to check out the events we have coming up this month and in March at the Event’s link at www.WomanTalkLive.com:

February 29th -  Understanding the Investment Vortex
A Raskin Global Financial Coaching Session

March 12th -  Exclusive Viewing of Main Street Money with Mark Matson
More about Mark Matson

March 15th –  Women Getting Wise on Wealth
Your Fearless Financial Foundation - Budgeting for a Bold Future
Download WGWOW flyer

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Raskin Global is a team of highly experienced financial planners and investment advisors who believe you deserve more than financial advice. You deserve to be confident and inspired so that you can take charge of your own future and make the wisest decisions possible in all areas of your life.