Among all the guides, blogs, and tutorials you have come across about devising your debt elimination plan, you are bound to find budgeting, an important part of paying off your debt. A budget gives you better control of your finances by identifying your spending and earnings. People end up in bad financial situations because they can not figure out how to eclipse what they have going with what is coming in.
A budget will allow you to assign what is earned and to spend with financial consciousness. Truth is, there are plenty of ways you can choose to do this. However, the following have proven to be most effective when eliminating debt. Lets briefly look at the options.
3 Budgeting Methods You Can Use To Pay Off Debt
1. 50/30/20 Strategy
By dividing your spending into wants and needs, this budgeting method clearly shows you what financial obligations require your urgent attention. Break down your income in 50:30:20 to cater to needs, wants and savings. Once your income is allocated, you can begin paying off your debts, starting with the most pressing ones.
2. Envelope System
It is an effective way to keep your finances in check and eliminate your debt. Being a cash-only system, it discourages using credit and debit cards. For each category, you will have an envelope labeled accordingly. Put cash in each envelope, even that dedicated to paying off debts while adhering to the spending limit you set for each category.
3. Zero Based Budget Method
Although its popularity has waned over the years, you can still use this system to eliminate debt. It requires one to develop a new budget from scratch every month. Unlike the current norm, where you can readjust your budget with changes in spending and income, you will have to review your budget and create a new one every month.
Conclusion
Regardless of the method, keep track of your spending with each. Use apps like YNAB to record, review and track how much you spend monthly. Just as important, arrange all your debts in terms of priority to keep track of your progress. Every debt you clear is motivation to stay on track until you are debt free.