Follow these four steps to create a budget and get out of debt

Budget to get out of debt

Are you finding yourself struggling to get out of debt?

Building a budget is part of setting yourself up for financial success, especially when tackling debt.

Budgeting forces you to slow down and examine your spending. If you’ve been making mindless purchases and only paying off the minimum monthly amount on your credit card bill, you’re not likely to make much of a dent in your debt. This can impact your credit score with rating agencies.

But setting monthly limits and guidelines forces you to make deliberate spending choices to get your finances on track.

New to budgeting? It doesn’t need to be complicated.

The golden rule: spend less than you make. But without a spending plan, it’s close to impossible to live within your means.

Step 1: Take stock of all your financial obligations

Write down how much you owe and what the interest rates are. Calculating your total amount of debt will give you an idea of what kind of challenge you’re facing.

Step 2: Prioritize your debts

Focus on paying off the debt with the highest costs of borrowing. Credit cards are usually top of the list.

Step 3: Track where you’re currently spending your money

This can help you figure out where your money is going, what is essential and where you can trim back.

Step 4: Set a spending plan for yourself

The 50/30/20 rule is one of the most straightforward and effective budgeting methods. The rule of thumb is that your after-tax income is allocated into three different categories: 50% for essential expenses such as housing, 30% for wants, such as clothing and entertainment, and 20% for savings and paying down debt. To wipe your debt even faster, you can re-allocate more money from your want category to paying off your loans.

Having a budgeting plan will help you plan for the future, cover immediate expenses and save for retirement while you do the things you love today.

Of course, you can modify the 50/30/20 budget to meet your needs by adjusting the amount of money you allocate to each category so that you can meet your current and future financial goals.

To learn more about iCASH and how you can get approved for emergency funding 24/7 with flexible repayment terms, check out their website at https://icash.ca.

This article is written by or on behalf of the sponsoring client and does not necessarily reflect the views of Castanet.

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