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Reduce Debt With Proper Budget

CREATING A BUDGET

This process takes time and honesty with yourself. The more you can accurately determine what you are spending and where it is going, the better you can commit to active changes.

BUDGETING LIST

The first step is to determine how much money you spent the previous month and where that money went. Do your best to gather a detailed list of all expenses from your bank statements, credit card bills, household bills, mortgage payments, etc.

BUDGETING: BASIC EXPENSES

You need to now separate your basic expenditures which are necessities, such as your mortgage, groceries, utilities, insurance, etc. Be honest with yourself in determining what is “required” and what is “desired”. We will look into this list later in time to help with this determination and suggest further trimming or advice on how to further reduce payments/interest rates, etc.

BUDGETING: EXTRA EXPENSES

You now need to look at all the other expenses that you are left with after eliminating basic expenses. Many consumers are surprised to discover that this can be as high as 30% or more of total expenses. This is the first list that needs to be addressed once our plan is utilized.

BUDGETING: LISTING CREDIT CARDS/CONSUMER DEBTS

Prepare a list of all your current credit card, high interest loans and merchant accounts. List your current balances, monthly payments, available limits, and your interest rates in descending order. We will then address these debts according to interest rate, payment and balance, in that order, and so should the client.

BUDGETING: SAVING

A progressive financial debt solution should not only be focused on debt. Saving money should be a primary concern and you should pay yourself first(it’s easier to do once you have reduced your out of pocket monthly expenses to debt repayment). A realistic debt management plan should see 10% of your after tax earnings being dedicated to a combination of short and long term savings. This will provide for unexpected expenses as well as long term security. This is best accomplished with a fixed amount being withdrawn from your account monthly to a savings vehicle.