Start A Debt Elimination Budget -

Tips To Debt Busting

Setting up a debt elimination budget is something you should learn about, even if you have no current debt. This debt elimination budget will teach you a great deal of how budgets really do help you save money. Being in debt is just a motivator that many people need, however, you should avoid debt as much as you possibly can. It is very hard to get out of debt.

I like to call this process Debt Busting. The first step is to evaluate whether or not you are really in debt trouble. Most people are in debt some way or another. Some people manage their debt pretty well, while others fail miserably. You just want to make sure that you are one who manages debt well.


If you answer TRUE to the majority of the following questions, you may have a debt problem:

- I use credit cards at places where I used to use cash.

- I have lost track on how much I owe.

- I have no more money in savings.

- I have used the maximum amount of cash advances that I can.

- I have not paid one or more of my bills for over a month.

- I receive letters from collection agencies on a regular basis.




If you have realized that you have a debt problem then you need to start a debt elimination budget as soon as possible. The basis of this budget is:

• Keep track on ALL of your spendings at ALL times

• Eliminate a portion of those spendings completely

• Set a limit on spending based on savings goals

You spend money on so much without realizing it. Cut out all your unnecessary spendings. Categorize them all by type of expense. Your debt elimination budget should require you to keep ALL receipts. You need to keep track of every penny you spend.

If you are going to eliminate debt, you have to be ruthless. You can't afford to keep piling up the debt. It doesn't matter how much you make. Cut your spendings to the bare necessities. Go to the Personal Budgeting page for more information on the different types of expense categories there are.

Now that you are keeping all your receipts and you have set clear lines on what expenses you can pay and you have eliminated the ones that you don't need, you can start to set limits on the expenses you do need. The biggest part of this debt elimination budget is to put a cap on your spending.


Sticking To The Budget

Different people have different methods to make sure they are budgeting properly. One method that a close friend of mine uses is fairly easy and you can do it too. He developed this method because he didn't want to go below zero on his checking account, because there was a very steep fee that he would have to pay if he did.

He started by putting $100 in his account. But he didn't mark it in his checkbook. It's called his invisible minimum. He then deposited $397.67 (his paycheck) and he wrote in his checkbook a balance of $397.67 when it was REALLY $100 more. Now, if he ever went under his current balance from writing checks, he wouldn't have to worry about any fees involved, but he mentally told himself to keep it above $0 (or $100) at all times.

I incorporated his method into the debt elimination budget idea, and it has worked very nicely. You can do this with less than $100 if you'd like. The trick is, every month, increase the invisible minimum amount by a little.

Here's why....

If you have a debt of $1400 in credit card bills that you want to pay off, and you make $2000 a month from your job and have $1800 in routine expenses (food, rent, bills), you should have $200 a month available.

Use $100 to kill some of that debt, then add the other $100 to your invisible minimum. After a little over a year, your debt should be fully paid.

Now, you can go back to your invisible minimum, and withdraw it as a personal gift to yourself. Hmmm, $1400 dollar gift. Not bad right? You can use it to spend on that new computer you wanted, or you can start an investment. This extra money that you keep putting away into your invisible account is incentive that when you pay off your debt, you get a gift.

Granted, some debt situations are worse than others, so this system may not work for you. But are there any other systems you feel like you can use? Do you have any personal motivators that you can use to keep the budget going? As always, be creative and work hard at it. Your debt will disappear in no time!




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