Chris O'Shea
If you’re struggling with debt, you can use a simple budget to dig yourself out. Yes, a simple budget is a great way to deal with debt. It provides a framework that will guide you to eventually being debt-free. Here’s what you should know.
Review First
First, if you don’t have a budget, you need to make one. If you have one, revise it to prioritize debt payments. Here are some steps to get started:
- You can use a budget app to create a budget or do it manually.
- Focus on money coming in and money going out.
- Then, see where you can cut back spending to funnel toward debt payments.
Pick Your Method
Now that you have your budget set up, it’s time to identify how to pay your debts. There are two main methods: The debt avalanche and the debt snowball. Here are the differences:
- Debt Avalanche. With a debt avalanche, you start by paying the debt with the highest interest rate first, then the next highest rate, and so on.
- Snowball Method. With this method, you pay the smallest debt balance first, then move on to the next smallest balance, and so on.
No matter what you pick, the most important thing is to choose a method that you’ll stick to.
Revise Your Budget
Once you choose your debt payment method, go back and look at your budget. Review it to make sure your chosen payment method will work in connection with your budget. If you need to make changes, make them immediately.
Do One Thing: Choose a debt payment strategy that you are most likely to stick with over the long term.
Jean Chatzky
