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Being in debt doesn’t just affect your credit rating; it affects your emotional wellbeing, too. Accumulating debt can cause anxiety and uncertainty about the future and, with the current economic climate, more people are feeling the effects of owing money. The quickest way to get out of debt is to look closely and carefully at what you spend each month – and what you spend it on. Made simple, working out a budget isn’t as much of a chore as you might think it is.

Write it all down

It’s not hard to make lists, and it’s the best place to start when drawing up a budget. First list your monthly income (if it’s not fixed, work out an average), then list all payments you have to make monthly (rent, groceries, car payments) and list the amount of money you have to pay off in debt each month – include credit cards, loans and mortgages. If you’re left with very little, follow the next step.

Think simple

Once your lists are drawn up, look for any monthly payments you can cut out. Things like magazine subscriptions, payments on a second car (when one is enough) and cable TV aren’t necessary. Look into what you spend on luxuries like eating out, clothing and nights on the town and figure out ways to do your favourite things on the cheap. Making your own coffee at home rather than buying it in the morning on the way to work could end up saving you a lot of money in the long run, for example.

When payday comes

Before you spend money on anything else, pay off your debts as soon as payday comes. Set up debit orders so these payments are made automatically as soon as you get your salary. Start off small, and increase the payments as you streamline your spending.

Once you’ve put money towards your debts, tackle other essentials like rent, car payments and the groceries. If you tend to spend your money for groceries on other things, put the money aside in an envelope and only take it out when you’re headed for the shops.

What’s left is all yours

Whatever is left over in your bank account is yours to do with as you please. Indulge in something you love to reward yourself for making, and sticking to, a budget.

Tags: budget, debt, saving money