Why Budgeting is Still the Method of Choice when Considering Debt Reduction
The UAE Money Experts will always tell you that the really dramatic, too-good-to-be-true methods of debt elimination should simply be ignored. They’re never as good as they seem. Alternatively, some of the very BEST options for eliminating debt take longer, but are FAR simpler and will not leave you worse off than when you started.
Wait, but what about debt consolidation?
We’re not going to make any silly claims that debt consolidation has never helped anyone. And depending on your situation, it could most certainly help you both manage and pay off your outstanding debts.
But we also firmly believe that debt consolidation should only be considered after you’ve tried plotting a budget and are certain that it cannot help your situation. The best budgets will take into account all of your expenditures (all of them, not just bills) and then compare those expenditures to your total monthly earnings. If you cannot free up any money at all to service your outstanding debts, even after a very ruthless budget, then consolidation may be your best bet.
A bare-bones look at your expenditures
When you’re planning a debt-eliminating budget, you need to be ruthless in cutting back what you don’t need. Create a list of all of the absolutely necessary expenditures, such as your mortgage or rent, utility payments, food bills, etc. Then list the things that you like to have every month but don’t really need. Maybe this is money spent going out or buying clothes. If you’re serious about eliminating your debt, everything on that list needs to go—at least for the time being.
Once you’re done, compare that list of necessary expenditures to your total income (from all sources.) Again, if you are in dire straits with your debt, you’ll want to take every bit of that additional income and start paying off your debts. If you’d just like to be debt free and aren’t in a critical situation, then find a way to balance fun and debt payments with the spare income you have.
One of the best ways we know of to eliminate debt consistently is the snowball method.
Before we close this article up, it’s important to remember that you must be willing to stay true to your budget. You’re the only one that can make you debt free.