Debt used to be a scary word. If you ask many of your parents or grandparent, debt was something to be avoided at all costs. But nowadays, debt has become very common.
In fact, almost every young and middle-aged person is in some form of debt. Statistics show that 80-90 percent of individuals are in debt in the USA alone.
This can be through student loans, credit card debt, or personal loans and mortgages. These can all add up too. Many people juggle many of the above forms of debt for most of their lives. In fact, a lot of people die with substantial debt.
This doesn’t seem quite so bad until you realize the impact this debt has on physical and mental health. Increased debt and financial strain have been associated with decreased mental health. This can include higher anxiety, the occurrence of depression, and the effects on physical health like high blood pressure.
5 Tips on how to budget yourself out of financial stress
1 Repay your debts efficiently (prioritize!)
One of the biggest mistakes most people make when they’re trying to get out of debt is treating all debts with equal importance. But, all debts are not created equal. Some come with massive penalties for late or missed payments. Credit card debt is a great example of this.
Meanwhile, some debts actually penalize early repayments. Some personal or business loans are key examples of this. So, prioritize the bills that penalize lateness or missed payments first. Push back what you can. This way you can keep yourself solvent with less effort.
2 Set up standing orders
People are usually their own worst enemies when it comes to achieving goals or changing lifestyle. Debts and budgeting is no exception. Many have difficulty with the discipline required to put a certain amount of money to pay bills on a later date.
Setting up a standing order helps avoid this issue. With a standing order, your money is automatically debited from your account to pay a bill. If this is set up so most of your bills are paid straight after payday, discipline can be taken out of the equation. This way you can better see how much disposable income you truly have.
3 Hire a tax consultant/accountant
Most people are always shocked to find out how much money they throw away unnecessarily in taxes every year. This is because most people are unaware of what purchases can be written off against tax.
Meeting with an accountant, debt lawyer or tax consultant can help you save a lot of money each year. This doesn’t have to be a recurring cost either. One or two meetings should be enough to set up you up to have a more efficient tax bill each year.
Just take care to update your knowledge with any tax laws passed to avoid getting a bill or audit down the road.
4 Examine your monthly bills and eliminate unnecessary expenses
This is one of the more obvious tips for those budgeting their way out of debt. But, there are still a large number of people paying for subscriptions they never fulfill, gym memberships they never use, or TV channels they never watch.
Taking a day or two out to examine your monthly bills and assess which are necessary is a great way to save yourself from mounting bills. It can also help you assess whether you really need some subscription services in the future.
5 Calculate your average daily and weekly cost of living and income
Most people think of bills and income in monthly or yearly timeframes. Rarely do people calculate their weekly or daily costs. This is a real shame, as finding this number can take your ability to budget to the next level.
It can help you detect small drains on your income that you can otherwise miss. Things like daily coffees or eating out can mount up to huge costs over time. Budgeting day by at can help you make those little extra savings that can lead to large gains down the road. It can also help make sure as much money as possible is going towards getting yourself out of debt.