Prudent Planning to Combat Debt

If your debt is beginning to get out of hand, you need to takes steps to immediately gain control of it, then work to get rid of it and avoid building it up again. While this process may seem like common sense, it nonetheless escapes the grasp of far too many individuals. Let's explore what it will take to successfully complete the task.

Control spiraling debt

First and foremost, stop spending! This is step No.1 in controlling debt. Many people don't realize how much of their money is flying out the window with frivolous spending. Grab you’re your checkbook or bank statements for the past few months and look at all the charges that were incidental. A couple of gourmet coffees and fast food lunches each week can add up quickly, and rolled together with other seemingly 'innocent' little purchases, you may find that you've frittered away literally hundreds dollars by the time the end of the end of the month has rolled around.

Make a budget

In fact, you should create two budgets: a "get-control budget" and a "keep-control budget." While many people create budgets, few actually stick to them. Keep in mind that a budget is like a monetary diet – you will not see results immediately, and you won't see them at all unless you stay on the program.

The get-control budget is not just any budget, but a strict disciplinary plan that will help you start to turn your debt picture around. This budget only has room for priorities that must be paid. There are very few extras. Any leftover money you have at the end of the month should go toward the reduction of your debt.

You'll use the keep-control budget once you have your debt under control. Of course, this budget will still cover all the essentials, but now you can add in a little fun money as well. And, as we all know, if you can't have any fun at all, you won't be encouraged to continue to do what you need to do. So, include a modest amount of 'reward' money (it's a smart move to allocate yourself this money in cash; when you go through it, you know that you're done for the month).

Save for 'emergencies'

In addition to paying down your debt and establishing a budget, you should institute an emergency savings fund. It's a prudent idea to put a little money aside every month (into some type of savings vehicle), so that if an unexpected expense arises you'll be able to handle it without digging the debt hole all over again.

Building up adequate savings is a fundamental strategy for staying out of debt. Many often start out on the right path and do well for a time, staying dutifully within their budget. Then an unforeseen circumstance confronts them. Perhaps the car breaks down, or a sudden medical bill or other expense that must be paid for drops them back into debt. With a savings plan in place, you'll have a financial 'safety net' to lessen the impact of such unexpected occurrences.

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