The key to the success of whatever form of debt relief you choose — whether it’s consolidation, management, or settlement — is sticking to the plan. You’ll experience a significant setback if you don’t follow through and fulfill the obligations you agree to take on.
To do this, you’re going to need to be careful about how you allocate your income to make sure you can afford the monthly payments. This means you’re going to have to come up with a spending plan and adhere to it. Here’s what you need to know about sticking to a budget when you’re on debt relief.
Crafting a Spending Plan
Regardless of which debt relief strategy you select, there will be a definite sum you must work with each month. The smart play is to draft a spending plan before you sign up for a program to be certain you can afford it in the first place.
Notice we’re saying spending plan rather than a budget?
The word budget implies sacrifice, while the phrase spending plan sounds like you’re engaging in an indulgence. Yes, they both accomplish the same thing, but what’s wrong with a bit of a psychological incentive?
Make a list of all of your current expenses each month. We’re talking about the basics: such as food, clothing, shelter, transportation, utilities, etc. Include some inexpensive entertainment so you don’t feel too deprived.
Next, total all of your sources of income to see how much money you have coming in each month. Ideally, this sum will be higher than the sum of your expenses. The difference is what you can afford to put towards creating an emergency fund (if you don’t have one) and your debt relief plan.
Earmark your dollars accordingly and you’re off to the races.
Sticking to the Plan
Nix credit card spending. Make purchases wait until you can pay for them in full. Or, find a substitute you can afford if it’s something you really need and can’t afford to pay cash for it out of your dollars on hand.
When you’re tempted to buy something you want — rather than need — hold off for a week or so before making the purchase. It’s probably a genuine desire if you still really want it after seven days. Look for the most economical way to get it — and pay cash.
Plan your meals in advance and eat at home. That way it’s easier to stay on plan when you go to the grocery store — and less costly. You’ll know exactly what you’ll need, so you’ll be less likely to get sucked into impulse buying.
Prepare for holidays and events for which you’ll need to give gifts in advance. This enables you to find nicer things at better prices, as opposed to last-minute panic shopping and spending more than you should.
Keep track of every dollar you spend, and collect your pay stubs to make reviewing your situation easier as you go.
Enlist a family member or a friend — whose opinion you hold in high regard — to serve as your accountability partner. Empower this person to review your plan and your receipts to ensure you’re staying on task. This will help you stick to the strategy because the embarrassment of failing in another’s eyes is an ugly thing.
Sticking to a budget on debt relief is largely a matter of making sure you can afford the plan in the first place. After that, it’s all about doing everything possible to keep your word to yourself.
These tips will help you do just that.