A spending plan is one of the tools that you can use to make debt consolidation a huge success. Unfortunately, a lot of people fail to use it to their advantage. In fact, there is a report that revealed how 1 out of 5 Americans prefers to spend their time planning vacations rather than getting their finances in order.
While there is nothing wrong with enjoying your hard-earned money while going on a vacation, it is not advisable to make it more important than financial management. You need to know your priorities before you make plans about spending your money. A vacation is not cheap. Of course, there are ways to be budget-conscious about it. However, if you inspect your financial obligations carefully, you will realize that there are more important expenses that you need to be focusing on. This includes your debt payments.
Use a spending plan to make debt consolidation a success
There are many tools that can be used to make debt consolidation easier. One of these is a spending plan. To be specific, this will help you stick to your consolidation plan. It will bring several benefits that will assist you in making sure you can complete the debt consolidation program that you started.
It controls your expenses
First of all, using a spending plan allows you to control your expenses. After all, this plan will list all the expenses that you make in a month. You have full control over what you will put on this list. If you feel like a certain expense needs to be there, you have the freedom to include it. The good thing about this is that you can compare it with your income. You can determine if the expenses that you want to include can be covered by your monthly salary. If there is something that cannot be covered, you can decide not to include it in the list.
It secures your debt payments
When you control your expenses, it increases the chances of securing your monthly debt payments. Of course, it also helps if you put the debt payments in the spending plan. This will ensure that it will be given its own funds. And you have to make sure that you will not use this money on something else. With this plan, it is only a simple matter of following what is in it. If an expense is not in this plan, then you will not spend it. This will keep it from compromising the priority expenses – specifically your debt payments.
It tracks your finances
According to a survey, almost 6 out of 10 respondents admitted that they are not tracking their expenses. This is dangerous because sometimes, we overspend because we do not realize that we are already spending way more than what we can afford. And when you overspend, that means some of your expenses are being paid for by credit. That means it increases the balance that you are paying. If this goes on, it will compromise your debt consolidation program. It can also eat up your savings and personal net worth that you are trying to build. Make sure you have a spending plan so you can keep your monthly expenses in check.
3 types of expenses in a spending plan
As you can see, the spending plan is a necessary tool that will allow you to complete your debt consolidation plan. At least, it will make things easier for you. When you are in control of your spending, it makes bills payments bearable.
But what should you place in this plan?
There are three types of expenses that you can place here.
These are the expenses that have the same amount each month. Usually, these are secured or unsecured loans. It can also be subscriptions or insurance payments. Sometimes, the bills do not come each month. There are payments that you pay for every quarter. If you opted to use a debt consolidation loan as your debt relief strategy, it will also be included in this list. The important characteristic of this is that it should have the same amount on the billing statement. What is great about this expense is that it will make it easier for you to budget it. After all, you know how much you are expected to pay.
These are the necessary expenses that you pay for on a regular basis but it does not necessarily have the same amount every time. A perfect example of this is your utility bills. You have to pay your electric, phone, water, and gas bills every month. However, the amount that you have to pay will be based on what you consumed during that month. Another example is revolving debts – or credit cards. This also includes your food and grocery budget.
Among the other categories in your spending plan, this is the one that you can control. If you want to save on your expenses, this is the category that you can alter. It is basically the money that you choose to spend. That means if you do not spend on these, you and your family can survive. The examples in this category include entertainment expenses, eating out, clothing, etc. You can also include your savings here. Ideally, you should have a set amount that you can save and stick to it. This will help you improve your financial position. However, if things become too strained in your budget, you can opt to stop saving temporarily.