You are reading Week 8 of 52 Weeks to Eliminate Debt & Curb Spending. Please read the overview here to learn more about the series & get your FREE financial planner. If you just joined us, please start with week 1.
We have already talked at length this year about creating a functional family budget. This week we want to look a bit more at making wise budget choices. You have created a budget, but sometimes you need to look a bit closer at what you are allowing into your budget that could be adjusted to pay down debt or to increase your savings account. This is not to condemn your financial choices, but to remind you that sometimes you need to look at the big picture for the most success. Sacrifices now can result in a debt free life later.
Making Wise Budget Choices:
Look beyond immediate benefit to the big picture. As you look again at your budget, you need to look at the big picture and not just immediate gratification. I know, you REALLY need a night out. That new iPhone would be awesome. Don’t look at right now, look at how much better that dinner will taste once you save up and can pay in cash.
Focus on getting caught up, so you are no longer in default on accounts. This should be one of the key focus in your budgeting. Yes you need to account for rent, insurance, food, transportation and savings – but those optional things like a morning coffee or a lunch out with friends should be shelved until you are no longer in default on credit accounts. The longer you stay in default, the larger the fees and your balance will become.
While paying off a small balance this month may be rewarding, it would be better to put that money toward a debt you are in default with instead. Say you are $200 behind on payments to credit card A, but credit card B has a balance of only $200. You want that zero balance, but reality is getting the zero balance on credit card B would actually cost you more in interest and penalties. Look at the big picture and focus on getting caught up, so you are not in default before you focus on paying off debt.
Rethink what you consider must haves or needs in your budget. Sometimes you really do have to get serious and rethink what you consider needs. We are not saying you can have no fun or splurges in your budget. We are however reminding you that when you are in debt, even a $10 payment is better than nothing with many creditors. Focus on debt now, and fun will come later.
Making wise budget choices is often painful. It may require you to give up comfort items, fun times and even a little bit of your pride. When debt has taken over your life, you have to focus on what is best for your future, not what is convenient or easy.
Week 8 Challenge:
Look at your budget and see if there are items that aren’t really needs. Could you cut cable for awhile? Do you use the gym membership enough to justify the monthly fee or could you simply run outside instead of on the treadmill? Keep your long term goals in mind. You have been working on getting rid of debt for 8 weeks now! Congratulations!
Feel free to comment and share your ideas or accomplishments.
Disclosure: I am not a financial adviser nor do I have formal financial training. All articles are for informational purposes only and should not be interpreted as financial advice or consultation. Please consult your account and/or financial adviser before making changes to your finances. All situations are different, so please consult a professional to determine your individual needs.