Trouble With Debt
It is always a good idea to have a clear understanding of your income, debts and expenses before you discuss your options with a specialist. Budgeting is all about making a smart allocation of your funds that works within your means.
We’ve created an online Budget Calculator to help you understand your cash flow. If you’d rather manually create your own budget here are the best ways to form a plan and implement a solid plan so that you’re able to manage your money more effectively, and build your savings.
Work Out How Much Money You Have Coming In
This is everything that comes into your bank account every week, fortnight or month. From your salary to additional income that might be shared with your significant other, it’s important to take every single part of your earnings into account such as dividends from shares, side jobs and interests on savings..
This way you can even determine for yourself how much you are earning and how much you can afford to put into your repayments each month, and what it will take for you to pay off your debt budget entirely.
Find Out Where Your Money Is Going
Now that you know how much money you have coming in, it is time to take a look at your outgoings. What costs the most, what can be sacrificed and what can be changed for the good of your wallet.
Start with regular or fixed amounts that you have to pay such as rent/mortgage, credit cards, personal loans, and taxes. Generally, these amounts are fixed or of the same value that’s due each month. Then work through the amounts that vary depending on your lifestyle, for example: groceries, utilities, entertainment and subscriptions.
If you haven’t been keeping track, write everything you spend within a week or month. At the end of the week/month, you’ll have a good snapshot of where your money is going and you can track your expenses against your incoming wages.
Calculate How Much You’re Spending
Subtract the spending amount from your income total (after tax) and you will be left with either a positive or negative amount.
If the number is positive then you can be happy with the knowledge that you’re spending less than you earn and can perhaps start looking at savings or paying down debts according to your budget. If however, you are in the negative, don’t worry, the whole point of creating a budget debt is to find out what is going on and then use this information to fix any deficiencies. From here you can determine if you need professional help to manage your debt issues.
Adjust Your Spending
You’d be surprised how only a few little fixes and changes to your spending habits can give you a bit of extra money in your pocket at the end of the month. That $5 burger could be better spent on buying 5 frozen ones in the supermarket, or that luxury handbag money could be used on your next utility bill.
Usually making some basic adjustments can help you get on top of your debts and take control of your finances. However, if you find that your regular payments are outspending your income, then it could mean that you are insolvent.
Unless you can change your situation you might need a more formal approach to getting on top of your debt repayments.
There are also many options available to you that can help you break free from debt; some examples include:
- A Personalised Debt Action Plan
- Government Legislated Debt Agreements
- Personal Insolvency Agreements
If you would like to discuss the above options, call 1300 171 351 and speak confidentially with one of our debt specialists to find out which option is right for you.