Trouble With Debt
If you find that your finances are spiraling out of control or that you are living on credit to make ends meet, for whatever reason, it is important to act quickly—just remember that you are not alone and that help is available.
It is always a good idea to take a long hard look at your budget before you discuss your options with a debt specialist.
Budgeting Is all about Taking It Back to the Basics …
- Work out how much money you have coming in
- Find out where your money is going
- Discover if you are spending more than you are earning
- Then adjust your spending, or savings, in certain areas to improve your situation
Lets go into a little more detail on each option:
Work Out How Much Money You Have Coming In
The first step is to determine how much money you make, that is, your total income. This is usually a simple amount to figure out, as you can check your pay slip or review your online bank account to find out exactly how much you earn per week, per fortnight or per month.
If you are single, then it’s just your income; if you are married or share finances with a partner, then be sure to include their income in the budget as well. In addition to your wages, be sure to include any other sources of income (e.g. investment property income, an online store on eBay you use to sell items through, shared dividends, etc.).
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 (i.e. your expenses). It is best to start with the regular or fixed amounts that you have to pay, such as rent, mortgage, credit cards, personal loans, taxes, etc. Generally, these amounts are fixed or the same value is due each month.
Once you have accounted for your fixed amounts, it is then time to go through the amounts that can vary depending on your lifestyle, for example: groceries, utilities, entertainment, subscriptions, etc. If you don’t keep track of spending on these items, then focus for a week or a month on writing down everything you spend money on and the amounts you spend. At the end of that period, you will have a pretty good snapshot of where your money is going and can then track your expenses against your incoming wages.
Discover if You Are Spending More than You Are Earning
By now you should have a pretty good idea of your incoming and outgoing money, so take some time to total up your income and spending. Then, 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, well done, you are spending less than you earn and can perhaps start looking at savings or paying down debts with the left-over money. If however, you are in the negative, don’t worry, the whole point of creating a budget is to find out what is going on and then use this information to fix any deficiencies.
Adjust Your Spending or Savings in Certain Areas to Improve Your Situation
Now that you have identified the short fall, you can review your outgoings and adjust your budget to get back into the positive. With just a few tweaks to your spending habits, you can often significantly improve your situation. Consider making coffee at the office instead of buying it each day, eating out once a week instead of twice, or forgoing Gold Class at the movies and go to the regular cinema.
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 like the rent, utilities, car registration, etc., the needs of life, not just the wants, are out-spending your income, then this could mean that you are insolvent; unless you can change your situation (i.e. rent a cheaper property, be more frugal with your power usage or sell your car and opt for public transport), you might need a more formal approach for getting on top of your debt.
There are 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.