- 01
- Oct
If you’re in debt up to your ears, you may not understand the reason why. It’s common for people who are in debt to not fully comprehend exactly what got them into the situation that they are in. But, as someone who has been in debt and known many other people who have been in debt, I can almost guarantee you that I know the reason why you’re in debt.
You’re in debt because you don’t budget. You either don’t have one, or you don’t use it. It’s as simple as that.
I’ve been in and out of debt, and the only time that I was consistently able to stay out of debt was when I was using a budget. Others who have been in debt say the same thing: a budget is an almost a surefire way to keep yourself out of debt, or to get yourself out of debt.
Why is budgeting so powerful? And how can a budget help you to get out of debt?
First, a personal budget forces you to examine your spending. A good budgeting system will make you look at each and every expenditure, categorize it, and compare the total of your spending to the amount of money you make each month. There are dozens of different budgeting systems, and each has a slightly different way of accomplishing this, but in the end they all do the same thing.
Second, a budget helps you keep track of how much of your spending is in each category. This is useful when it’s time to find places to cut your spending. The more you keep track of your spending, the easier it will be to spend less. Reducing how much you spend will give you more money to put towards paying off your debts.
Third, budgeting is a useful tool to get you and your spouse on the same page with regard to your finances. It’s crucial that you and your spouse agree on a “game plan” if you’re going to get out of debt. If you are both working at cross purposes, you’ll take a long time to get out of debt, or you’ll even go more deeply into debt. Budgeting can give you a way to work as a team, with the same goals. You’re much more powerful together than as individuals.
Fourth, budgeting helps you to internalize the debt repayment process. By putting a budget onto paper, or into a computer program, you can more easily visualize and understand where you are in your debt repayment process.
If you’re trying to track your spending habits and debt repayment progress in your head, you can’t possibly do as well as with a written budget. There’s something about putting numbers onto paper or computer screen that makes it seem more “real”.
Fifth, a budget will motivate you. Keeping track of how much progress you’ve made will get you through discouraging times, since you can look at where you’ve been and how much better off you are now. Motivation is a vital part of building momentum in the debt payoff process.
