Life on a Budget Prepares You for Debt Freedom

Living on a budget may not be easy, but it’s a necessary part of getting out of debt. Credit card payments can eat up a significant part of your paycheque. The money you borrowed in the past keeps you from doing the things you want in the present.

Getting out of debt is a great goal and will make the effort worth it in the long run. You’ll have more money to enjoy and save in the future.

Setting a Timeline for Debt Freedom

A major obstacle to consistent budgeting is will-power. It can be tiring keeping track of all your spending and consistently resisting impulse purchases. By setting a timeline for getting out of debt, you’re telling yourself that there is an end to it. One day, you will see the results of your hard work. When your last account has been paid off, all the money you were using to pay interest and give back to the credit card company is yours now. You can build your savings, treat yourself, contribute to charity, or put it toward any life goal you have.

The question is, how soon can you be debt free and holding onto more of your money? That depends on a number of factors:

  • How much do you still owe?
  • How high are interest rates?
  • How much can you afford to pay each month?
  • Are you using any form of debt relief or restructuring debt?

A debt repayment calculator can help you quickly see what your timeline looks like and how it can change if you leverage different tools, including debt consolidation options, a consumer proposal, or bankruptcy.

Lifestyle Tips for Living on a Budget

Life on a Budget Prepares You for Debt Freedom

#1 Find the Right Money Tools

You need the right money management tools to pay down debt. They don’t have to be complicated. They might include:

  • Setting a savings goal so you know how much you want to contribute to debt payments each month;
  • Using a budget to calculate how much you have to spend and how much you can save;
  • Using a spending tracker app, spreadsheet, or even a notebook to keep an eye on where your money is going;
  • Establishing an emergency savings fund that will help you avoid debt in the future.

#2 Stick to Essentials

Fixed expenses are tough to wiggle out of. Things like housing costs and car ownership are longer-term investments. Being frugal when you move or buy a car are the best ways to keep those budget lines down and free up more room for other things. Everyone’s circumstances will be different, but you can try to save on fixed expenses by only driving one car as a family, driving a smaller and less expensive car, sticking to a smaller house, or even renting instead of owning.

#3 Turn Off Social Media

Often our spending habits are influenced by what we see our friends and family doing. Social media provides a constant stream of photos of exotic vacations, dining out, cool clothes, and more. Seeing all of that normalizes conspicuous consumption. You can start to get jealous and wonder why you can’t afford those things too. But what social media doesn’t show you is the credit card bill that comes afterward.

Turn off social media and focus on your own life. Do the things you enjoy that don’t cost a lot of money, and don’t worry about what others are buying.

#4 Challenge Yourself to Stop Eating Out

Eating out can feel like a harmless expense, and a well-deserved one after a long and stressful day. The costs of eating out several times a week add up quickly, though. Restaurants and takeout can cost hundreds of dollars a month and cutting them out of your lifestyle – or limiting how often you go out to special occasions – is an easy way to get fast savings. One way to start is to try not to go out for dinner for one month at first. Some find habits are easier to form if you give them a trial run before committing all the way.

#5 Cut Out Shopping as Recreation

Going shopping as a leisure activity can quickly stress out your budget. Although it may sound simple, if it’s an activity you’ve become accustomed to, you may need to find another way to de-stress and occupy your time. Setting clear financial goals, such as saving up for something, can also help you defer the impulse to spend, because you have a bigger goal to look forward to.

What to Do When a Budget Isn’t Enough

You’ve taken a deep look at your budget, trimmed all the expenses you can, and you still don’t have enough to make progress on your debts. Getting stuck making minimum payments or only slightly more will keep you in debt for years, and that’s if you don’t add to it.

If budgeting isn’t enough to help you get out of debt, it’s time to talk to G. Slocombe & Associates about another plan. You have other options that can help you get out of debt sooner and for less money. The top two options for debt relief in BC are a consumer proposal and bankruptcy.

A consumer proposal is an increasingly common solution over bankruptcy, and only a licensed insolvency trustee in B.C. can help you file one. In a consumer proposal, a significant portion of your debts are forgiven and interest rates stop. You are given up to five years to pay the remainder in monthly installments that do not change even if your income does. The size of the monthly payments balance how much you owe with how much you can afford. A consumer proposal can give you a chance to get out of debt in far less time and at a much lower cost.

A budget is a great first step, but it may not be enough on its own. If you can’t tackle debt on your own, there are other tools you can use.