Financial stress doesn’t disappear at bedtime, it can keep you up at night worrying about repayment, especially if you’re dealing with multiple debts at the same time. But losing sleep won’t help you with repayment. The key is a good budget strategy that works for your lifestyle and specific situation.
50/30/20 Rule to Pay Down Debt
Just like anything in life, different strategies work for different people. The 50/30/20 rule is a great starting point for beginners or anyone who likes structure. It allocates 50% of your budget to necessities like rent or mortgage, utilities, auto loans, and groceries; 30% to recreation and entertainment; and 20% to savings and debt repayment. To pay down debt faster, look for ways to trim—stream movies at home, save restaurant meals for a special occasion, and redirect what you save toward your balance.
Zero-Based Budgeting for Debt Repayment
With zero-based budgeting, every dollar has a purpose. You budget down to $0 each month, giving every dollar a designated destination before the month begins.
Pay Yourself First Budgeting
Saving for your future or for an emergency is important, and financial experts highly recommend putting a certain amount away each month. If you’re one of those people that finds saving hard to do, then you may want to try this strategy. Instead of paying the necessities first, you would set aside a specific amount of money each month to go to savings, using the rest to apply toward bills and living.
Envelope Method for Debt Repayment
You might be thinking, who uses paper anymore? Well, the truth is, many people still do. But there are plenty of people who prefer to budget digitally. With this method, you can do both. Whether you label real envelopes and put cash inside them or through digital means, you should assign each envelope a category of spending, including recreation, groceries, and entertainment. Once the money is gone for the month, you have to wait until the next month to begin again.
Additional Tips to Help You Budget Better
In addition to having a solid budget plan, choosing a debt repayment strategy like the debt avalanche or debt snowball can help you stay on track as you pay back debt.
You don't have to budget alone. Budget apps like GoodBudget or Honeydue can help you track your spending and bills right from your phone. And if you're feeling overwhelmed, a nonprofit credit counseling agency can help. Certified credit counselors will work with you to build a budget tailored to your situation and, if needed, enroll you in a debt management plan, negotiating with your lenders for a lower interest rate and a consolidated, affordable monthly payment. Whatever path you choose, the right strategy makes debt repayment more manageable than you might think.