Debt Solutions - Creation of a Budget
No man is an island. We all need help once-in-a-while. Were not only referring to personal matters. Were talking about financial matters. We reach a point where we have to buy something out of necessity, but we cant pay in full just yet. An example of this is a home.
Now the time has come for you to repay on what you own. You must have the discipline to plan out how much you should have saved so when your time is up and you have to shell out the money you owed there and then (plus interest), you wouldnt have a hard time doing so.
Prioritize which of the debts must be paid first. Prioritize your bills. Make a list so it would be more organized because you could see it right in front of you.
This is what you call establishing goals. Establish first what must be prioritized over those you could schedule paying some other time.
The essential debts are debts that should be on top of your list. These are - Rent or mortgage. Of course, who in his right mind wont pay up as soon as possible. Paying your rent or mortgage bills on time helps you have a roof over your head.
- Child support. If you dont pay on time, theres a possibility you can be held behind bars.
- Utility bills. As much as possible, set aside a budget on gas, heating, water, electricity or telephone when you get your paycheck. In doing so, when the bill comes, then you have something prepared.
- Car payments. This also includes car maintenance.
- Other secured loans. If you dont repay collaterals, the creditor takes the property even without court interference.
The non-essential debts can be set aside because when these arent paid, they dont have that much of a side effect. Its a desired goal but not really a priority. The only concern that can be considered when you dont pay non-essentials debts for a long period of time is the negative image it could project on your credit report.
- Department store and gasoline charges. Failure to pay these charges may result in losing credit card privileges. If its too large, you might be sued.
- Loans from friends and relatives. Morally speaking, there is an obligation to pay but sometimes since theyre family, we think that they will understand if we cant. Check with them if you can delay the payment and ask them for how long.
- Newspaper and magazine subscriptions. Little by little, if you havent paid, theyll amount to so much.
- Legal and accounting bills. If these remain unpaid after a long period of time, then thats when you might be sued.
- Other unsecured loans. In unsecured loans, theres no collateral for the debt. This means that the creditor can sue and then collect the debt.
Heres the confusing part. Some of the bills border between essential and non-essential. If you let these bills defer for a long period of time, it could have consequences in your personal life.
- Auto insurance. The consequence in some states is losing your drivers license.
- Medical insurance of bills. If you have a tainted record, you might have a hard time getting new insurance in the future.
- Credit and charge cards. If you dont pay your bills on time, you might lose your credit privileges and would have a hard time applying for a new credit card.
Now that we laid out the groundwork on how you can prioritize which bill to pay first, we move on to having a time frame.
Its best that you have a calendar in front of you. A palm pilot or the calendar in your Microsoft Office program will do. Mark the dates wherein you would have to pay the specific debt be it essential or non-essential. Then what you can do is set aside the bill that is allotted for that debt.
As for the budget, prevention is always better than cure. You know how much you get in a month. That being in mind, you must allot how much percentage of your salary shall go to which. Then do your best to stick to that budget.
If this is how much you should spend for leisure, then thats how much you should spend for leisure. If at one point, it went overboard, then there would have to be a sacrifice on another aspect, such as food. That seems off, right?
So even in budget, you must also list down which is number one for you. Have the discipline to stick to your priority, your budget and your time frame. If you succeeded, paying the bills wont be any problem.
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