It’s not rocket science. If you’re buried in debt, you spend more than you should. Maybe just cutting back in a few areas will be enough to get you back on track. However, for those with excessive debt, a drastic approach may be necessary, such as implementing a frugal budget.
What’s a Frugal Budget?
A frugal budget eliminates all unnecessary expenses and greatly restricts spending. The goal of a frugal budget is to maximize the amount of money you have to use toward paying down your debt.
Does It Work?
Yes; however, doing this type of budgeting isn’t for the faint of heart; it takes a tremendous amount of willpower. Living in complete frugality is rare, but we all know that person who still has a flip phone or takes extra condiments from a fast food place to use at home. You don’t have to become that person to create a frugal budget. It can be an effective short-term solution to get a big jump on paying down your bills, especially when used in conjunction with a debt settlement plan through a debt relief program.
One such program is a balance transfer. When you transfer your balances from high-interest cards to one offering a low or 0% introductory interest rate, it’s vital to pay as much as possible during that introductory period. A frugal budget can allow you to pay more toward it, and the end of the period signals the end of your frugal budgeting. When there’s a light at the end of the tunnel, frugal budgeting is easier follow.
How Do You Do It?
Making a frugal budget isn’t difficult, but you need to be thorough.
1. List your monthly expenses
Include everything that you currently spend money on, such as utility bills, food, rent or mortgage, entertainment, gas or transportation costs, credit card bills, and even your morning coffee.
2. List your total income
Include any money you have coming in, not just your job. Include child support, rental properties, bonuses; and anything else you can think of.
3. Calculate the difference between the two
Are you spending more money than you’re bringing in? If you’re not, how much is left over?
4. Make cuts
Go back to your list of expenses and analyze your spending. Determine which items you don’t need. Be tough. Your goal is to have as much money as possible to use to pay down your debt. Keep only the absolute necessities.
5. Don’t forget your savings
While the goal is paying down debt, your budget should include some money to put into your savings account. If you don’t, you’ll be taking a giant step backward if your car breaks down and you’re forced to use a credit card to pay for repairs.
If you need help creating your budget, National Debt Relief has a handy budget worksheet, found here.
Assess Your Progress
Once you’ve implemented your frugal budget, and you’ve been faithfully sticking to it for a full month, take time to assess how things are going. Are you finding that you’re running out of money for things you need? If so, then you may need to adjust your budget. If you feel the budget is too restricting and unbearable, don’t give up. Adjusting the budget to include a little money for entertainment purposes will make it a little easier to bear.
Looking for other ways to have more money for entertainment can help too. Get a side job, host a potluck dinner for friends, or visit your local library for complimentary or discounted admission to nearby attractions. With a little imagination, entertainment options are limitless!
Learn to Spend Wisely
Frugal budgeting is all about making smart decisions with your money. By scrutinizing your spending, you’ll learn to make wise decisions throughout your life, even when you’ve gotten on the right financial path and put your debt behind you. By adhering to a stricter budget, you’ll be motivated to look for ways to stretch your dollar, such as going to thrift stores, looking for sales, and clipping coupons.
Frugal doesn’t need to mean boring, nor does it mean cutting all the fun out of your life. Being frugal simply means you’re more responsible with your money and that you’ve creative ways to get what you want out of life!