Law Office of Rick Morin, PC

Is your debt getting out of control? Here are some budget life hacks that might help you get out of a sticky debt situation.

1. Build a Budget

This one is so obvious, but I have to put it as number one because most people don’t have a budget plan. Without a budget, the rest of the following tips will be meaningless. A budget can be a simple listing of your usual household expenses, such as rent, utilities, food, etc. In fact, I’ve prepared a PDF budget that you can fill out for yourself. Download it here.

Only once you have a grasp of your financial situation will you be able to make informed choices about your debt. Don’t just wing it. Sit down and create a comprehensive budget. It will only take a few minutes.

2. Revise Your Budget

Maybe you don’t have any money left over on your budget to make debt payments. If that is the case, you might need to re-evaluate your budget. Common areas that can easily be cut back are the communications line: cell phone and cable plans can eat up a huge portion of your budget. If you’re deep in debt, do you really need to spend $200 a month on cable and $200+ a month on a cell phone plan?

If you can’t think of any areas where you could reduce your budget, think about showing it to a friend or family member. A fresh set of eyes might help provide some context for where you are spending your money. What might seem like a “typical” monthly expense for food or a car payment might seem excessive to another person.

3. Stick to Your Budget!

Now that you have an idea of your monthly budget, it is time to stick to it. If your budget states that you have $300 over at the end of the month, you could easily dedicate that to debt payments. But you’re only going to make progress on your debt if you dedicate your disposable income to paying things off.

4. Look at the Cost of Your Debt

Are you always taking out high-interest payday loans or over-drafting your account? These are very expensive ways to borrow money, and they will quickly wreck your budget. Do whatever you can to avoid $35 overdraft fees and the crazy-high interest charges associated with payday loans. This is why a budget is so important: you need to live within your means. If you can’t live with the income that you have, you are going to dig yourself a deep hole because of the high cost of “quick fixes” like payday loans and overdrafts.

5. Bankruptcy Might be an Option

There might be a point where no manner of re-jiggering your budget will help you get out of debt. A Chapter 7 or Chapter 13 bankruptcy might be the solution for your debt options. While bankruptcy will not affect the structural issues of having a unbalanced budget, it will get rid of the pressure of having to pay off your unsecured debts. A fresh start might be all you need to get back on track. But even after bankruptcy, the tips above will be critical for you to build a solid financial foundation for the future.

Please call my office you would like to discuss whether bankruptcy is right for you. I can be reached at (916) 333-2222.