Stop Living with Debt: Four Ways to Prioritize Repayment
Start budgeting to pay off debt today with these tips from Citizens Bank
Whether you've just graduated with student loans or have a mortgage to pay off from purchasing your first home, maintaining a budget while paying off your debt is a top priority for your personal finances. This will help you make your payments on time, avoid additional interest, and build or rebuild your credit. Budgeting to pay off debt is more than just skipping lattes and lunches out. If you’re living with debt, managing it responsibly begins with structuring your budget to complement your debt repayment plan. Check out these tips to get a better handle on paying down your debt while also refining your monthly budget.
How to prioritize your debt repayment plan in your personal finances
Budgeting to pay off debt and repairing your credit is easier when you keep track of exactly how much you have and how much you can afford to put toward your debt. Consider these simple, yet impactful, ways to start creating your new budget:
- Itemize and prioritize your expenses. When you create your budget, add up the minimum amount due on all your monthly bills, debt payments and necessary expenses, and subtract the total from your after-tax income. This will give you a working total for the rest of your budget. Once you have this total, take a second look at your budget categories. When you’re budgeting to pay off debt, it’s important to determine if there are any areas you can cut to increase the margin between your income and expenses.
- Factor additional payments into your budget.After all necessities are accounted for in your budget, consider taking 5-10 percent of the remainder and devoting it to paying toward the principal of one of your debts. It’s often beneficial to first focus on paying down the debt with the highest rate (to avoid accumulation of interest), but if you have a debt that is nearly paid off, you might consider focusing on that debt first. Over time, these extra payments can help you limit the amount you pay in interest, rebuild your credit, and could significantly reduce the length of your debt repayment plan.
- Stay organized from the beginning. When you’re living with debt, staying organized can help you keep your spending within the budget you set. A spreadsheet program is a great way to organize your existing debt, ongoing monthly bills and obligations so you can ensure you’re spending within your limits. When it comes to taking on new debt, you can also use this process to make sure you can afford the new payments and maintain your style of living, or look for places to cut back.
- Look for opportunities for everyday savings.Consider shopping at a discount chain for a few months to cut back on groceries, carpooling with a coworker or postponing an expensive family vacation in favor of a camping trip to focus more of your funds toward your debt. While being frugal is a financially responsible way to live all the time, these can also just be short-term cuts while you focus on paying down debt and repairing your credit. Aside from frugal spending, if you have student loans or own your home, you may be eligible to refinance your student loans or mortgage to save money on the interest you’re accumulating.
Make managing your budget a part of your daily routine with online banking tools
Maximizing convenience is key when you’re budgeting to pay off debt. The easier it is to track your expenses and monitor progress, the more likely you are to stick to your new budget. With online banking from Citizens Bank, you’ll have the option to pay your bills with the click of a button anytime. You can also set up direct deposit and automatic bill payments to streamline your regular transactions. Plus, our mobile banking app makes it even simpler to check balances and handle payments – helping you stay on track when you’re on the go.
Choose the right bank account to help reduce expenses when living with debt
If you’re currently living with debt and looking for ways to get the most out of your budget, consider One Deposit Checking from Citizens Bank®, a simple bank account designed to save you money. With One Deposit Checking, if you make at least one deposit per month, we’ll waive the monthly maintenance fee, leaving you with more money to put toward your debt repayment plan. To open a bank account or learn more about how online banking tools can make debt repayment easier, contact a customer service representative today.