How Can I use Budgeting to Repay Loans?

If you have loans, then you may be struggling to repay them or have a desire to repay them early. In either case it could be worthwhile using budgeting as a method to be able to achieve your goal. There are different methods that you could use but one of them is explained here.

Make Sure You are Aware of Your Financial Status

The first step is to be totally aware of your financial situation. This means that you need to know exactly how much you owe in loans, what savings you have and also what is going on in your current account. It can be useful to note down, how much money you normally have paid in and how much you spend each month and then you will be more aware of what you have available to repay your loans. You may find that there is nothing left, but that is okay as that could be a situation that can be changed. However, to start with you just need an awareness of what is going on.

Plan How Much You Want to Repay

It is also good to have a plan with regards to how much you want to repay. It is usually the case that you will know exactly how much needs repaying and this could be a daunting amount. Try to split it down to monthly amounts as that will be a lot easier. You will be able to cope better with a monthly amount rather than thinking about the whole thing. You can use the information you know about your financial status to help to guide you with this as well. If you know how much money you normally spend on non-essentials, you could allocate some of that to repaying loans. Therefore, set a specific budget for things that are not essential and then you will know how much you can spend and will leave enough to pay for your essentials as well. You may feel that this will not be enough money for you though, but there are things that you can do to increase the amount if you want to.

Change Spending to Aid That

You could change the amount that you are spending. If you reduce your budget for non-essentials then that will make more money available for saving. However, you may not have any left for this or you may not want to do this. However, there are other things you can try. You can look at the things you are buying, both essential and non-essential items and compare the amount that you are paying for them. Make sure that you are not paying more than necessary for things that you are buying. You might be able to change suppliers, lenders, providers, brands, retailers etc and pay less for the things that you already buy which will mean that you will have more money available that you can choose to save.

Consider Earning More

Another method could be to see whether there are ways that you can earn more. You might be able to sell some things to make money or do some freelance of temp work to get some lump sums of money which could help. If you have a more consistent income though, this might be useful and that could mean that you need to find some more ongoing work, perhaps a second job, doing more hours in your job or some online work from home. There are lots of options to consider trying out and you could experiment with some different things so that you can find something that will work well for you.

How Does Budgeting Work?

Budgeting is something that we can often be told to do if we are struggling to manage our money. But it is not always that simple to do if you have no idea how it works. There are actually different ways that you can budget as well, which can make it more confusing, but it need not if you find something that will work well with you.

What is Budgeting Generally?

So budgeting means that you make sure that the money that you have will be allocated to the places that you want. For example, you might want to make sure that you cover the cost of all of your bills or you might want to have money available to repay a loan or put money into your savings account. If this is the case then you will need to come up with a plan and a budget is a way of doing it. Often people will take a look at how much money they tend to have coming in each month and the things that they have to pay a fixed amount for, such as rent, utilities, council tax, phone contracts and loan repayments. Then there will be things that will change such as food, fuel, toiletries as these are not always a fixed cost but you will usually still have to buy them. Then there are luxury items and these are the items that you can do without if you have to.

The idea tends to be that you find out how much you need to spend on necessities and make sure that you allocate some of your income towards these so that you know you have enough. Then you can calculate what is left to spend on other things. You may not have enough money to even cover essentials and you will then need to find ways to get them cheaper so that you can still afford everything that you need.

How Can I Make it Work for me?

It can depend on how your mind works and what you feel would be best for you. There are lots of different approaches that you could take and you need to find that one that suits you the best. One approach is to set up most of your payment by direct debit or standing order to be paid just after you get paid. Then you will know that the money that is left in your account after these get paid is what is left to pay for the remaining things you want and need to buy. Some people even buy everything they can on a credit card and pay this off in full at this time too which makes it even easier for them to budget, but this can be risky unless you are completely confident that you will be able to control your credit card spending to ensure you will be able to afford to repay it.

Another approach is to have different bank accounts for different payments to go out of and allocate money each month to that account to make sure enough money is put towards each thing. This can also be done with cash in envelopes if you pay things by cash. This is a very different approach but some people find that it is really helpful as it allows them to separate out all of the things they have to pay and ensure they have enough money for each one.

You will need to think about what approach will work for you, it may not be either of these but something a bit different. It is important to find something that will not confuse you and that you will be motivated to stick to.