Budgeting the Way out of Credit Card Debt

Credit card debt can be a scary, scary place. Most consumers facing debt have racked up debt that they are unable to afford to repay and therefore are only able to make the minimum payments toward the credit card debt. Unfortunately, the majority of the minimum monthly payment paid to the credit card company is allocated towards the interest of the debt, rather than the principal. This means that the customer paying the minimum monthly payment pays a small portion of the debt and therefore can take years to get out of the debt that has been racked up.

Though there are many ways to get out of credit card debt, the customer is often required to make significant changes to their budget and spending in order to repay the credit card debt and increase the amount that is being paid every single month.

The first step to budgeting the way out of credit card debt is to establish the income and the expenses. Those in debt will often find that the monthly expenses are above the income of the household and therefore they are accumulating debt every single month. Customers need to reduce the expenses to balance the budget, or increase the income – and this often comes with changes that are made to the expenses. Though it can be difficult to change the fixed expenses each month, like the mortgage, customers are often able to adjust the variable expenses throughout the month like spending on food and clothes, or even adjusting the transportation expenses by choosing less expensive insurance or getting rid of a vehicle in the family.

How much of the budget should be allocated towards credit card debt? No more than thirty percent of the budget should be allocated towards debt. In fact, thirty percent is a high percentage of the budget that is allocated to debt – and consumers that choose to allocate thirty percent of the income towards are creating an aggressive repayment plan to eradicate the debt effectively.

The customer can make small changes in the budget to find more money – including taking on a couple of extra shifts in the workplace or even choosing to  get rid of a few luxuries in the budget short term, like cable packages or days out with friends. Finding less expensive alternatives can be an effective way to find the extra money in the budget to repay the debt.

Creating the budget is one thing, but the consumer must be dedicated. If the consumer is not dedicated to the debt repayment plan then the debt will not be successfully repaid.