Debt

Establishing A Link Between Budget And Debt Relief

If you choose the right budget plan you will get the right debt solution. Ideally, there is a relation between the two and therefore if you want to get out of debt you will need to focus on budgeting.

When you are in debt and struggling, you will get a lot of help from the different debt relief programs. There are different types of such programs such as:

  • A debt consolidation loan
  • Debt management 
  • Snowball method and 
  • Bankruptcy. 

Ideally, there is no shortage of solutions for your debt issues and conditions. You can use any one of it but if you do not know the difference, you will be in fact in a dilemma while choosing the right solution for it. 

Actually, finding the right debt relief option is very important if you really want an effective and permanent solution to your debt situation.

  • In order to make the right choice there is no single and proven formula for it. For this you will need to make the right pick considering your financial capabilities. 
  • You can use different online debt calculators that are available to determine the most suitable debt relief option according to your present financial conditions.

It is also required to make sure that the debt relief programs suits your finances the best so that you do not have any difficulty in continuing making the payments every month. This is why a proper and carefully crafted budget is required. 

The budgeting tool

In addition to the loan payment calculator, you can also use another tool for your debt management and relief endeavor. This is the budgeting tool, which you will get aplenty on the internet. This tool will help you to create the most precise and effective budget that will help you in ways more than one such as:

  • It will help you to know all your income from all different sources
  • It will help you to know all your expenses and your cash outflow
  • It will help you to review your budget from time to time to know the unnecessary areas of your spending
  • It will help you choose the right debt relief program according to your need and 

All this will help you to stay out of debt, eventually.

Need for a budget plan

Proper budgeting will helps you to choose a debt relief program. Ideally, finding the right debt relief assistance is not at all difficult but it is surely not a process that you should rush into. A proper budget plan will help you to be focused and stay organized with your finance. It will also help you to keep you away from any financial crisis.

  • In absence of a proper budget, you will make reckless spending without having any clue about how much money is actually coming in, what is the deficit and what other alternative sources you have to meet with that deficit.
  • Moreover, when you have a proper budget you will have a better view and knowledge about your debt problem and find it easy to organize your money. 

The primary reason that a budget will help you to organize your money and deal with your debt more effectively and productively is that it will help you to know about your disposable income more specifically. This is money left in your hand out of your income after you have made all your basic expenses. This money you can put away for your saving with which you can make your debt payments.

Scenarios to consider

When you want to choose the right debt solution you will need to consider a few specific scenarios. 

  • If you have more than enough money to pay your debts off comfortably then you can choose the snowball method. This method involves restructuring your payment plan. You have to simply pay off the priority accounts first. Pay off those with the lowest balance first if you ideally want to experience the taste of an early success. You will need to pay the minimum amount due for all your debts and put more money for your priority debt. 
  • If you have just enough money to pay your debts and your basic needs and even have a slight deficit you can choose the debt consolidation plan. This is actually a payment method that will enable you to reduce your monthly payments. It will also help you combine all your existing payments into one and eliminate the hard time that you may be facing in monitoring and tracking your monthly payments
  • If you just have enough money in hand to meet with your basic needs and just a little bit of money left over to make your debt payments you will seriously need a debt reduction. The most suitable debt relief option in this matter is the debt settlement program. In this program, you simply negotiate with your creditor and make them believe with reasonable evidence that you have a financial crisis and can meet only the basic needs. The creditors may agree to a settlement wherein you need to pay a portion of the total amount outstanding in a lump sum. Anything that is not paid by you will be forgiven but it will have an effect in your credit score and will also be considered as a taxable income.
  • If you do not have enough money to meet both your debt payments and basic needs then the best and probably the only option is bankruptcy. You may choose to liquidate your assets in Chapter 7 bankruptcy to pay off your creditors with the money generated or a Chapter 13 bankruptcy that will discharge all your debts but the effect will remain in your credit history for ten long years.

Therefore, the primary objective for you to ensure that you choose the right debt relief option is to determine your disposable income first. Remember, your PA unemployment card will not help you much in choosing the right debt relief option as much as your disposable income would. Take help of a pro if you need.