Budgetting With Debt...

Pepperoni

Those in debt - do you build pots for things like car maintenance, presents, etc? Or do you just budget one month ahead and throw everything else left at the debt?

On_my_way

Different people budget in different ways. The most important thing is to get as much income as you can and draw up a budget of exactly everything that you will need to pay for including your debts, bills, utilities etc.

I am sure others will have some very useful links for you. Most people try to build up an emergency fund so that they can be more confident that they are getting out of debt but have some money back just incase of emergencies.

andyfromotley

Hi peps.

I posted on your SOA thread. I have just started budgeting 'properly' i use a programme that i bought. I budget for EVERYTHING that i can reasonably foresee. That includes, Christmas, Holidays, Car mot and service, My car and house insurance, (due in 12 months so i don't have to pay by more expensive monthly DD) School dinners, school trips. i am budgeting for my BILs 50th party in three months, (its a weekend away) etc etc. Everything. This means when these things happen i have the money and i don't have to bat an eyelid. I also budget for things i cannot foresee precisely, such as i have a car repair fund. Now i hope i never use it but if i need a car repair i know i have x £££'s to cover it. These are called Rainy Day Funds. I also budget toward an emergency fund. When it reaches 1k i will stop and start topping it up again if i use it) The point being none of these events should catch me out and force my to stick it on the plastic!! Its amazing how many people, myself included were caught out by Christmas every december!!) these things were responsible for building up a large debt by not budgeting from my perfectly adequate salary. No More!!

FireWyrm

There is no point in NOT budgeting for those things since they will happen regardless. In terms of paying debt, you ought to be paying it at the fastest rate you can comfortably afford and pretending that an MOT isnt going to happen and paying the debts more quickly only to end up reaching for the credit card a few months later because you are inadequately funded is counter productive. What should happen is that one figures out all the fixed outgoings (stuff that cannot be avoided), then adds discretionary stuff (what can be cut down comfortably, but not dispensed with entirely) and then whatever is left, is for debt cessation.

If one then uses some sort of budgeting software (see my sig), they can be sure that the money not being used for debt is used efficiently for a given purpose. Just because I have many thousands of pounds in my accounts does not mean that it is available for me to spend. Every other 'spare' penny goes to debts. If you are saving to cover an MOT or whatever, then it is not 'spare' in that sense of the word. What most people can do to help themselves is to ensure absolutely that those pennies that are not debt busting are used in the most efficient way possible and never squandered needlessly.

timbstoke

You need to budget for all foreseeable expenses, but that doesn't necessarily mean you can't still pay as much as you can towards your debt. For example, suppose you're paying off a credit card debt, and you know you'll have to pay £200 for car insurance in two months time. You don't necessarily need to put £100 a month into a separate account ready for the insurance. You can pay £100 extra off the credit card, and then pay the insurance on your card. You'll probably save more on your interest payments that you'd earn by keeping the money in an interest bearing account. It's all about figuring out what works best for you.

Silian

As the others said, budget for everything.

But if you are using ynab it doesn't matter in which of your accounts your money is - you can move it to your credit card to save on interest. Just be careful because there are some things that you can't pay on your credit card.

I am actually doing the opposite right now. I budget for everything (including repaying my debts), but because my credit card is currently on 0% I leave the money in my normal account to earn interest. Once the 0% runs out I will move the money over to my credit card.

Pixie5740

You need to budget for everything. If you don't then the next time an "emergency" pops up like needing a filling from the dentist or the car needing new tyres, it will just end up back on a credit card. It's a good feeling when these (un)expected expenses occur and you know there is money budgeted and available to pay for it without resorting to credit.

enthusiasticsaver

My advice would be to budget for everything and cut up the credit cards if you have money outstanding on it and you are paying interest - only exception being 0%. Otherwise you will never get ahead of the curve. Calculate your costs from last year re car/home insurance and mot and service/repairs etc and add on 10% then divide in 12 - depending on what time of year it is due. Set up a separate savings account for presents and Christmas. Also try to put something into an emergency fund so you have a safety net. Debt reduction on its own is no good unless you are putting in good practices for the future which means not reaching for a credit card or the overdraft if you run out of money. Most of these things can be foreseen so plan ahead and it will help relieve the stress of finding money for these things.

daydream_believer_2

We now budget for everything, and I literally have envelopes for everything.
I work out how much I need to cover all expenses,and put the money away, and whats left we throw as much as possible at the debt, and live on as little as possible.
We have a very hapazard inome due to being self employed, so I put away as much as possible when I can, to cover all expenses first. This means the debt is slower in being paid off, but we never use credit anymore, so its not increasing.