How to manage personal finances and avoid debt with the help of budgeting

Posted by: Aiden white on

Are economic downfalls affecting you and creating financial hardships for you? Are you too worried about losing your job or how to deal with your existing debts? Don’t get paranoid! You may easily avoid a potential personal financial crisis, get out of debt, and stop incurring new debts if you get back to basics with a proper budget.

However, creating a budget is a simple thing that you can do right now to improve your financial situation. Budgeting may include mapping out your current finances and prioritizing your spending requirements. Above all, the key to a successful budget is consistency.

Since budgeting is a long-term process, the more consistently you log your expenses, assess your progress toward your financial goals, and look for ways to reduce wasteful spending, the more benefit your budget will have on your financial life.

Let’s take a closer look at the budgeting strategy and how it can help you to manage your finances, along with keeping your debts away!

What is budgeting?

Budgeting is the method of creating a financial plan to spend your money wisely in multiple categories. The spending plan is named a budget. This plan will help you to allocate money from your paycheck into several essential spending groups like household, transport, debt payments, insurance, mortgage, etc.

Budgeting helps you to balance your monthly expenses with your hard-earned limited income. This balance is needed as if you overspend in any category or group, the other groups may face a deficit. Many people often forget that they spend more than they earn and slowly sink deeper into debt every year.

So, you’ve understood that you need a budget to run your financial life smoothly. If you don’t have enough money to buy a certain thing, budgeting can help you to make provisions and help you focus your money on the thing that is most important to you.

Why is budgeting so important for you?

Budgeting is one of the most important financial habits that you should follow. Creating a budget is wise whenever you face financial hardship and control your money problems. But if you’ve never lived on a budget, or haven’t experienced all the benefits that budgeting has to offer. So, you might have no idea about the importance of budgeting in your life.

You need a budget and a proper spending plan to pay off existing debts, save money, and avoid debt. Apart from that budgeting is also important because it helps you control your expenses, track your expenses, and help to create an emergency fund to meet sudden financial needs. Additionally, through a revised budgeting, you may make better financial decisions for your life and focus on your long-term financial goals.

These are the benefits of budgeting that makes it so important for your finances:

a. Budgeting helps you to remain organized – It will be easier to live your life if you follow a budget and keep your financial life organized. Budgeting helps you to maintain all the accounts, debt payments (credit card debt, payday loans, etc.), and other calculations in order, which keeps every expense category well funded and balanced with the monthly income.

b. Budgeting helps you to be on track towards financial goals – It is important because it helps you to be on track when you are trying to fulfill financial goals. To complete your life goals you’ll need a good plan, and need to focus on the method you are following. That’s why having a budget is so important.

c. Budgeting allows you to control spending – Budgeting helps you to keep a close eye on your daily spending habits. This way you may locate every big/small expense and its effect on your budget. That information can help you take control of your spending.

d. Budgeting keeps you away from debt – It can help you get out of debt, or help you to create a plan that may help you save a good amount of money every month. You can use that money to pay off unpaid debts and purchase without using credit cards. This way you may avoid debt and keep the total debt amount under control.

e. Budgeting helps you to save for emergencies – Creating a budget may help you to be prepared for any unexpected financial event. You never know when an urgent renovation or repair work will arise in your home, or your car needs a major overhaul. So, through budgeting, you may generate a good emergency fund and create provisions for sudden expenses.

f. Budgeting makes you financially free – Budgeting helps you create a solid plan for every possible financial move in a month. You can assume and allocate money for your every need, and cut off unnecessary items from the requirement list. This way you may stay ahead of your financial goal.

Apart from that, once you start living on a budget, it will help you to finally build your desired financial life that you always wanted. Through budgeting, you may ease up your paycheck-to-paycheck lifestyle, become debt free, and have plenty of financial back up ready.

Different budgeting strategies to manage money

1. Budget what you have earned

You might be going to receive money from different sources apart from your paychecks, such as alimony or child support. But those are uncertain funds, so you should depend upon the monthly paycheck that you have received, and create a budget on that money to cover expenses. It would be a practical approach to budget on the money that you have in your wallet.

2. Savings should be a fixed priority

Savings should be treated as an expense and should be included within the budget. That means you should decide how much you can afford to save and make provision for that money in your monthly budget. Practically you’ll be paying that amount to your savings account each month.

This is how you can build a money-saving habit into a consistent habit. If you like you may ask your HR department to split your Direct Deposit between two accounts, one into your checking account, and the other one into your savings account.

3. Track your spending without fail

This is most important as most of the time people lose track of their spending and build a huge debt burden. Overspending may create havoc in your financial life so, if you are budgeting, make sure to track every penny you are paying. Save your receipts and note your purchases immediately; it will help to analyze day-to-day expenses and you can confidently pay off debts.

4. Limit credit card purchases

Credit cards are mostly responsible for overspending. If you run out of cash, you may have to use a credit card. But if you have enough cash with you to make the payment, do it. Do not use credit cards if you can’t afford to pay the bills. The more you stop using credit cards, the less you will fall into credit card debts.

5. Make seasonal adjustments for household expenses

Many flexible expenses change seasonally such as gas bill, electricity bill, water bill, etc. If you set these types of flexible expenses around the most expensive month in the year, you may not have to make seasonal adjustments. You’d rather see more savings in the months when you don’t reach the average limit. You should use that money to pay off debt, if any, so that you can get out of debt faster in the future.

6. Treat debt pay off as a mandatory expense

It doesn’t matter what type of debts you have, such as credit card debt, payday loans, student loans, mortgage, tax debt, and other expenses. Once you ignore paying such debts in a month, it will start generating more debt in the form of interest and late payment penalties.

So, you must include debt payments as a mandatory expense in your monthly budget.

How budgeting can stop you from going into new debt

It is important to take charge of your finances as soon as you understand why you need to avoid debt burden in the first place. Most of the time it is caused by serious spending issues. Your credit card bills are the prime reason for increasing debt load. Apart from that, utility bills are also one of the big factors that trigger overall debts.

So, following the below-given steps of budgeting may help you to stop evergrowing debts in a month.

  1. Buy with cash – If you can’t afford to buy a particular item or service, without a credit card, it is best to avoid it. If you have enough cash with you, use it promptly. It will limit your spending most of the time.
  2. Track your credit spending – If you still have to use a credit card, track how much and where you spend that money. Make sure to calculate how much time it is taking to pay that amount back through the credit card bill.
  3. Determine priorities – Remove the items from your list that you want but don’t need immediately. Things or services that are essential for you must be purchased, such as groceries, medicines, milk, vegetables, and services like power bills, water bills, etc. But you may easily skip an expensive wine bottle, or a costly chocolate box for the kids, or dining out at an expensive restaurant. Avoiding these luxuries may help you to pay off debt with ease, as the bill will be lower and affordable. It can help you avoid incurring new debt, too.
  4. Avoid cash advances – Never take out a cash advance by using your credit card. Credit cards have a high APR and the interest is charged daily. It will increase your debt amount way faster than usual.
  5. Pay off credit cards in full – Pay off your credit card debts in full every month. Most of the time people only pay the minimum balance in a month and leave the rest of the balance unpaid. As a result, the credit card company charges the interest, and the total credit balance increases. It will be easier for you to manage credit cards if you follow a budget plan with credit cards.
  6. Find options to reduce credit card bills – Use coupons, discount vouchers, as much as possible to reduce your credit card bills. It is practical to use 1 or 2 credit cards that offer great deals and discounts. So, instead of using multiple credit cards, use those two cards with maximum benefits.
    Apart from that, using multiple cards may increase overspending as your credit limit will increase, and you might lose track of your spending. As a result, your total monthly credit card debts might get increased. So, limit the number of cards you have and lower your credit usage.

How to pay off existing debts through budgeting

  1. First of all, list how much debt you owe and to whom. Also, note the applied interest on every debt account you are paying. Once you get a complete picture, it will be easier to form a repayment plan and motivate yourself.
  2. Pay off debts as per their priority. Mortgage and vehicle payments should be paid first, as they are secured debts. But do not underestimate unsecured debts and make the payment on time.
  3. Develop a realistic debt relief strategy. Make sure you can cut off expenses from unnecessary items to generate some extra money by reducing overall monthly household costs. Do not forget about contributing to retirement accounts and investments. They may also help you to pay off debts when a situation calls.
  4. Once you follow a suitable budget and generate some savings, think about considering debt consolidation services under the guidance of a professional debt relief company. This way you may consolidate your debts at a lower interest rate, without incurring more debt.
  5. Have an emergency fund ready with at least 6-month of your paycheck. This will help you to get out of debt and cover your household expenses if you become unemployed, sick, or temporarily disabled.
  6. Increasing your total monthly income is also a part of a good budgeting strategy. By doing some side hustles if you engage more money into your monthly budget, you’ll have excess funds to pay off debts which you might avoid paying in the current month. This way, you can make an extra payment on the existing debts and get out of debt faster, along with saving from the interest payment. That means you’ll be paying less interest but become debt free faster.


There is no doubt that by using a solid budgeting strategy you can manage your money easily and handle your debts better than others. But forming a budget only won’t work if you do not follow it properly. Also do not expect to get a positive outcome from the first month. Initially, you’ll see a low amount of savings. But in the long run, you will be able to save a lot and become debt free.

What can seniors do if they are struggling with credit card debt?

Posted by: Aiden white on

According to a recent CNBC report, debt among the older adults in our country has increased rapidly by a whopping 543% in the last two decades.

Isn’t it shocking enough? But what makes them fall prey to the credit card debt trap?

Many seniors have been using credit cards for a long time. And they don’t pay off their credit cards during retirement.

After retirement, a substantial portion of older adults depends on Social Security. And in 2020, the average Social Security check was about $1,503 a month. So, certain unexpected costs in retirement and inflation with limited income make them dependent on credit cards.

How can seniors pay off their credit card debts?

Paying off credit card debt after retirement can be difficult. But it’s not impossible either. Here are a few ways that can help you to eliminate credit card debt in retirement.

1. Opt for a repayment strategy

You can start paying off your debt with the smallest outstanding balance amount first. And at the same time, you will have to make minimum payments for all other debts. This repayment strategy is known as the debt snowball method.

So, if you opt for the debt snowball method, you are likely going to pay off the smallest amount of debts within a few months. Thereby, it can help you stay motivated in the due course.

Once you pay off the debt having the smallest outstanding balance amount, you have to move to the debt with the second smallest outstanding balance amount and so on. This way, you have to continue this process until you eliminate credit card debt from your life.

2. Negotiate with your creditors

If you are unable to repay your outstanding balance amount in full, you can talk to your creditors about it before they sell off the debts to a collection agency.

Explain to them why you are unable to make the necessary payments. And try to convince your creditors to reduce the outstanding debt amount. If you have been regular in making payments and suddenly you are going through financial hardship, they might approve your request.

However, negotiating with creditors is quite a cumbersome task to do. Why would anyone accept less than what you owe? So, if you want to negotiate with your creditors to lower the outstanding balance amount, it would be better to opt for professional help.

3. Opt for a debt consolidation program

Are you overwhelmed with multiple credit card debts? If yes, you might be shelling out a substantial amount every month for making the monthly payments. The worst part of credit card debt is its high-interest rates that make the monthly payments hefty amounts.

But if you opt for a credit card consolidation program, you won’t have to worry about managing multiple debts anymore. You can get rid of your multiple credit card debts with ease. Because unlike before, you will have to focus on making a single payment every month. And you may have to shell out much less as the interest rates are likely going to reduce. But make sure that you approach a reputable debt consolidation company that has goodwill in this field.

4. Apply for a reverse mortgage

You can opt for a reverse mortgage if you are 62 years or older. By doing so, you can borrow up to 80% of the equity in your home. Unlike a traditional mortgage, you can take out the loan in the form of monthly installments. And the best thing is, you don’t have to make any monthly repayments.

However, the loan is repaid when you sell the house or after your demise. Upon your death, only a handful of assets will be available to leave for your heirs since you have used your home equity. If you leave the home to your heirs, they will have to pay off your loan balance amount.

So, I would say that opting for a reverse mortgage can be your last resort to get out of credit card debt. Because in this case, you are keeping your shelter at stake. And I hope you know how important a shelter is!

What are the good money habits that seniors can develop to avoid debt in the future?

Well, you might have started paying off your credit card debts to get out of this situation. But at the same time, you need to develop some good financial habits to stay away from debt traps as much as possible. Here are some of the best possible tips that you can follow:

1. Replan your budget

A budget is a basic tool to keep your finances on track and put aside money for your well being. After retirement, your income might become less than your earning years. So, you need to look for ways to reduce your expenses and save those dollars.

This way, you can maintain the safe withdrawal rate (financial experts consider 4% as the safe withdrawal rate to lead a comfortable retirement) to avoid exhausting your nest egg.

2. Beware of co-signing

Is your child struggling to take out a personal loan? Or, is your grandchild planning to take out his/her first credit card?

If yes, you must be planning to do the best for them. And for that, you might be planning to become a co-signer of their loans.However, your generosity can affect your financial life adversely. And it might make you fall prey to the debt trap too.

If the borrower doesn’t make payments on time or doesn’t repay at all, you will be held responsible too. The lenders might sue you for non-payment of debts. And you may have to repay the debt in full if the borrower fails to pay off.

Besides, making late payments or no payments can hurt your credit score too. And let me tell you, the new changes in the FICO score take late payments or delinquencies very seriously.

So, before you become a co-signer, think about its pitfalls. Make sure to read the terms and conditions carefully as the creditors will give you a notice that will explain your obligations.

3. Check your credit reports thoroughly

According to an FBI (Federal Bureau of Investigation) report, millions of older adults become victims of financial fraud every year.

So, I would advise you to check your credit reports from all the three major bureaus (Equifax, Experian, and TransUnion) at least once a year. By doing so, you can detect any unusual or fraudulent activities in your credit accounts.

If you come across any suspicious activity, report it to the credit card companies and the credit bureaus. Otherwise, you will have to pay off the debt that you haven’t racked up.

So, check your credit reports by visiting You are entitled to receive a free credit report once a year from all three bureaus.

Read: 7 Ways to protect your credit from identity theft

What are the tips for your grandchildren to lead a financially stable life?

Being a grandparent, it’s obvious that you would want the best for your grandchildren. To help them financially, you might plan to give $15,000 a year for their college costs without incurring a gift tax. That’s good.

But you need to share the experience you had about your financial life. And impart good financial habits so that they can lead a financially stable life ahead. Here are some of the good financial tips that you can share:

1. Live below your means

Living below your means is spending less than what you earn in a month. For that, you can help your grandchildren to chalk out a budget that has helped you. Also, share some tips on how you stick to a budget.

If they learn to live below their means successfully, they will be able to save for their financial goals. They can also lead a financially stable life ahead by focusing on the necessities of their lives.

2. Pay yourself first

Ask your grandchildren whether or not they are saving money at the end of the month. If they’re not able to save a substantial amount, make them understand to put aside money for their savings first and then spend money on other things.

Also, advise them that they should start saving for retirement right from the day they receive their first paycheck.

3. Set financial goals

One needs to set up financial goals first and then start working on their finances to accomplish them. So, you can advise your grandchildren to set financial goals like early retirement, buy a house without a mortgage, etc.

4. Stay away from unsecured debt

Unsecured debts like payday loans, credit cards can burn a hole in your pocket due to their high-interest rates.

Eventually, your grandchildren may have to sacrifice a substantial amount of their paychecks to make the debt payments.

So, ask your grandchildren to refrain from incurring unsecured debt as much as possible. If they want to use credit cards for maintaining a good credit score, ask them to use credit cards wisely. For example, advise them to pay off the outstanding balance in full and within the due date, charging credit cards for affordable amounts, etc.

So, the bottom line is, if you are an older adult and struggling with credit card debts, you need to look for strategic ways to get out of the situation asap. The more you wait, the more you will have to shell out for making interest payments.

At the same time, you need to learn how to live frugally when you have become a senior citizen and relax during your golden years.