How to actually pay off your debt

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No matter the time of year, the cold reality of debt can hit at anytime.

But without a plan to make sure those goals happen, we hate to break it to you—you’re probably going to be disappointed.

Managing your finances better, paying off debt, or saving more money are common goals—and for good reason. But how do you actually make sure you make those things happen?

One word: budgeting.

But just because the answer is simple, doesn’t meant the solution is. Creating—and sticking to—a budget is hard.

How do you know what to budget?

Staring down a blank budget sheet can be intimidating. Just how much per month should you actually spend on groceries?! What’s a reasonable amount to contribute to a savings plan? What percentage of your income should be dedicated to paying for housing?

There is no one-size-fits-all answer to any of these questions. It’s about determining what works best for you and your unique financial situation. And it’s about being honest—really, brutally honest.

Do your homework.

A good exercise to get an idea of your monthly expenditures is to sit down and keep track of every single transaction you make for a month (or longer, if you’re really dedicated). At the end of the month, divide everything up into appropriate budget buckets (groceries, housing, savings, clothing, entertainment, etc.) and take a hard look at what you see.

Sometimes our estimated budget and our actual budget can be a little different. If that’s the case, it becomes a matter of making some tough decisions.

Decide what’s important.

Ultimately, budgeting is just simple math—what you have going out can’t be more than what you have coming in. And if it is, you either need to cut back on what you’re spending or you need to find a way to make a little more money (side hustle, anybody?!).

When you’re working from a blank budgeting spreadsheet, start by filling out the non-negotiable amounts first—these are things like your rent/mortgage payment or other fixed monthly payments (like a loan, cell phone bill, car payment, etc.). Once you have those fixed costs filled in you can start to play with the other amounts, like groceries or entertainment costs, that may vary month over month

Don’t forget to set aside a certain amount in your budget for extras. No matter how detailed you get in your budgeting, there’s always going to be something that you’re not going to account for. If you’re not prepared for it, it can put you in a tight spot financially.

It’s a marathon, not a sprint.

Most importantly, be patient with yourself. Budgeting isn’t an exact science and chances are you’re going to need to make some adjustments as you learn more about your finances. The important part is to keep going. Just because you blow your budget one month doesn’t mean you’re doomed forever. Often, being more aware of what you’re spending can go a long way, so keep at it! This is a long game.

Need a little extra help getting started? Contact your nearest credit union to talk to a financial expert.