Budgeting in order to reduce debt (part 1)

In this part of the budgeting article, we will be covering the style of budget that is commonly referred to as the starvation approach. The goal in this approach to budgeting is to free up extra money that you can use to clear your name of debt faster. With this method, you take a look at where you can save and scrimp. If you can give up costly activities, make sure the new things you decide to do actually cost less. Then you have to be certain that those saving you create go straight to debt reduction attempts – not new spending.

When the majority of the people in the world go on a regular diet, they typically eat small quantities of healthy, low fat types of foods for the fist few days or weeks. Then over a period of time they begin to break off from the diet little by little and eventually blow it all together. The same can be said for people who use this technique when trying to reduce debt. After awhile, they fall off of the wagon and spend. This is most likely due to the fact that the scheme was stared out o drastically - -whether dieting or reducing lifestyle to pay off debt – it is hard when the goal was started out so demanding. Often time, people completely overspend when they fall of the wagon in this approach to saving money to reduce their debt and create too much new debt that it makes it very hard for then to dig back out. It is not unheard of for someone to be successful at attempting the starvation approach to eliminate debt, but it is not the most successful of the types of debt reduction schemes we will cover in these pages.

When you do decide to begin reducing your debt, one option is to start drastically (such as this one) and stay with it long enough to change your attitude about spending, but not so long that you limit yourself from basic needs. Do not spend money on anything except basic food, housing, clothing, transportation, communication and health care and entertainment when going with this method of debt reduction.

Food

As far as food is concerned – no eating out allowed. Try cooking at home instead. Even if you are cooking for one, it is cheaper. Cook larger quantities of inexpensive foods so you can eat through the week from the same dish, such as pastas and the like. No expensive ingredients. This will take time out of your day, but it will save money quickly. Stay away from drive through value meals even though they are dirt cheap – they are really bad for you. Eat healthier by cooking at home. If you put just a bit of creativity into your cooking it can be something you look forward to doing – free entertainment!

Housing

In the short run, it will be hard to change your biggest housing costs such as your rent or mortgage. You could get a roommate if you have space or live alone to save money fast. Many people who do have larger houses and have to stay in them because they own them and such should try closing off a section of the house to encourage lower utility bills. Don’t waste any money on unnecessary home improvements while try to reduce your debt either.

Clothing

See if you can go 3 whole months without buying any unnecessary clothing items. Try not buying any at all. Instead of buying new clothes and creating money spending, try weeding out your closet at this time. Get rid of all the items in there that you don’t wear. Even have a garage sale if you want o earn extra money. This way, you will get rid of the items and make money doing it. If not, donate the clothing to your favorite charity and claim a good tax deduction from it.

Transportation

This is obviously not the time for purchasing a new car and like housing it is not easy to change your mode of transportation in the short term. Just use the car when you need to and save gas and mileage. Don’t go skipping regular maintenance needs such as oil changes if they are warranted. Just don’t buy the synthetic oil while trying to save. Use a coupon for a cheap oil change.

Communication

It is not necessary for you to have a huge phone bill every month. Try losing your cell phone or your land line for awhile. It will most likely be a better idea to eliminate your home phone because most cell phones come with lengthy contracts that are not easy to get out of in the short term. If you must keep a home phone, ditch the extra features on it at once.

Health care

Many people who are in big debt either have healthcare through their employer at a reasonable price or they can’t afford it if their employer does not provide it. If you have employee benefits keep them if you can at all costs. This is an import thing to consider when you think of getting rid of benefits – can you afford to go to the hospital without it – NO. The answer is no.  

Entertainment

This is where many of you will groan. You have to eliminate overspending in this area the most as it is the most expendable of all of the categories. Stay in and rent a movie with a group of friend instead of going out to one. Cook at home for your friend and family instead of going out to eat. Have potlucks when watching movies at home. Visit free museums if the area you live in has them. Every city has parks – get outside and read a book (no it doesn’t have to be about debt reduction either).

Part of the starvation approach is to be reasonable and realistic. Sometimes that means not cutting back on the cost of something if doing so will cause to spend more in the long run. Do not deny yourself cable TV if you can manage it. It tends to cost money when you sign back up in a few months and it is cheaper to watch TV at home than it is to be out on the town spending. Think of things in term of whether it will be practical to end if you have to pay start up costs again in a few months to start something back up.

Part2...

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