Using a debt reduction worksheet to help get rid of your debts and get your finances back under your control will give you the best possible chance of success. No matter what type of worksheet you use, be sure you keep it somewhere you can see it so you can keep track of your progress. You also need to remember to update it each time you make some progress.
Things to Put on your Debt Reduction Worksheet
If you intend to create your own debt reduction worksheet your starting point should be to enter your total income after tax. This gives you a clear idea of how much you have to pay your expenses, bills and repayments each pay period.
List your current living expenses in a separate column beside your income amount. Include rent or mortgage payments, utilities bills, insurances, fuel costs, grocery bills, school fees, day-care costs, phone bills, internet costs, cable charges, how much you spend buying take-out and any other expenses you have.
In a separate column, write down all your consumer debt repayments. This means figuring out the payments you make on credit cards, store cards, payday loans, personal loans, auto loans, medical expenses and any other debts. All up the totals and take a good look at how much you spend each month repaying these debts.
Building Your Debt Reduction Plan
Far too many people assume they should sell the family home in an effort to pay off all their consumer debts. It’s strange how many people don’t think to sell off all the unnecessary things within their homes that got them into financial trouble in the first place. Will you really need a big screen TV if you lose your home? Will that expensive car still impress your friends if you’re living in it? Is having an expensive, fashionable wardrobe worth the stress of financial hardship?
Go back to your debt reduction worksheet and take a good, hard look at your consumer debt repayments. These are what eat into your income each month, so it makes sense to get rid of these and free up your income.
Cutting Costs
When people think about cutting costs, they assume that cutting back on take-out coffee or switching off the electrical appliances in their homes is all they can do. These tiny changes won’t make any difference.
Once again, take a good hard look at your debt reduction worksheet and take careful note of the amount you have to pay each month on consumer debts. Not only are they eating much of your income each pay period, but they’re being charged interest that costs you far more than you receive. So it makes sense to find ways to find ways to reduce these first.
Negotiating with your lender for reduced interest charges or comparing other lenders and transferring your balances to lower interest options could be a good way to get your interest costs down and reduce your repayments. You might even consider a debt consolidation loan to help reduce your costs even further.
With every change you make to your expenses or repayments, remember to add your progress to your debt reduction worksheet. When you can see measurable changes happening and you see your debt balances falling with each week that passes, you’ll find it much easier to stay motivated and keep working towards debt reduction.