Debt is a growing problem in America. Total household debt was almost $13 trillion at the end of 2017’s third quarter — up $116 billion from the second quarter, according to the Federal Reserve Bank of New York.
The bulk of that amount was comprised of mortgage debt, followed by student loan, auto loan and credit card debt. And delinquent debt — payments that are 30 days or more late — is also growing. Cutting your expenses and bills can help manage your debt but often only provide minimal assistance. Fortunately, whether you’re drowning in debt or just want to pay down what you owe more quickly, there are several budgeting strategies you can use.
Click through to see how you can dig yourself out of debt.
Create a ‘You Only Live Once’ Budget
A YOLO budget gives you a clearly articulated vision you can use as a guiding principle to save, spend mindfully and pay off debt, said Jason Vitug, author of “You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.”
Write your vision statement at the top of your monthly budget planner to remind you of your effort’s purpose. You can also include in your vision statement how you expect to feel when you’re living the lifestyle you want — and add photos to illustrate that lifestyle, Vitug said.
Use Digital Cash Envelope Budgeting
Paying with cash only isn’t a new approach to budgeting, but it might be a novel idea if you rely heavily on credit. Start by dividing your cash into envelopes for your expenses — one for groceries, gas and so on, and spend only those specific amounts.
A digital cash envelope system, such as the ProActive app, can help you make the transition. You link your bank account to the app and distribute money into virtual envelopes for saving and spending categories.
Try a Zero-Sum Budget
With a zero-sum budget, you create each month’s budget based on the amount you made the previous month, with the goal of putting those dollars to good use in the current month. You divvy the funds for regular bills and expense,s and put the excess toward repaying debt.
For example, if you earned $5,000 last month and have $4,000 in expenses for the current month, use the extra $1,000 to pay off debt at the beginning of the month to avoid spending it unwisely.
Find Extra Cash in Your Budget
You might be able to find more cash in your budget for bills with the help of Qoins or Digit. Connect your accounts to the Qoins app and it will withdraw your spare change and make an extra debt payment of your choice each month. A $1.99, monthly fee applies.
You can also link the Digit app — free for 100 days; $2.99 thereafter — to your checking account. Digit regularly analyzes your income and spending to determine how much can be set aside in savings, then automatically transfers that amount for you.
Resort to a Bare-Bones Budget
When you’re buried in debt, you might have to go to extremes. “In order to pay down debt, I lived on a bare-bones budget — in other words, with next to no extras or frills,” said Melanie Lockert, author and founder of the blog Dear Debt.
To stay motivated while she was living on a bare-bones budget, Lockert used a rewards system. “For example, after paying off $1,000, I’d treat myself to a lunch,” she said. “After $10,000 was paid off, I’d get a massage on the cheap at the local beauty school.”
Use a Debt Thermometer
You can download Jen Smith’s free, printable thermometer from her site, Saving with Spunk. Use an online debt repayment calculator to figure out the total amount you’ll pay — with interest — over the time period you think it will take you to pay what you owe.
Next, label the lines on the thermometer with the amount you need to shell out each month to pay off the total debt in a certain time period. As you color in each section on the thermometer, you can actually see — and celebrate — your progress.
Use a Budget Template
Although adhering to a budget might seem like a lot of work, you can make the task simpler by using a budget template. You can find tons of budget template options online to download.
Look for a budget planner that fits well with your lifestyle. For example, if your income and expenses are straightforward, choose a basic template. But for extra categories or other bells and whistles, look for one you can customize.
Track Your Spending
When you start noticing what you’re spending on things like coffee, Friday night pizza and other impulse purchases, you might be surprised at how much money you could save.
To make tracking easy, download a personal finance tracking app on your phone, like the Wally app. It’s free, and it enables you to scan receipts and track expenses. Once you see where you can cut costs, you’ll have more money to make your budget work.
When you’re drowning in financial obligations, the best thing you can do is route money toward debt. Seriously consider whether to continue paying for monthly services. Get rid of the ones that take the biggest bites out of your funds first.
For example, almost 50 percent of satellite and cable subscribers in North America pay between $51 and $100 monthly for their service, according to Statista. Consider a much cheaper form of television entertainment, like a basic Netflix subscription for less than $10 per month.
Sacrifice Extra Money
It can be tempting to use work bonuses or annual tax refunds for vacations or new furniture, but spending that money instead of paying off debt won’t get you anywhere. Instead of spending the extra funds that come your way, use them to pay off some of your debt. That way, you can make progress toward getting a handle on your budget.
Do Your Grocery Shopping Online
Picking out and paying for your groceries online will benefit you twice if you make a list and stick to it. First, you will be less likely to overspend. You’ll also save time by not having to shop in the store.
You can choose from plenty of grocery shopping services, such as home delivery and curbside pickup. Make sure you research which service is better for your budget.
Take Up Couponing
You really can save money by using coupons. Check out websites like the The Krazy Coupon Lady and Money Saving Mom for great coupon tips and budget advice.
At first, don’t try to coupon at more than one store at a time or you won’t benefit as much, according to information from U.S. News and World Report. Instead, pick one store and focus on mastering its coupon offerings and policies before you move on to the next retailer.
Cut Clothing Costs
Even if you’re averse to wearing someone’s hand-me-downs, try it — especially to save on more costly clothing items.
Visit Goodwill or The Salvation Army to score some great deals on gently used clothing. It might take a little legwork, but finding a name-brand winter coat that’s in great condition for a fraction of the original price can save you big bucks.
Hold a Family Meeting
To make sure everyone — including children that are able to grasp the concept of budgeting — is on the same page, hold a family meeting. Discuss the importance of having a budget and paying off debts.
To avoid future disappointment, tell your children what you do — and don’t — have room for in your budget. You’ll find it easier to say no to your child if he asks you to spend money on something that’s unnecessary.
Leave Your Credit Cards Behind
It’s understandable that you might want to keep at least one piece of plastic in your wallet, but you don’t need more than that. One of Dave Ramsey’s money-saving tips is to shred or cut up your cards to break free from the vicious cycle of debt that using credit can perpetuate. You do whatever it takes to keep yourself from digging further into debt.
Consider Consolidating Your Debt
Part of tackling a budget is streamlining your expenses, and consolidating your debt is one way to do it.
Many different debt consolidation and credit counseling services are out there, so research them carefully before you choose one. Some charge high fees and others have racked up customer complaints, so make sure you’re dealing with a reputable company.
Give Yourself a Weekly Allowance
Unless you’re in an extreme situation, consider giving yourself a small amount of cash each week as an allowance to buy things you enjoy. Or, if a weekly allowance seems too frivolous, allot it to yourself monthly. A small reward can serve as motivation to help you stick to your budget goals.
Reevaluate Your Budget as Needed
As your income and expenses evolve, so should your budget. Each time you experience a change in your financial standing, reevaluate your budget. For example, if your child graduates from college and you no longer include him on your health insurance, subtract the premiums from your expenses. Next, decide where the extra money would serve your budget best.
Cynthia Measom contributed to the reporting for this article.