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Budgeting methods to help you get out of debt fast

Julie Lord

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Where there is a will there is a way…

Getting out of debt can feel like an impossible task – but it’s not. If you’ve been struggling to clear your debts, or you’re stuck feeling like you’ve made zero progress, it may just be that you haven’t found the best way to do it yet. There lots of different options when it comes to budgeting methods and you may just need to try a few to find the one that works for you.

  • Incremental budgeting.

    This way of budgeting relies on all your income and expenses from the previous year. Using this data you can create a new budget for this year that takes into account the way you already spend. Apart from incremental changes everything remains the same with this budgeting method so it may not work if you’ve experienced any significant shifts.

    Incremental budgeting can be effective if you’ve had debts for a while and you’re looking to overpay to clear them.

  • Cash-only budgeting. This method works on the basis of removing debit and credit cards from your spending habits completely. Instead, you use only cash and when the cash runs out you stop spending. Many people find this a useful way to get spending under control and to learn to stop when they reach the end of a budget, as opposed to resorting to a credit card. It’s a tried and tested method for halting any further credit card spending that could increase debt so that you can start getting out of it more quickly.
  • Priority-based budgeting. This involves structuring your budget around items that you consider to be “priority” so that you’re always putting available cash towards what matters the most. You might start with life essentials, such as rent/mortgage, bills and food.

    After that you could prioritise in terms of where you want your money to go, putting debt repayment towards the top of the budget if you’re looking to clear your debts faster, especially if you have expensive debt like loans for people with bad credit .

  • Percentages budgeting. As the name suggests, this type of budgeting uses set percentages to determine where your money goes when it comes in to your bank account.

    You can work out your own percentages or you can start with those that others have identified as a good budgetary split. Experts often recommend allocating 50% of your income to essentials, 30% to wants and needs and 20% to savings. But you could move these around depending on how much debt you have and how quickly you want to repay it.

    The key is to stick to the percentages consistently.

  • Zero-based budgeting. With this type of budget you’re starting from zero each month, not using payments, budgets or debts from previous months or years as a guide but working with current income - and demands on that income - afresh. This can be a good option if your income is changeable or if your financial goals are shifting. With this type of budgeting you may need to do it more often to stay on top of it – weekly budgets may work best.

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