How can you create an effective debt payment plan that will help you achieve debt relief success?
It begins with your budget plan. The payment plan will be derived from it. Your budget will provide a general picture of what your finances are capable of paying on a monthly basis. Given that, you need to start with this step.
A budget plan begins with a careful analysis of your income and expenses. Use an excel sheet to plot all the details. You need to list down in one column how much money regularly comes in every month. Feel free to make it a combined household income if the other working members of the family agree to help with the debt payments. The income can come from your salary, pension, disability benefits and other cash inflow that you consistently receive every month. After that, put in another column all the expenses that you and your household spends for every month. When you have all these details, your budget plan is complete.
To create your payment plan, make a list of all your debts. Encode details like the creditor, the amount of debt, interest rate, outstanding balance and due date. Put the minimum payment requirement on the last column to the right. When you have that, get the total amount of the minimum payments that you have to shell out every month.
Now go back to your budget plan and deduct the expenses from your income. The result is your disposable income. It has to be a positive number. If it is negative, that means you have to go back to your budget and make sure you can get a positive disposable income out of it. That can be done when your grow your income or decrease your expenses.
Compare your disposable income and the total minimum payments and make sure the former is bigger. If not, you need to grow it further. If your disposable income can cover your monthly payments, then you are in good shape to proceed. Create another column to the right of the minimum payments but leave it blank for now. This is where you will put the amount that you will allot for it every month.
The next step is to create a payment schedule. Rank your debts according to priority. Ask yourself, do you want to pay the debts with the highest interest rate first or the one with the lowest outstanding balance?
When you have decided, put in all extra disposable income in that debt while continually paying the minimum for the rest. Put it on the rightmost column you created so you can monitor how much you have to pay for that particular debt every month. Create another column that will monitor your decreasing outstanding balance. As you complete the payment on that debt, get the funds allotted for that and put it on the next debt to grow it. Continue doing this until all your debts have been paid off.
