Managing your debt in a sensible way will keep you out of
financial trouble. Look at the steps below and find out
how to control your debt.
First, do your debt evaluation.
Write down for each credit card, store card and unsecured
personal loans following:
- Current Debt Balance
- Interest Rates Charged
- Monthly Payments Due
Do your household budget (cost per month):
- rent or mortgage
- food
- utility bills (electricity, water. etc)
- car expenses (petrol, service, insurance)
- medical bills
- childcare bills
- any other monthly bills
- credit card 1
- credit card 2
- personal loan
Now subtract all the above bills from your monthly income,
that will leave you with your Monthly Disposable Income.
This is the extra money you use to pay your debts. You can
adjust spending on the above bills so you can have more
or less money as your Monthly Disposable Income.
Most of your Monthly Disposable Income should be used first
to pay your debts with the highest interest rate. Credit
card debt has usually the highest interest rate, although
some personal loans debt may have interest rate as high
as 29%.
| Monthly expenses |
Amount per month |
| rent or mortgage |
$1,200 |
| food |
$1,150 |
| utility bills (electricity, water. etc) |
$105 |
| car expenses (petrol, service, insurance) |
$285 |
| medical bills |
$35 |
| childcare bills |
$110 |
| any other monthly bills |
$0 |
| credit card 1 |
$55 |
| credit card 2 |
$78 |
| personal loan |
$285 |
| TOTAL |
$3,303 |
In this example we are assuming that your monthly income
after tax is $4,000. Your monthly expenses are $3,303.
So, to calculate your Monthly Disposable Income we subtract
your monthly expenses from your monthly after tax income:
$4,000 - $3,303 = $697.
It looks simple, however if you can stick with your budget
you will soon have no more debts. You can beat bad debt
with careful budgeting.
