With so many loans to pay off, how should someone prioritize their spending and saving from their take-home money?

The subject of how to manage your loan debt so that you may go on with the rest of your financial life is more crucial than ever since more individuals than ever are carrying sizable amounts of debt.

A person with significant debt must decide whether to prioritize paying it off or use their limited resources to a number of other financial objectives while still trying to fit the debt payment into the overall plan. Substantial debt is a burden on a person’s future.

There isn’t a single, universal solution to this problem, but there are a number of tactics you can use to go forward. It will depend on where you are in life right now, where you aspire to go, and how quickly you want to get there how and when you put those methods into effect.

Establish a reasonable budget.

Being completely aware of your income and spending is the first thing you need to accomplish. And to do that, a budget must be made.

Having a plan that specifies how you will deploy your funds is the entire point of a budget.

Once you’ve done so, you’ll be better able to assess your alternatives, including whether to pay off your loan debt or to save and invest money.

Online budgeting tools, both free and paid ones, are available to help you create and stick to a budget. Yet the fundamental principle is always to keep tabs on your earnings and outgoings, usually on a monthly basis, and then adjust as necessary.

After taxes and other payroll deductions, start with your net income. Next, a list of your costs. It is helpful to divide them into three broad categories:

  1. Rent, debt repayment, and insurance are examples of fixed expenditures.
  2. Variable costs—including those for groceries, utilities, and fuel
  3. Expenses that are desired but not required are referred to as optional costs; examples include travel funds, dining out, and gym memberships.

Finding out how much spending flexibility you have requires segmenting your costs.

Your fixed costs are often required for your survival. Unless you want to lower your minimum level of life, there isn’t much you can do about them.

Variable costs are required expenditures, but you may control how much you spend on them, making them flexible. You may find several strategies to lower your grocery expenditure, or even to lower the cost of some utilities, like heat and electricity.

Consider your budget’s “fat” as being made up of discretionary spending. In other words, if you require additional funds for other uses, they will probably come from this area.

You’ll be able to calculate your monthly surplus once you’ve calculated your costs and available revenue. If there isn’t any money left over, you’ll need to minimize costs or raise your income.

The entire point of this exercise is to find or add breathing room to your budget. That is the cash you have.

(to be continued…)