You know you’re swimming in debt. You also know that you need to make big changes if you’re ever going to reach your financial goals.
Before you do anything else, it’s critical to review your budget. This allows you to answer questions such as:
- How much income do you earn each month?
- How much are your expenses?
- How much debt are you currently carrying?
- What types of debts do you have?
By answering these questions, it’ll become clearer as to the steps you need to take to address your personal financial concerns. Here is where you should focus your efforts when reviewing your budget:
- Where your income is going every month
- Expenses you can eliminate or reduce
- Your current plan for paying off your debt
For example, if you don’t know where you’re spending your money, it’s difficult to prevent the same mistakes in the future. However, once you have a clear overview of how much you earn and where your money is going, you can adjust your approach accordingly.
All of this will lead you to a clear cut plan for paying off your debt. Maybe you want to pay off your smallest debts first to gain some momentum. Or maybe you want to tackle your debts with the highest interest rate.
If a review of your budget makes it clear that you’re in too deep, it may be time to file for Chapter 7 or Chapter 13 bankruptcy. Compare the pros and cons of both, as well as the process for filing, so you can make a confident decision on what to do next.