How-to Guides » OLD GUIDE Destroy your debt

Step three: Make a budget

1 tip on this task  |  Tweet

While your spending diary is being completed you can get on with compiling your budget.

Now it's not as scary as it may seem - if you've never budgeted before, it's simply a case of working out how much income you have, against how much your outgoings are. So grab your paperwork and list how much you get per month from salary, benefits and allowances etc.

Now list your rent/mortgage, bills, council tax, childcare costs, and other outgoings. You'll need to work out a reasonable monthly allowance for food shopping, going out and miscellaneous expenses like birthday presents (your spending diary will help here).

And hopefully, when you subtract the outgoings from the income, you're left with some cash (if not, you need to trim some outgoings!). Here's a budgeting calculator from the FSA that might help.

Now we go back to snowballing. If you have, say £300 left over each month (after making sure the minimum payment is being made on each of the other cards) use this as a "snowball" to throw at the most expensive debt. Then, when that one has been cleared, throw that £300 at the next most expensive debt.

As time goes on and the debts start to clear you'll have more and more surplus money each month (as there are fewer minimum payments to be made) so this extra cash can also be thrown at the debt - leaving you with the happy knowledge that your debts are being cleared even faster!

Take the next step to destroy your debts