Julie sighed and ran her hands through her rumpled hair yet again. How on earth could she manage all of her monthly repayments on her suddenly reduced income? She had a stack of bills and because her son had become ill, she’d spent most of the last month in the hospital with her son, instead of working. As a casual employee, Julie didn’t get paid when she didn’t work. She’d known she had been struggling financially for quite some time, but this month, she was in crisis.

Are you like Julie? Are you traveling on the edge of financial disaster? Are you struggling to pay your monthly bills? Do you have a number of different credit cards and store cards all sending you monthly bills demanding minimum payment? Are you ”˜robbing Peter to pay Paul’ by using a credit card to pay off another credit card or loan?

If you can relate to Julie’s situation, or answered ”˜yes’ to any of the above questions, you need debt help. It could be time to consider debt consolidation options to consolidate your debts. The first step in deciding on a program of debt management is to create a personal financial budget. Once you know what you can afford to pay, you’ll be better placed to negotiate debt consolidation loans with financiers or look at other debt consolidation options.

In order to create a personal budget, you need to know two things: how much income you have coming in, and how much money you need to spend to cover your expenses. The first step is to take a note of all of your sources of income. Count your income based on your usual wage or salary, not on overtime or bonus payments, as you may not receive these.

Once you have calculated your usual income, the next step to creating a personal financial budget is to list all your expenses. You should list your expenses into two categories: essential and discretionary. Essential expenditure includes payments on your mortgage or your rent, your electricity and gas bills, fuel, and food. You need these items to live. Discretionary expenditure is what you spend on entertainment, clothes, savings, and gifts. These are things you may want, but do not need to survive.

Besides the items you buy each week, there are certain bills you must pay on a regular basis, such as council rates, water rates, insurance bills (including health insurance), and car maintenance. Most of these bills are annual or monthly payments, so you don’t necessarily think of these items every week. However, if you forget to include these bills into your budget, you will end up paying them on a credit card and then struggle to pay off the additional debt.

List all of your debts, including your mortgage, your credit cards, your store cards, your personal loans, and your car loans. Next to each item on this list, put the minimum monthly payment you need to pay and the total debt remaining. Put the interest you pay on the account next to each debt, as this could help you to choose which debts to consolidate or pay off sooner.

Remember, if you want to pay off your debt, you will need to pay more than the minimum payment each month.

Add up all of your expenses for the year. Divide your annual expenses into 12, to come up with a monthly figure. If you receive wages on a fortnightly or weekly basis, you may like to create a fortnightly or weekly budget, instead of a monthly on

When you first create your budget, do not include any discretionary spending. List all of your essential payments, including your debt repayments. If you can consolidate your debts and reduce your repayments, you’ll find it easier to reduce your debts. You may need to choose one debt to repay first. In this case, allocate the minimum monthly repayment to all the other debts and allocate as much as you can to repay the debt with the highest interest. Once you have repaid this debt, you can change your budget to repay the debt with the next highest interest rate.

Then, look at the difference between your monthly income and your essential expenses. This is what you have to spend on discretionary expenses. Allocate some funds to discretionary spending, but try to leave some for savings. You may want to see if you can reduce your discretionary spending while you focus on repaying your debts. If you add to your savings account each pay, you’ll build up an emergency fund that you can use if something unexpected happens, such as Julie faced with a child becoming ill.

Many Australians find themselves in situations similar to Julie above. If you can relate to Julie’s financial circumstances for any reason, it’s time to take a good look at your debts and create a personal financial budget you can stick to. This will help you to reduce your debts and get your financial situation back on track. If this fails you should consider contacting a debt consolidation company like Debt Fix Pty Ltd.