BA250 Week 4 ASSIGNMENT Debt Management Plan

Debt Management Plan

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Debt Management Plan

A debt management plan would be important in order to review my spending habits and plan a way of servicing my loans in order to settle my debts. I intend to come up with a debt management plan to match my income to my expenses and the amount spent on servicing loans each month. From my income and my expenses, it is evident that I spend a lot of my income leaving a balance of only $1500 every month. It is also evident that the amount I spend on servicing my loans every month is less than the amount I allocate monthly to some luxurious activities such as vacation, entertainment, clothing, gas (automobile), and commuting (parking).

Currently, I have three sources of debt. This debt arises from loans, goods, and services taken on credit. These include mortgage/rent, credit card and student loan amounting to a total of $950 for this budget period. The balance owed to mortgage/rent is $800, that owed to credit card is $50 and that owed to student loan is $100. It is evident that I need to cut down on the amount spent on various items on my budget list. Another possible option is to talk to my creditors to set an achievable amount of debt that I need to settle every budget period, in line with the amount of money on my income per month and with my expenses for every budget period.

My plan for managing this debt is by carrying out a review of the amount spent on every expenses category in my budget for every budget period. I intend to find an agency to help with debt counselling and if possible, the development of a debt management plan. On the debt management plan I intend to draw more realistic amounts of money that I can pay to my creditors per month in every budget period in order to settle my debts. I will then mark out the most important expenses and plan how to cut down on the remaining expenses categories.

The specific behavioral steps that I personally need to take to match my debt aspirations to my debt reality include a review of my spending habits. I need to match my income to my expenses and the amount of debt I have. I also need to establish the amount of time I have to pay my debts as agreed with my creditors. I need to check my budget list and come up with a list of priorities for each category of expenses. I need to cut down on the amount of money allocated to luxurious activities, without necessarily getting rid of these luxurious activities off my budget. I will then set out a plan to enable me cut down on these expenses and attempt to allocate more money in my budget towards clearing off my loans and debt.

I plan to cut down on luxurious expenses and maintain only the most essential ones. I intend to cut down on expenses in the ‘miscellaneous’ category of my budget. I will cut down on the amount on monthly savings for vacation. I will do this in such a way that I get to go to vacation on a low budget that is affordable until I settle all my debts then I can increase the monthly savings allocated to vacation. This means that I need to change my vacation destinations to suit the low budget until I clear my loans. In addition to this, I intend to cut down on the monthly budget allocated to entertainment. My plan is to take part in entertainment activities that require less money, or accumulate the money in subsequent months and spend it in an entertainment venture that requires a high budget.

Another practical way to cut down on my spending is to spend less on transport. From my budget, it is evident that the amount I spend on gas for my vehicle and on commuting fees, including parking is quite high on the budget. I intend to cut down on this by taking the train to work and using my car only when necessary. This will help me cut down on the large budget and save up some of the money to spend on other utilities. The amount I allocate to clothing on a monthly basis is quite high as well. It may be important to cut down on the amount spent on clothing by buying clothing once in every two months. This way I will save $2000 to add up on the amount I allocate to loans and debt every month. This way, I may be able to complete payment of my debts as soon as possible.

References

Mundis, J. (2012). How to Get Out of Debt, Stay Out of Debt and Live Prosperously*: Based on the Proven Principles and Techniques of Debtors Anonymous. Random House Publishing.