Where you have accounts that offer a discount for early payment you should also take advantage of those discounts by applying the budget surplus towards them.

Until you have cleared your debt you shouldn't consider using the surplus for investing, as the money you will receive from the investment, less the tax that you will pay on that income, will be less than the amount you will save in interest payments for clearing debt.

Always look for the most benefits for each dollar spent and in almost all cases there is no better benefit than clearing debt.

Of course once you get to the stage where you have your finances in order and everything is under control budget surpluses can be better spent on investing in appreciating assets such as property, provided the property market is rising, and only where you will be able to make more money from borrowing to buy the property than you would using the money elsewhere.

That is something you can look forward to once you have managed your debt and with your ability to budget well you will be able to calculate the ratio of income to expenditure and determine whether it is a good investment that you will be able to handle comfortably before you spend your money.

You will be able to make all your decisions based on simple steps that will eliminate all the guesswork and ensure that you don't get into financial difficulty again.

Sometimes you only need to change a few factors in your life to go from a budget deficit to a budget surplus and that is what you will be aiming to do as soon as possible. The more of the budget surplus you apply to debt the bigger the surplus will become and this affect begins to accelerate over time.

There is a huge difference between wants and needs and if you honestly look at your financial position and consider how you have built up the debt that you are currently faced with you might just find that it is due to over expenditure on wants.

Needs are those factors that are required for you to lead a healthy happy life on a daily basis to maintain good health in mind and body for you and those whom you are responsible for.

Good food, shelter, health care - These come under the banner of needs because these are the simple things in life that you need to get by.

DVD players, alloy wheels on your car, the latest designer clothing, cigarettes etc - These are wants and there is certainly no need to have them in your life.

These are the things that get people into trouble. These are the things that cause your debt and stress and detract from your lifestyle.

These are the things that make people miserable at the end of the day because you still have to pay for them, you don't need them and you certainly don't need the debt that comes with them.

Take a look around your house and see how many items there are that fall under the category of wants, and then ask yourself how often do you use these items and what sort of pleasure have they given you compared to the distress that you are now feeling with the debt you have to pay back.

Sure there might be some items that you still get pleasure from such as playing on your Playstation but consider once again how the time that you waste on the Playstation could be better spent on something more productive or something that could improve your health and well-being such as a walk or a jog in the park.

Can you convert some of those items into cash? Of course you can and if you aren't using them then wouldn't it be better to sell them and put that money towards your debt.

Just understanding the difference between wants and needs might be all that you need to turn your life around and ensure that you never become overburdened with debt again.

Just as some people 'reward' themselves or find comfort in chocolate there are many more who spend money in response to certain emotions.

Are there occasions in your life when something has happened where you immediately feel like you need to go out and celebrate by either buying something or having a meal at an expensive restaurant?

Many people buy material items in an attempt to make them feel better about themselves.

It is not uncommon for people with low self-esteem to spend money on items that they think will give others a higher opinion of them.
People buy expensive cars or yachts to boost their ego.

Some people buy when they are happy and some people buy when they are sad.

Many people these days buy with no thought about the future and the fact that they are going to have to pay off the debt that they have just incurred today for the next year or so. Impulse buying can be particularly dangerous as it is generally for items that you don't need and the debt that comes with these types of purchases is something that you definitely don't need and will possibly regret for a long time.

If you can define precisely why you buy then you will be in a lot more control over your financial future and you will understand that the short term benefits that you get from your buying sprees are certainly outweighed many times over by the stress and worry of the financial burden that they bring with them.

It might even be necessary to see a professional for consultation to help you change these bad habits that are getting you into financial strife on a regular basis.

More often than not they are just bad habits and we are unaware of what we do a lot of the time.

For a start having debt on appreciating assets such as a mortgage on your home can be a good thing because the value of your house will be increasing at a rate that is far greater than the amount of money that you could save and quite possibly you would never be able to save the amount of money required to purchase a house in the first place.

For most people this will be the only type of debt that is worthwhile having simply because the advantages far outweigh the cost of the debt in the form of interest.

The debt that is incurred for purchasing items that can't be regarded as assets, for example motor vehicles where they are depreciating and you are losing money the longer you own them, can't be regarded as good debt.

Credit cards are one of the biggest causes of financial problems in the country but they too have their uses and in particular when you're trying to rebuild your credit history by taking out smaller amounts of borrowings and paying them back on time all the time.

Getting small amounts of credit card debt and repaying it, can help you to move on to personal loans and then eventually you'll have the opportunity to get a mortgage to purchase a house again even if your past create history has been bad.

So you can see that in the right circumstances there are various reasons why debt can help you have a more fruitful life.

Racking up restaurant bills and purchases of the latest fashion items on your credit card can never be regarded as good debt in anyone's books.

Without a budget you can't hope to have control over your finances as most people will find that once they start doing a budget they realize all the additional expenditure they have in their life that they hadn't noticed in the past.

It is the little bits and pieces of expenditure that accumulate into a bigger debt problem.

Creating a budget is one of the first things that you should do and using that budget daily will keep you on track to getting out of debt.

If someone were to ask you right now to write down exactly how much it costs you to live day to day, week to week, and month to month — could you do it?

If you are honest you would probably have to admit that it would take quite some time as you would have to look through your card statements, monthly bills, shopping lists and more to get a clear picture of what money you are spending.
In addition to that you would need to look at any expenses that occur at irregular intervals either quarterly or once yearly.

You would also need to make allowances for additional spending during the festive season and the extra interest you would need to pay on the credit card debt that you would drum up over that period.

On top of that you would need to make allowances for maintenance on your vehicles and household maintenance.

The more you look into the expenditure the more that will be revealed and that is why a budget is so important. Most people get a big shock when they prepare a budget for the first time as they never realize how much money they spend on things that they don't think about.

And that is why you must have a budget. There is no suitable alternative. You can't run a business at its best without a budget and you can't run a household without one either.

Time is money and you need to manage your time as well as all other aspects of your life.

By managing your time well you are controlling your life and this will flow over into all other areas of the day to day running of your household and your finances and will make the management of those factors considerably easier to achieve because you will have planned the time to take care of that aspect of your life.

Having the burden of financial debt and the necessity of juggling money from one place to another to cover costs here and there takes up a lot of time and this is lost time that could be used for other more productive purposes.

While you are getting your finances in order there will be additional time needed and that is something that you will have to accept however if you have a plan and a goal and you set yourself specific tasks to do throughout the day then you will find that you get a lot more done and you leave yourself some time to simply take time out.

It is essential that you do take time out even if you think you can't afford the time or the money because maintaining a happy and positive state of mind and good health is essential for you to get to the next stage of this journey.

You don't need to spend money when you take time out and often it is the things that cost nothing that will have the most benefits for you such as a walk in the park or a swim at the beach where you can forget about life a short while and think about normal things and where you might be in a years time.

Good time management will allow you to enjoy that part of your lifestyle during this time of financial stress.

With your debt cleared, and excess funds available each month over and above your expenditure, you need to consider the best way of handling this additional money.
What you don't want to do is to get back into the situation you were before where you start spending on things that you don't need and building your debt back up again.

Just consider how much better your life is without the debt and compare that to the time when you were always stressed out and finances were on your mind day night. Then ask yourself was it worth it and do you want to go back there.

Most people will admit that it is unpleasant to be weighed down with the stress of overwhelming debt and by having followed the process that reduced and then eliminated your debt you can continue to use that basic model of having a budget and sticking to that budget to build up a nest egg of funds that can ensure a good quality of life as you age.

You will probably have a different attitude to wants and needs and find that the quality of life doesn't depend on the material things that you own but rather the things that you do that are memorable on a day-to-day basis.

You need to continue setting goals but now the goals won't be to reduce debt but rather to invest money that will create long-term wealth for your future.

A future without these is the most wonderful position to be in as that gives you the freedom to do what you like when you like and that is more than most people will ever get to appreciate.

Here is the fact of the matter — no matter how much work you feel you need to do or how much income you feel you need to make or how many people are pressing you to get your accounts paid, you still need to consider your health and wellness and that means that occasionally you need to give both your mind and your body a break and take some time out.

A walk in the park can energize you and can be sufficient to help you achieve some of those goals that you may have been procrastinating about.
It can help you maintain a better level of health that will help you to cope better with your current situation.
It can help reduce stress considerably and help you sleep better at night and make more positive decisions towards achieving your goals.

Nobody can go on forever working and trying to cope with overwhelming debt without having a break now and again.
If you don't have a break then you are highly likely to have a breakdown and that will place even more burden on your financial position and your ability to pay your debts from being able to earn a decent income.

You need to look at this debt reduction process as various steps towards a long-term goal and one of the steps to that goal is to maintain your ability to earn an income and to whittle away at your debt.

Yoga and meditation are excellent forms of helping you to cope with many different situations and is well as energizing you they will help to calm your mind and stop you constantly thinking about the problems you face.

It doesn't take long to fit a little bit of yoga or even a walk into your daily lifestyle but the benefits that can be gained from this are long reaching and will see that you come out the other end full of energy and debt free.

The importance of the debt is determined by the impact that it can have on your life both now and in the future so clearing past due taxes would be one of the first debts that you would have to look at due to the penalties and compounding interest that you will have to pay and the fact that the IRS has so many powers to seize assets and make life very difficult for you.

A mortgage is another debt that needs to take top priority as losing your house can impact on your ability to pay all your other debts and also make it difficult for you to find accommodation elsewhere. If you don't have your own home then you need to ensure that your rent and utility bills are kept up-to-date so you have a roof over your head and are able to live in suitable conditions to be able to work your way through your money problems.

Your budget will give you a clear indication of the total amount of debt that is owing to others and from there you can set your priority list where you can start working with the people you owe money to and sort out payment plans with your creditors and your own steps to clear your debt.

Medical bills and court-ordered child support debt are also high on the priority list as failure to pay these can result in drastic action being taken that will once again make it difficult for you to work your way through your other debts.

Car loan repayments are a priority because car finance companies will quickly repossess your car if you fall behind with the payments and this can impact on so many other areas of your life such as your ability to get to your place of employment.

Don't be forced into paying minor debts at the hands of debt collectors if you haven't covered these priority debts first.

Many students get into difficulty paying back their loans and they begin their working career with bad credit due to defaulting on their loan. You don't want this to happen and you will need to factor into your budget the repayments of the loan.

While payment is due once you graduate or stop with your education there is often a grace period of 6 to 9 months after that date, depending on the type of loan that you have. The first thing you will need to do if you are having problems paying is to determine what type of loan you have and what options are available to you.

This grace period will give you time to find a job to help make the payments.

With some loans you will begin to make interest payments immediately whereas others will allow you to pay the interest over the term of the repayments or at the end of the repayment of the actual loan.

This is why it is important for you to find out what type of loan you have and what options are available to you to help with your financial planning and make sure that you don't default on the loan repayments.

If you do default on the loan there are various consequences that you need to be aware of. The full amount of the debt could be called up for repayment in total or it could be turned over to a debt collection agency.

You could incur additional late fees and collection fees and your credit history will be damaged.

There are many more areas that will impact on your life so it is wise to work through any issue with your lending advisor and do so with the assistance of the budget that you will have already prepared. They might be able to arrange a consolidation of debt that you help you pay off your loans at a lower interest rate thereby reducing your overall payments that need to be made each month.