Go debt-free with these effective budgeting methods

Serious about going debt-free? Find two budgeting methods that can help you say goodbye to debts effectively!

Want to Get Out of Deb

Debt has become a common aspect of most individuals’ financial portfolios. According to a report published by TransUnion CIBIL, India had a working population of 40.07 crores until January 2021. Out of this, 20 crore individuals, or 50% of the working population, had some or the other form of loans.

While debt is typical, its repayment matters, especially after the pandemic’s financial impact. According to reports published by the Reserve Bank of India (RBI), banks' credit card default rates stood at 12.7% by September 2021 as many users defaulted on their credit card bills.

Where do you stand with your debt?

(Also read: 5 money behaviours that can push you into debt)

Defaulting on debt is a double-edged sword that demands additional interest payments and damages your credit score. That is why debt management is essential. Moreover, if you want to save the interest outgo or want another loan, pay off debts faster and go debt-free.

Wondering how? Well, there are two simple yet effective budgeting methods that can help you bid goodbye to debt. Let’s have a look.

Budgeting Methods To Get Rid of Debt

Proportional budgeting 

As the name suggests, proportional budgeting allocates a proportionate part of your income towards debt. Under this method, you break up your income into different portions. Each of these portions is then assigned to specific expenses, debt being one of them.

Proportional budgeting has different proportional rules to choose from. These include the following

Budgeting methods

You can use any of these rules and ensure that 20% to 30% of your income is directed towards debt repayments. This would help you pay off your debt faster.

(Also read: 5 ways to deal with medical debt

Zero-based budgeting

The zero-based budgeting method aims to use up every last penny of your income. This method works on a simple premise –

Income – expenses – savings = 0

You use up all of your income, and nothing is left with you at the month-end.

For instance, say you earn Rs.1 lakh per month, and your average monthly payments and expenses are Rs.40,000. After that, you use up Rs.60,000 for investments and debt repayments so that at the end of the month; you have nothing.

(Watch this video to understand zero-based budgeting)

Which Budgeting Method is Better?

Each of these budgeting methods has its respective pros and cons. Have a look –

Budgeting methods


The choice, therefore, rests with you. Consider your outstanding debt and then make a choice. You can also experiment with both methods and see which works best. Alternatively, you can use both methods for different months and find an ideal way to get rid of debt.

Debt management is individualistic. You can best know the ideal debt relief method by assessing your income, expenses, and lifestyle choices. So, understand these two budgeting methods and use them to go debt-free.


Related Article

Premium Articles

Union Budget