An engineer’s guide to smart budgeting and realistic debt management
You are finally finished with college and you are happily employed at hopefully the company of your dreams. Before you realize it, six months have passed and the first payment on your student loan is due. For most new engineers this is the moment of truth where one is forced to take a second look at their finances. So, how do you prioritize your bills while still cognizant of future spending, down payment on a house, marriage etc? This article provides a realistic guide on smart budgeting and debt management from an engineer’s perspective.
Budget
It is worth mentioning that you should live on what you earn. Most people end up in debt because they have chosen a lifestyle which they can not sustain based on how much money they earn. The first step to prevent yourself from falling into this all-too-common trap is to come up with a budget, clearly noting all inflow and outflow cash amounts.
While creating the budget, please note the following:
- Make sure you conservatively estimate for all essentials, rent, insurance, food etc.
- Always save a portion of your income, say 10% and stick to it
- Allocate a standard amount which you are comfortable with to debt repayment. Several factors should be in play here, how much you have in debt, how long you need to pay off your debt, interest rates etc. (more under “paying off your debts” below).
- If you are planning a major purchase in the future, a simple excel worksheet should help you determine how much you should save every week.
No matter how deep in debt you might be, stay away from Debt Management Companies
The way these companies work is that they take a monthly lump sum payment from you and distribute the 
money to your different creditors. In some cases they might negotiate with your lenders for lower payments, or reduced interest rate. For these “services” they will charge you a standard or monthly amount. DO NOT sign up for their services.
Most credit card companies are willing to make exemptions if a customer calls them directly. You do not need a paid emissary to negotiate a better rate for you with your creditors. A simple call to your creditors explaining your financial difficulties might be all you need.
Paying off your debts
Use your budget to help you plan your debt-reduction strategy. The first step is to list all your debts, from the highest interest rate to the lowest. Aggressively pay down the highest-rate balances while making on-time minimum payments on all the others. The amount you allocated for debt repayment should dictate how much you can devote to paying down your balances each month.
In addition, consider these tips:
- Use any extra cash — bonuses, extra paychecks, lottery winnings — to pay down debts.
- Based on your budget you should be able to figure out how long you will take to pay off the debt. If paying that debt within that time-frame is not possible, you might need to consider alternate ways of generating income such as, volunteering to work overtime, getting a second job or selling merchandise on eBay.
- If you can’t earn more money, you’ll need to spend less. Try these tips.
NO NEW DEBT
A successful debt-reduction strategy is only so if you do not accumulate any new debt. Be mindful of traps which might lure you into debt such as an unnecessary credit line increases. Spend wisely on the essentials and avoid getting ripped off.
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