Get Debt Under Control By Setting Up A Budget First
A debt elimination plan starts with an understanding of where your money is going.
If you are ever going to become debt free or get ahead financially, you have to start with setting up a budget.
I'm not talking about keeping a running tab in your head or doing your best "guesstimate", we've all done that.
I'm talking about taking the time to actually calculate every penny that is coming in and going out.
It isn't easy but once it is set up and you get into the routine, it's easy to maintain and will give you a better perspective about your overall financial situation and allow you to gauge and plan towards the future.
It will take you about 2 hours so; set some time aside undisturbed, and get it done.
You don't have to do the information gathering all at once, start at the beginning of the month.
Take a few moments out of each day and start gathering up the materials.
Remind yourself that this is the year that I am going to become debt free.
I'm going to eliminate my debt and invest in my future.
Treat yourself like a company.
Get into the habit of looking at your own personal financial life as you would run a company.
Manage your debt and expenses as well as the income coming in correctly and you will reap the rewards as a good CEO or fail as a bad one.
Once you have all of your information, commit to a day at the end of the month that you will put all of it to good use and set up that budget! Here is what you will need: 1.
Review you last 12 months of checks that you have written.
You can review your monthly bank statements (I like these because it will also show me ATM purchases and withdrawals, any additional monthly service fees, etc.
)Remember, you need to know where all you money is going so, gather up the info.
2.
Gather up the last twelve months of income/deposits.
Net take home pay, rental income, investments, etc.
3.
Get yourself a small notepad that you can fit into your purse or put in your back pocket.
Starting at the beginning of the month, every time you spend money, write the date, item and amount down in the notebook.
When you buy gas or go to the grocery store, get a cup of coffee, go to the movies or dinner, write down the date and amount spent.
At the end of the month when you sit down to put your budget together, you have an overall snap shot of where some of your non-fixed expenses are.
This is where you can usually identify extra income you could be using to get out of debt or invest in something other than a latte.
4.
Get yourself a legal size note pad.
Now, you could go out and get a budgeting program like QuickBooks but, it will only work if you use it.
Let's just start with the basics and then you can move on from there.
The first sheet of paper will be labeled at the top:Current Income If you are married and both you and your spouse work, create two columns on the paper.
One is for you and one for your husband/wife.
On the first line, you are going to list your average monthly salary.
If you get paid every two weeks, take your take home pay (after taxes) and multiply by 26.
Take that total and divide the number by 12.
This will give you your monthly take home pay (average).
For example:If you take home $1,500 every two weeks - $1,500 x 26 = $39,000 $39,000 / 12 = $3,250 is your monthly take home pay.
If you get paid weekly, take that number and multiply by 52 then divide by 12.
$750 x 52 = $39,000$39,000 / 12 = $3,250.
Below the average monthly salary, you are going to list any of the following with the appropriate amount of money received.
If you get any kind of interest or dividends payments periodically (quarterly) add up the grand yearly total and divide by 12, this will give you that monthly average.
Income from real property Interest and dividends Alimony, maintenance or support payments that you receive Social security or other government assistance Pension or retirement income Any other monthly/yearly income that you get not listed above..
..
..
Now, tally all the columns up and that will give you your current income situation.
5.
On the separate piece of paper we are going to get into the heavy lifting.
Label this one at the top, Current Expenditures - this is where you are going to list all of your monthly obligations (both fixed debt and non-fixed debt).
make a list of the following and fill in the blanks.
Rent or home mortgage payments (include lot rented for mobile home) Real estate taxes (if not included in your regular mortgage payments) Property Insurance (if not included in your regular mortgage payments) Utilities:electricity, heating fuel, water and sewer, telephone, gas, cable, DSL service Home maintenance - figure out what you spend a year and divide by twelve.
(fix a leak, paint, general overall house maintenance.
) Food (you can get that from your small notebook) Clothing (every year when the kids go back to school and they get new close, etc.
; figure out the monthly average) Laundry and dry cleaning Medical and Dental expenses:prescriptions, co-pays, etc.
Transportation (not including car payments):oil changes, regular vehicle maintenance, registration fees, etc.
Recreation, clubs and entertainment, newspapers, magazines, etc.
Charitable contributions Insurance (not deducted from wages or included in home mortgage payments) - if insurance is paid quarterly, etc.
total the yearly amount and divide by 12.
Homeowners/renters Life Health Auto Other Monthly Debt Installment payments: Auto Minimum monthly payments on all credit cards debts Furniture, etc.
Alimony, maintenance or support you pay to others Payments for support of dependents not living at home Add all those columns up and you will have an average monthly expense page.
Hopefully, when you take your monthly income and subtract your monthly expenses, you will have what we call a budget surplus.
This money should be put toward getting out of debt, setting up an emergency cash reserve, invest, etc.
If you don't have a surplus, then you really need to think about getting some type of professional help to manage your debt or to get some type of debt solutions help you eliminate your debt.
Now that you have a clear picture of what is coming in and what is going out, you can map out a plan for the future.
You can figure out what areas you can cut back on (cook at home more often) or ways to save in certain areas (using coupons when grocery shopping).
Shop around for a better phone plan or DSL package, check with other insurance carries for a better rate.
Contact your credit card companies and see if they will give you a reduced interest rate to stay competitive (believe it or not this sometimes works).
If you are ever going to become debt free or get ahead financially, you have to start with setting up a budget.
I'm not talking about keeping a running tab in your head or doing your best "guesstimate", we've all done that.
I'm talking about taking the time to actually calculate every penny that is coming in and going out.
It isn't easy but once it is set up and you get into the routine, it's easy to maintain and will give you a better perspective about your overall financial situation and allow you to gauge and plan towards the future.
It will take you about 2 hours so; set some time aside undisturbed, and get it done.
You don't have to do the information gathering all at once, start at the beginning of the month.
Take a few moments out of each day and start gathering up the materials.
Remind yourself that this is the year that I am going to become debt free.
I'm going to eliminate my debt and invest in my future.
Treat yourself like a company.
Get into the habit of looking at your own personal financial life as you would run a company.
Manage your debt and expenses as well as the income coming in correctly and you will reap the rewards as a good CEO or fail as a bad one.
Once you have all of your information, commit to a day at the end of the month that you will put all of it to good use and set up that budget! Here is what you will need: 1.
Review you last 12 months of checks that you have written.
You can review your monthly bank statements (I like these because it will also show me ATM purchases and withdrawals, any additional monthly service fees, etc.
)Remember, you need to know where all you money is going so, gather up the info.
2.
Gather up the last twelve months of income/deposits.
Net take home pay, rental income, investments, etc.
3.
Get yourself a small notepad that you can fit into your purse or put in your back pocket.
Starting at the beginning of the month, every time you spend money, write the date, item and amount down in the notebook.
When you buy gas or go to the grocery store, get a cup of coffee, go to the movies or dinner, write down the date and amount spent.
At the end of the month when you sit down to put your budget together, you have an overall snap shot of where some of your non-fixed expenses are.
This is where you can usually identify extra income you could be using to get out of debt or invest in something other than a latte.
4.
Get yourself a legal size note pad.
Now, you could go out and get a budgeting program like QuickBooks but, it will only work if you use it.
Let's just start with the basics and then you can move on from there.
The first sheet of paper will be labeled at the top:Current Income If you are married and both you and your spouse work, create two columns on the paper.
One is for you and one for your husband/wife.
On the first line, you are going to list your average monthly salary.
If you get paid every two weeks, take your take home pay (after taxes) and multiply by 26.
Take that total and divide the number by 12.
This will give you your monthly take home pay (average).
For example:If you take home $1,500 every two weeks - $1,500 x 26 = $39,000 $39,000 / 12 = $3,250 is your monthly take home pay.
If you get paid weekly, take that number and multiply by 52 then divide by 12.
$750 x 52 = $39,000$39,000 / 12 = $3,250.
Below the average monthly salary, you are going to list any of the following with the appropriate amount of money received.
If you get any kind of interest or dividends payments periodically (quarterly) add up the grand yearly total and divide by 12, this will give you that monthly average.
Income from real property Interest and dividends Alimony, maintenance or support payments that you receive Social security or other government assistance Pension or retirement income Any other monthly/yearly income that you get not listed above..
..
..
Now, tally all the columns up and that will give you your current income situation.
5.
On the separate piece of paper we are going to get into the heavy lifting.
Label this one at the top, Current Expenditures - this is where you are going to list all of your monthly obligations (both fixed debt and non-fixed debt).
make a list of the following and fill in the blanks.
Rent or home mortgage payments (include lot rented for mobile home) Real estate taxes (if not included in your regular mortgage payments) Property Insurance (if not included in your regular mortgage payments) Utilities:electricity, heating fuel, water and sewer, telephone, gas, cable, DSL service Home maintenance - figure out what you spend a year and divide by twelve.
(fix a leak, paint, general overall house maintenance.
) Food (you can get that from your small notebook) Clothing (every year when the kids go back to school and they get new close, etc.
; figure out the monthly average) Laundry and dry cleaning Medical and Dental expenses:prescriptions, co-pays, etc.
Transportation (not including car payments):oil changes, regular vehicle maintenance, registration fees, etc.
Recreation, clubs and entertainment, newspapers, magazines, etc.
Charitable contributions Insurance (not deducted from wages or included in home mortgage payments) - if insurance is paid quarterly, etc.
total the yearly amount and divide by 12.
Homeowners/renters Life Health Auto Other Monthly Debt Installment payments: Auto Minimum monthly payments on all credit cards debts Furniture, etc.
Alimony, maintenance or support you pay to others Payments for support of dependents not living at home Add all those columns up and you will have an average monthly expense page.
Hopefully, when you take your monthly income and subtract your monthly expenses, you will have what we call a budget surplus.
This money should be put toward getting out of debt, setting up an emergency cash reserve, invest, etc.
If you don't have a surplus, then you really need to think about getting some type of professional help to manage your debt or to get some type of debt solutions help you eliminate your debt.
Now that you have a clear picture of what is coming in and what is going out, you can map out a plan for the future.
You can figure out what areas you can cut back on (cook at home more often) or ways to save in certain areas (using coupons when grocery shopping).
Shop around for a better phone plan or DSL package, check with other insurance carries for a better rate.
Contact your credit card companies and see if they will give you a reduced interest rate to stay competitive (believe it or not this sometimes works).
Source...