I am going to be starting something new. It will be about saving money and getting out of debt. I will try do a frugal challenge and tip every week. I will also be discussing the areas that we need to work on and how to start getting out of debt. I will be doing all these things along with you. I had wanted to get out of debt by the end of the year but with a shortage of income the past several months I wasn’t able to achieve it. So I plan to double down on it and get it taken care of while trying to help some of you along the way.
I will try to do a post once a week on different issues and ways to work on getting out of debt. I feel like this is something that we need to do sooner rather than later. As of today, the markets are down almost a 1000 points over the past few days hopefully it will bounce back up in the coming days. But the thing is that it is eventually going to go way down so now is the time to start getting prepared for it. So be sure to watch for the post. ( this is my super busy time of year so please bare with me if I miss a week I will pick it up the next. )
Getting a budget put together,
Ok, I know just saying the word budget turns a lot of people away but if you are really serious about getting out of debt and getting your finances in order it is something that needs to be done.
How many of you live paycheck to paycheck? What happens if you have an unexpected emergency? How many of you can’t seem to keep all the bills paid every month? How many of you always have some form of late fee or bank charges every month? How many of you would like to stay home with your kids but don’t feel you make enough money?
Putting a budget together ( and following it ) helps prevents overspending, helps to build savings and an emergency fund, helps get rid of debt , helps to buy a new car, house or even that dream vacation.
First, let’s address a few questions you may have.
Why set a budget? Most people don’t even realize where all their money goes they just know that it doesn’t go near as far as they thought it should. So by making and following a budget, you will be able to see exactly where all your money is going and where you can make improvements. If you want to be debt free and able to pay your bills on time you need a budget.
Is now the best time to create a Budget? You bet it is with the holidays coming up you do not want to overspend and put your self into more debt ( will have more on the holidays later).
I don’t have a set monthly income so how will a budget help? There are some of you who don’t have set incomes but with a little extra work and planning, you can make a budget work.
What if I set it up and after a month or so I see it isn’t working? That is OK it will take a few months to get it all ironed out.
So where to start?
First Determine what you are budgeting for. Having an end goal makes it a lot easier to stick to. Do you want to be debt free, buy a house, a car, or that dream vacation, or just paying your bills on time with a little left over for fun.
Get a notebook to put it in I know some like to use a computer program and if you do that is fine. I just like having it on paper in front of me so I can see it at a glance whenever I need to.
Gather everything from incoming to outgoing money, All your bills, Bank statements, utilities, credit cards, bank loans, vehicle loans, mortgage or rent, insurance, everything, receipts from the past month even what you spend at Starbucks everything that you spend money on.
First, figure out how much income you have coming in. Your paychecks or any extra income you receive. Add all these together and put in a separate column.
Separate all your fixed committed expenses. Mortgage, rent, car loans, insurance, other loans any fixed monthly expense etc.
Now separate all your variable committed expenses. Utilities, phones, credit card, medical bills, groceries, transportation, etc.
Now separate all your discretionary expenses. Eating out, movies, cable or satellite t.v., gym membership, sports ( golf, bowling etc), gifts, cd’s, books, magazines, entertainment, kids activities, etc, all your other expenses.
Now add all your annually and semi-annual expenses such as taxes ( personal and property), Insurance( if you pay once or twice a year) any other thing that you only pay once or twice a year. Divide these by 12 or 6 for your monthly total.
Add all your expenses together.
Ok, now the moment of truth look at your totals of incoming and outgoing do you have way more outgoing than incoming or it pretty close? If not, then figure out the changes you need to make.
If you are in the red then you need to reduce your spending. If you have some leftover then you need to start applying it to your debt ( after you have a savings of at least 3 months of expenses saved up).
Making changes to the budget
Most of us are going to have way more going out than coming in so now you need to figure out how to get it in line. I know that can be hard if you already feel like you are pinching pennies. You can go here for more ideas on how to save you can go here. It will be hard and not really a whole lot of fun but you can do it.
First, look at your variable committed expenses, where can you cut? You can start really paying attention to your utilities cut where you can ( turn off lights, lower the thermostat etc), be sure to pay credit card bills on time to avoid finance charges etc.
Now look at your discretionary expenses, this is where you can really make a difference.
Do you really need that satellite T.V. or that gym membership that you only use once in a while, or do the kids really need all the extra things you have them in ( I promise they will survive if they are not in every sport of events, mine did)?
Once you have cut back look at the budget again are you good or do you still need to cut expenses? If you still need to cut go back and relook at everything and make some more cuts. In the upcoming weeks, I will have more ideas on how to cut expenses.
As I said above tough YOU HAVE TO BE COMMITTED or it won’t work. You have to remember what is more important a roof over your head or dinner out? Do you want out of debt or do you want that new T.V. or car? A few sacrifices now will make your future so much easier and enjoyable, just imagine not having to worry and stress every month about if you are going to be able to pay all the bills.
YOU CAN DO THIS! In the upcoming weeks, I will have more on how to get your expenses down and how to stay on track with your budget.
If payments are higher than you can manage and you can’t find extra money, a free credit counseling service, such as the National Foundation for Credit Counseling, can help. (Be wary of services that charge a fee and promise to reduce debt.)