Have you ever wondered where all your money goes?
Only 32% of U.S. households prepare a monthly budget. That's less than a third!
It's not how much you make; it's how much you save. You can't save, if you don't know how much you're spending. That's why we all need a budget.
When you put things in black and white in front of you, they all of a sudden start to make a lot more sense. This is very much so the case with fixing your debt – writing your budget in black and white on a piece of paper will help you to realize the sectors of your life in which you can save money and the sectors in your life in which you can spend more.
When it comes to debt, you should be trying to save money on the things that you pay out for on a day to day basis and placing more money aside to pay off the things that you owe on.
How to Make a Budget: Step-by-Step Guide
Step #1 How to Make a Budget: List Income and Expenses
Here is a step-by-step guide to making a budget. Let's do it the old-fashioned way: with paper and pencil. There are some fantastic apps, but I have found that nothing beats getting your budget down on paper.
On your piece of paper, make a list. How much money do you have coming in each week? Every two weeks? Every month?
Then put all of your expenses and money that is going out. How much do you spend on groceries, car payments, credit card payments, cell phone bills, etc.?
Ideally, you should have an amount left over, once you have deducted all the money that is going out from your income, which should be in the positive.
If you do not, you have to figure out a way to balance these two so that income is always above the money going out.
Step #2 How to Make a Budget: Look for Places to Trim
Great, you have your budget and a list of everything that comes in and goes out of your home over a period of time. Now, you can clearly see exactly where you are having issues with money.
You need to be somewhat brutal and critical about your spending. If you are spending $200 per month on various streaming providers or a cable TV bill, watch out. If you have all the best channels and options for binge-watching, but cannot afford to meet your monthly credit card payments or the mortgage/rent payments, you need to sacrifice.
This doesn’t necessarily mean cutting out streaming or cable completely. Just trim. Maybe you don’t need the full cable package. Ditch one or two streaming services. Maybe don't keep HBO Max after you've finished The Last of Us. Check your credit cards for forgotten automatic re-bills and subscriptions.
Then use the money that you have saved to pay off some of your debt.
Do you have multiple credit cards each charging you a bunch of interest? Consider consolidating your credit card debt. You can get a loan to consolidate your debt or even consolidate it yourself onto a single credit card.
Step #3 How to Make a Budget: Do Great Things with the Savings!
It's that simple. The hardest part is nailing down all your income and expenses.
Remember: if you can measure it, you can manage it!
Debt management and fixing old debts doesn’t need to be a difficult process, you just need to be a little harder on yourself. Just a little. Over time. It's a process.
Many people have been able to pay off debt using this simple strategy. You may think that you are living the good life at the moment, but in reality you’re just putting yourself further and further into debt if you are spending more than you take in with no hope of getting out of it.
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