How To Get On A Budget
During tough times we all have to watch our money closely. Being on a budget will help us get spending under control. You will know where you can cut to save money easier than ever. Now you just need to know how to get on a budget and get spending under control.
Most businesses have budgets so why shouldn’t you? Budgets help you understand where your money comes from and exactly where it goes. Usually it helps a lot to see it written down to understand why you haven’t been able to cut your expenses like you planned to. According to the Merriam dictionary budget means: a plan for the coordination of resources and expenditures. Now to explain how to get on a budget.
CNBC has a great article about managing your money. It lists 7 things to keep in mind and is an article worth reading before you do your budget.
You will need to gather up all of your current bills, print a checkbook registry from the prior month, and estimates of future bills. Then you will need to gather up monthly paycheck stubs and other income. All of this will be needed for an accurate budget.
On the first column write down your income and the dates it will arrive. You can also use websites that make this a lot easier. They have a budget calculator that will show you everything in one place. Don’t forget child support, social security, pension, or any other money you receive on a regular basis. Add these and save for later.
On the next column write down all of your expenses. Write down balances in one column by themselves, the put the monthly minimum payments in the other column. If your bill varies put down an average payment. Also put in what you spend on groceries, gas, entertainment, lunches, etc. Don’t forget irregular expenses such as insurance or taxes.
Now on the next column write down what you would like to payment each month on each bill. For example you pay more than the minimum payment on credit cards, which cards and what is the “hope for” payment?
Also put in this “hope for” column your money savings. This is a must for any budget. You will also need to stop using credit cards where possible. Stop spending more than you have coming in and that is what you are doing by using credit cards.
Now let’s look at a beginning budget. Put the word Budget at the top. This is going to be what you plan on paying each month. First thing is house payments, utilities, insurance, taxes, and similar that must be paid. Do not put groceries, lunches, credit cards etc yet.
Next put minimum payments on your credit cards. Since these are not going to be used any longer we need to figure out what to pay off on these. You will need to know the interest rates you are paying on each card. Mark that down next to minimum payment. Which one is the highest rate? That is the first one you want to pay off.
Put down what you spend on groceries. Can you cut anything out? Do you use coupons and apps to help cut your costs? Are there cheaper alternatives that work just as well? Put down what you think you can cut it down to in the column without all the excess that you really do not need right now.
Take a look at your checkbook, did you miss anything? Is there an irregular payment you forgot about?
Now being honest about spending money. What do you pay out of spending money? Lunches? Can you take your lunch to cut costs? What about eating out? Can you cut that down? Remember you are no longer using credit cards so keep that in mind also. Are you gong out to the bar, can you possible cut that down to once per month? Be realistic with this estimate without being overly free this is where a lot of money you don’t track goes. You will never get this down to zero so don’t kid yourself. We might not be able to cut this any further if something happens.
Let’s look at your totals. Subtract expenses from you income and see what your net amount is. How much is left over? Let’s look at how much you can comfortable putting towards paying down the first credit card? How much can you put into savings each month?
Remember extra money goes put to paying down debt, your biggest cost. The sooner your cards are paid off the better your financial picture will look. Pick the one with the highest interest rate and pay down as much as you can afford to. You will want to put some in the saving. According to USNews the amount should be 20% of income before taxes. This includes any 401k or similar accounts.
Now that you know where your money goes each month you can start to watch for new ways to cut costs or earn extra income.
Take a look at your “hope for” column and then the more realistic budget, are you shocked at the difference? If you are still having issues you may benefit from this article from Consumer Financial Protection Bureau about credit counseling.