Get Out Of Debt By Setting Up Your Budget
In Credit Repair of CreditGuru (February 26, 2009 11:08 pm)
Being unable to pay your bills is usually not something that happens overnight. It takes a while. And, typically, it indicates an inability to handle money in a responsible manner. So what do you do when you find yourself in a situation like this? The best thing to do is to set up a budget. It’s much better to learn how to manage your money than learning how not to pay your credit card bills and debt.
Our minds are constantly playing tricks on us. We believe that we make more money than we actually do. If our salary is $36,000 a year or $3,000 a month, we don’t actually get to spend $3,000 a month. After federal and state taxes, FICA deductions, Health care deductions, and a slew of other miscellaneous deductions - we may have less than $2000 a month of spendable income.
Conversely, we spend more money than we think we do. The quarters for parking meters, the occasional night out, the various city licenses and such - are insignificant amounts on their own, but all add up to balloon our monthly spending. Being forced to put in writing all of our monthly income and expenses helps us to control our monies. It makes it harder to fool ourselves and our real money situation.
With a monthly income and expense budget, you’ll be ably to easily monitor your money and begin to eliminate unnecessary expenses. If you tend to be a big spender, a budget will help you to bring your spending under control.
Many people mistakenly believe that setting up a budget means investing in expensive sophisticated programs. But all you really need is a pen and paper. The important thing is that whatever method you use, it allows for reconciling your income and expenses at each month end.
The budget plan that you create will have two parts to it: The monthly income part consists of all anticipated income that you expect to receive in that particular month. Anticipated income includes salary, money from alimony, Social Security, and dividend investment income. Start by writing down the source and dollar amount of all income you receive. The expense part of the budget plan consists of all expected expenses that you expect to incur for that particular month. This includes all expenses. Mortgage bills, monthly rent, food, restaurant bills, alimony payments, and so on. If you forget any, just be sure to include them for the following month and from then on.
Now you put the budget plan through a trial run. Test if for a month. If you need to adjust it, do so. If you discover an expense that you left out, add it in. Do the same for any extra income which you omitted At the end of month one, you’ll have a pretty good idea of your net work, including ah eye-opening view into your spending and income habits.
The important thing is to continue to use the budget plan every month. When the month ends, compute your net income by subtracting that month’s expenses from the month’s income. If your expenses exceeds income, continue to find expenses that you can lower or eliminate until your budget is in balance.
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