For people dealing with debt, a personal budget is a must have if you want to get out of it. Without a budget, it is very hard to overspend each month and not only not make progress towards paying back your debt, but potentially make it even worse. If you are dealing with some debt issues, use the following tips to help yourself set up a budget. While it may not get you out of debt next week, it is a step in the right direction.
- Gather Information – In order to get started with a budget, you need to gather together everything that you’ll need. Documents showing how much you earn – such as a pay stub – along with documents showing what you spend – receipts and bills – are a must. To more information you can gather, the more effective your budget is going to be.
- Choose A Method – Once you have all of the information you can find, you need to decide how you want to create your budget. There are many mobile apps out there that can help you to create a budget if you want something that you can take with you on the go. Or there are computer programs you can download that will manage everything for you. Lastly, a simple piece of paper and a pen will be enough if you want to go that way. Choose whichever method you think will work best for you, and remember that you can always switch methods if the one you picked is not working.
- Organize Your Data – For the rest of the steps, we are going to describe the process as if you used a paper and pen, since each mobile app and computer program is different, but the overall concepts are the same no matter the method you chose. The first thing you want to do is organize all of your data. For spending, make a complete list of everything you spend money on in a typical month. Include bills, entertainment expenses, etc. Sort the list from the highest priority to the lowest, so that you can see which expenses are the most important. At the bottom of the list, add up everything so that you have a total expenses amount for a typical month. On another sheet of paper, write down all of your incomes and add those up as well.
- Adjust – If after completing the above step, you found that your expenses are more than your incomes, you are going to have a problem. Doing this for too long will quickly lead to debt, which you want to avoid. Look at your list of expenses and see where you can cut back. Start with those items that you put at the bottom of the list, and get rid of as many as you have to until your income total is higher than your expense total.
- Maintain – Now that you are earning more money then you are spending, you want to keep this up each month. You’ve now set aside how much you can spend on any given thing, and the important thing to do is make sure you stick within those limits. This is where mobile apps can really come in handy, as you will always know how much you can spend while you are out. If you don’t have one, just make sure you add your expenses in at the end of each day so you know how much money you have left for the remainder of the month.
The most important thing to remember about personal budgets is that they won’t work if you don’t stick to them. If you can plan them out, keep up with them, and let them dictate your financial decisions, you should have no problem managing your money effectively. Good luck!