I've had enough!! What's the best way to develop a budget?

Question

Is there a fool proof easy way to develop a budget that I can follow? I've got a lot of debt, i.e. credit cards, loans, etc. (22,000), along with 2 mortgages. I know that usual "spend less than make" but is there a plan or website that can give me some guidance, without charging a fee? I'm willing to take on a second job, that's what it takes. Thanks for the advice.

Answer 1

If you properly write out and follow a budget, you will begin to experience freedom. This is strange to many people as most think that budgets are made to control us and take away freedom. However, a properly written out budget begins to control the money. We spend too much time making money to allow our money to control us. Once we know where every single dime we make is going, we can easily see where problems lie and make adjustments.

Start out by budgeting items that are essential on a monthly basis. You should always start out with food, then housing and utilities, then transportation. Housing should not take up more than one fourth of your take home pay. If it is substantially higher than this, you may want to consider getting in a better housing situation. You should stay away from car payments by paying cash for cheaper cars whenever possible. You should never pay interest on a depreciating asset.

After these four items, start by paying out the minimum amounts on all of your other debts. We will come back to paying more on these debts a little bit later. Next, plan for insurance payments. Then list out other personal expenses such as child-care, education, recreation money, and other things that you anticipate. Finally, set money aside for lump sum expenses such as car replacement, vacation, holiday gifts, etc.There should also be a category for “blow” money. You will waste money from time to time so it is important to be aware of it and plan for it.

It is important to understand right now that you need to get out of debt if you have any (besides a house). The first step to doing this is to get some money in savings as an emergency fund (eventually 3-6 months expenses but at least 1,000 to get started) and cut up those credit cards if you have any. This way we accomplish the first step to getting out of debt which is putting yourself in a position to never have to borrow any more.

With whatever money is left at the end of the budget, we need to begin paying off these debts! Payments rob us of our most powerful wealth building tool, our income. There are two different approaches to becoming debt free. The first is to list all debts from the highest interest rate to the lowest, attack the highest interest rate and pay minimums on all the rest. The other way is to list all your debts from smallest to largest and attack the smallest first and make minimum payments only on all the others. The first may mathematically seem better but from my experience, the second approach actually works better from a behavioral standpoint. You get constant reinforcement as you knock out debts early and often. Either way, you need to cut your lifestyle and get angry. Have a garage sale and get a second job. Get intense and soon you will be free!

Once you are debt free (except for a house) make sure you are putting away 15%-20% of your income in a tax sheltered retirement fund. Also if you have kids, try to save for their college education.

Start taking these steps and you can become wealthy on a modest income. It will be tough and you will fail the first couple of months. It takes practice to get good at budgeting but don’t give up! Make sacrifices today that will pay hundredfold in only a few short years from now. This is your life, go and make the most of it!

Hope this helps!

Answer 2

First gather all your bill and know how much you need to pay every month, that also including credit card bills. With credit card, you need to include the higher of minimum due OR the month interest accrued. Don't forget the auto insurance or any other insurance (or let's just say things you pay every six months or annually), and find the monthly amount for those bills. As for groceries and gasoline, you will need to start to see how much you need every month by tracking your spending. Now you are ready to total all the monthly amount required. Second, take your take home pay (after tax), and starting to subtract all the bills need to be pay. I hope is not a negative number. Okay, if you still have 15% of your income left, that is good. That means you live within your means. Save up all the 15% to a savings account. If you like to save even more than 15% of you take home pay, or you are negative after you deduct everything, start review your bills. Maybe your cell phone plan can cut down to $35 a month instead of $150 a month. Start to cut down the unnecessary stuffs. Start tracking your spending and know where your money is. If you owe more than one credit card, start paying off by focus on the highest interest rate first.
After you get a grasp of how to budget, start to look at bigger picture and focus on paying off your debts. Such as credit card debts...Well, I am glad you are willing to take on second job, because if you want to be more aggressively pay off you debts. You really should. Also go on websites, most of the home page of yahoo or msn have a section "money" or "finance" that teach people how to budget. Start reading some article there will also help you a lot. Good luck!

Answer 3

MSN.com has a really great section called Money. There are so many articles that tell you all about handling money, coming back from debt, how to get out of the spending cycle, trimming little expenses etc.
I myself have trouble with debt. It's not hugely bad but enough to make me feel really bad. I have about five thousand left on school loan, and about 8 in credit card debt. I'm getting depressed thinking about it now because the credit card debt is just stupidity. It is spread out over several cards, in lower interest rates, but it is such a waste. I myself have started to read this site for info and encouragement because I too have had enough like you.

Answer 4

http://www.advantageccs.org/?s=adv1&OVRAW=free%20credit%20counseling&OVKEY=free%20credit%20counseling&OVMTC=standard&OVADID=541065022&OVKWID=2156967522

Take a look at this website, and read all about their debt management program. The counseling is free, but that program is fee based. They have an excellent rating.

In the meantime....

Start with what you take home, say $4000/month. Then subtract what you MUST pay, ie house/apt, utilities, car payment, all insurances, credit cards, loans.

Foolproof is impossible if you have no self-control. Once you have made your list of what you must pay, then that is what you do. Pay what you must, save 15% of what is left over.

If you cannot get your credit card bills under control, you will only get deeper in debt. Job One, pay them off.

If you can take a second job, then I highly recommend it. Pay extra on your credit card bills and any NON-Mortgages loans.

Don't buy new cars, new TV's and such. Take care of your current debt and wait until you are more solvent. Learn to live within your means.

Be of good cheer. If you are diligent, you will succeed.

Answer 5

I love Suze Orman's books about financial management, and I think they'd work for you, given your can-do spirit.

One thing to do is keep track of your budget. Write down what you spend -- every single little thing! -- for one month. Then take a look at it and figure out where you can save some money. Can you switch out one vending-machine drink for a cup of water at your desk? Would bringing your own lunch make a difference? In my case, substituting canned fruit for fresh fruit three times a week made a difference in my grocery bills.

The changes that you make have to be something you can do, or something that you will be able to say, "I will deprive myself for one month, but be able to go back to later." If they are hard and forever, it's really hard to stick to them.

You need to set up good habits, and watch the pennies -- otherwise the money from your second job might go toward all these little fripperies, too.

Good luck, and try the Suze Orman!

(BTW, my suggestions may sound like really little things, but there's an old saying that "Even dust, over time, will make a mountain." And there's "Look after the pennies, and the pounds will take care of themselves." We still remember these old sayings because they are true. "Every journey begins with a step." Another aside -- you can get these books at the library -- you don't have to run out and buy them.)

Answer 6

Open a spreadsheet program (excel or any spread sheet program) List all your bills with the account number, address and customer service number.

The next column list the Total Balance due and below that the minimum payment amount.

In the next columns List your pay days or just the months of the year. (example: Jan Jan Feb Feb)

When you pay your bill under the month list the amount you paid and below that the date you paid. Deduct that amount from your balance. As the bill is paid off remove it from your list. Use a different Tab per year. Just label them by year.

I have done this for years and it is very helpful in keeping track of everything I am paying.

Answer 7

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Answer 8

My personal budget plan is to make more money than I can spend. This plan works well because it forces me to save money. If I were in your position I would start by stopping the use of credit cards. If you don't have the money don't spend it. Start paying down things with high interest rates and work your way down.

Answer 9

Cut your cards up! Only buy what you NEED not want.
Make a list of your expences and try to pay more then they ask for each month. You may be able to get one card to pay off all others then pay that one as much as possible.

Answer 10

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