Planning a Budget Can Help Erase Your Debt


It is all too easy in the rush of everyday life to increase debt without even realizing it is happening. The antidote to this problem is budgeting and maintaining control of your spending. The good news is that there are easy-to-use tools and techniques that will help you master your money and stay in charge of your plan, while still enjoying life. What follow is a list of ideas, not a hard and fast “you must do this” set of directives, but rather, ideas you can adapt to suit your lifestyle.

Step 1: Figure out where you are now

Remember the map kiosk at the mall that shows a big red X so you can tell where you are? It’s impossible to know if you are heading in the right direction financially until you first determine where you are. Sit down with a notebook or legal pad and list your income and your regular monthly expenses. Don’t forget to include extras such as clothing, gifts, eating out, medical co-pays, and other expenses that might not occur regularly, but are necessities you will need to pay for, sooner or later.

An easy way to do this if you use a debit card or a major credit card for most expenses is to print the last two or three months of expenses from the bank website and review them. You can set up a spreadsheet with categories and enter the expenses, or your bank or credit card company may categorize them for you. You may also want to consider purchasing a money management software program like Quicken, or use’s free household budget tool. It doesn’t matter what you use as long as you get a handle on the two major questions: 1) What is the monthly household income? 2) What is the monthly household outgo?

Step 2: Figure out where you want to go

Now that you know your income and outgo, you can take steps to improve your status. If your outflow is greater than or very close to your income – take a tough look at where the money is going and decide how you can improve the picture. Your goal is progress, not perfection. Can you cut back on eating out, gift buying, and clothing for a while? You don’t have to do this forever, but if you are in a budget crunch, you can do it for a while until things ease up. If you just want to save more, set some goals and have money taken from your check and placed in the bank or in retirement savings before you can spend it.

If you are facing a crisis such as job loss, pull the family together and talk about the situation. When everyone works together, the old saying comes true: joys are multiplied and sorrows are divided. You can also brainstorm solutions. Can family members work part time work to fill in the gap? Can major expenses be put on hold? Can everyone work together to hold a garage sale, or can items be sold on eBay? Can homemade gifts be given? They might be more appreciated than store bought items, anyway.

If you are in a financial crisis, contact your creditors and explain the situation. Let them know that you have every intention of meeting your obligations, but you may need to temporarily reduce payments. With the economy and the job market in turmoil, you are not alone in having these issues. You may find your creditors to be more understanding than you anticipated. If they won’t cooperate, at least you will know that you made every effort to work things out. You can also seek help from a reputable organization such as Consumer Credit Counseling, or from a knowledgeable attorney or financial counselor.

Wherever possible, try to turn budgeting into play. Your attitude can make a difference to you and those around you. Clipping coupons can teach young children a lot about reading, comparing prices, and saving money. Holding a garage sale, or going to garage sales or thrift stores on a fine spring day, can be a form of inexpensive entertainment. A family board game night, RedBox or Netflix rentals, and homemade popcorn may create better memories than going out to an expensive first-run movie.

Step 3: Stay on track for the long term

Once you’ve gotten a handle on your finances, review your situation each month to make sure things are under control. It’s also a good idea to do a review of your net worth at least twice a year. Your net worth is a comparison of your assets to your debts, and a good worksheet can be found on the CNN money site at . As you pay down debt, increase savings, and stay on track with your spending, your net worth will gradually increase.

Remember that life is a marathon. You may have short time periods where a sprint is necessary, but if you keep your eyes focused on the long term goal – increasing your net worth – you will see steady progress.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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