A Budget and Debt Go Hand in Hand

Many people continually complain about being in debt but when you ask do you have a budget, do you know how much you owe, or when you suggest they cut back on expenses they look like a deer in headlights or they just plain out refuse.  I am always amazed at this, how can you ever get out of debt if you don’t change your mindset, if you aren’t willing to work hard and make sacrifices.  There is no quick fix or cure all to get out of debt.  It takes a long time to get in debt and you will not get out of debt overnight. 

Many people do not know how to create a budget for themselves and many don’t even know where to start. Luckily learned at an early age how to create a budget for myself.  I knew how much money I spent and how much I had left.  This skill helped me when I became an adult and got into debt.   

The first step to getting out of debt is creating a budget.  The basic premise for creating a budget is to know what you have coming in and what you have going out. Track everything you spend money on, cigarettes, candy, bubble gum, etc.  Make the budget flexible so you have room for unexpected expenses such as house repairs or car repairs. If you don't have an emergency fund or savings to cover these expenses you can readily see in your budget what areas you can reduce expenses to get money to pay for those unexpected expenses.

Most people don't think about how much money they spend per week or per month but when you see all of your expenses written down it provides awareness of your spending habits. A budget and being in debt go hand in hand. Most people who don’t have a budget or don’t stick to it are in debt. Most people in debt don’t have a budget.  A budget is the first step to help you get out of debt. A budget will help you to determine if you have any money left over to pay down debt. If you don’t here are 20 ways to help you create a budget and pay off debt:

1. Admit that you have a problem and do something about it.
2. Take accountability for your actions. Don't blame others for your financial situation.
3. You have to know where you are before you can get to where you want to go. A budget will help you determine – what you spend, what you earn and what you owe.  
4. Use pen and paper, use a software tool like Quicken or Microsoft Money, a smartphone app or use the envelope method to track you spending daily, weekly or monthly. Once you visually see where you are spending your money it will make it easier to reduce spending.
5. Automate. Use online bill payment to pay bills.  Most banks also offer online budget tools to help you track your spending.
6. Notify. Set email or text alerts to let you know if you bank account balance is low and to notify you when bills are due.
7. Write down a list of all of your debts.  Set a payoff date and develop an action plan and beside each debt write down steps on how you can pay the debt off: reduce spending, use coupons, use money savings tips, earn extra income, etc.
8. Pay off small bills first. Focus on late payments such as collection accounts, judgments, liens or repossession first, next focus on paying off credit card debt, then focus on paying off loans.
9. Plan. Setup payment plans and negotiate with creditors to pay off debt.
10. Support. Surround yourself with at least three people who are doing better financially and gain financial advice from them.
11. Seek professional help. Get professional help if you are unable to create a budget on your own.
12. Needs vs. Wants. Buy more needs vs. wants to help reduce spending. Needs are food, clothing and shelter, everything else is a want. 
13. Reduce spending. Buy in bulk, on sale, at discount stores, online or use coupons, buy generic brands.  Try websites such as groupon.com, coupons.com, freecycle.org, ebay.com or craigslist.com to find bargains. Reduce spending by 30%. 
14. Groceries. Don’t go shopping when you are hungry, buy items on the lower shelves and ask about specials, join store clubs to get alerts on discounts. 
15. Banking. Open accounts with little to no fees, ask about discounts and specials, and establish a relationship with the branch manager to get alerts about specials and new products and services that could save you money. Avoid using check cashing stores; cashing checks at the liquor store, payday loans or cash advances. 
16. Driving. Buy gas in the morning, combine nearby trips on the same day, keep the trunk empty, get regular maintenance on your car, search for the cheapest priced gas and buy a gas efficient car.  Drive the speed limit to also save money on gas. 
17. Medical. Buy at least basic medical insurance for you and your family, get a prescription card and fill prescriptions at discounts stores such as Wal-Mart or Walgreens to save money, negotiate medical services to save money and ask about programs for uninsured or low-income patients. 
18. Insurance. Buy insurance for health, life, disability and your home.  Buy bundled services to save money, buy homeowners and car insurance with the same company and ask about discounts. 
19. Compare. Comparison shop before making a purchase to get the best deal.  Use sites like www.bizrate.com, www.nextag.com, www.pricegrabber.com. 
20. Clothing. Shop at discount stores, buy clothes in off-season, check out discount racks at stores and ask if stores if they honor competitor coupons. Buy a few jackets and mix and match pieces to stretch your wardrobe.

 

5 Easy Steps to Eliminate Debt

Don't dwell on the financial mistakes you made last year. Hold your head up high even though you may be in debt. Think about how you can change your spending habits, eliminate debt and create a flexible spending plan for yourself. Here are 5 easy tips to eliminate debt on go on to lead a prosperous financial life:

1. Stop spending. Don't spend money you don't
have. This will result in your owning more money.

2. Take inventory. Write a list of all of your monthly
expenses and your monthly debts and write down
you monthly income (take home). If you have any
money left over use that to pay down your debts. If
not, find other ways to reduce your expenses and
gain extra money the money owed.

3. Reduce expenses. Find ways to reduce expenses.
Catch public transportation or carpool to work. Use
coupons or shop at wholesales stores. Have a yard
sale or donate unused items to charity and write the
amount off on your taxes.

4. Stop Credit Card Usage. Use your credit card for
emergencies only. Don't use your credit card to
purchase gas, food, clothing, etc. When using a
credit card instead of cash you end up paying 112%
more than the item is worth after finance charges
and other fees associated with credit card.

5. Educate yourself. Educate yourself about credit
and your credit rights. Read as much information as
you can about credit cards. Start by reading the
credit card agreement or disclosure that was sent to
you when you first received your credit card in the
mail. If you can't find it call you credit card company
and ask them to send you one. Read the agreement
carefully to find out what fees you could be charged,
the grace period and other important information.

How to Get Out of Debt

If you are having credit problems such as delinquent debts, bankruptcy, repackaging, judgments, student loans, tax liens, or any other credit issues here are six tips to help you repair your credit.

1. Chop Them into Tiny Pieces: Stop using your credit cards and pay with cash.
2. Get Ahead: Pay more than the monthly minimum. If you can't, it's time to cut spending.
3. Control the Reins: Develop a plan to reduce your total debt.
4. Get a Deal: Reduce your interest rates, but be careful of the fine print - a credit card with 0% interest could cost you thousands in interest depending on how the credit card is structured.
5. Work it Off: Get a part-time job in addition to your full time job.
6. Purchase my book: How to Get Out of Debt: Get an "A" Credit Rating for Free Using the System I've Used Successfully with Thousands of Clients for more information on how to repair your credit on your own for free at all major bookstores and Amazon.