Some people see a budget as a restriction, but the opposite is actually true. A budget simply allows you to see exactly where all of your money is coming and going. How you spend it is ultimately up to you. ACCC has some simple and helpful tools to build your budget to achieve your financial goals, like eliminating consumer debt.
How to Build a Budget to Eliminate Debt
There are four steps to take to form a budget that can help you save money, identify spending habits or provide a plan on how to eliminate debt.
- Step 1: Identify all of your sources of income, and how much your household earns each month.
- Step 2: Identify all of your monthly expenses. Examples include rent, utilities, cable, mobile phones, groceries, entertainment, transportation, loan payments, personal care, etc. Calculate the monthly amount you spend for each category. Use your statements, bills, and receipts to help. You can also estimate for those costs that aren’t easily trackable.
- Step 3: Do the math. Subtract your expenses from your income. Whatever is left over is your cash flow. If it’s positive, then you have extra money to spend or save (I recommend saving). If you have a negative balance after all your expenses are covered, then it’s time to cut back your spending.
- Step 4: Make changes. Now that you can see where all your money is going and what is left at the end of the month, you can make the decision to alter your spending habits if necessary. Maybe go to restaurants less frequently, or paint your nails at home in order to put more money into savings or to reduce credit card debt.
Budgeting can be an enlightening experience. You may have more money you could be saving to reach goals like homeownership or a vacation. You may also discover that you can crush your debt even faster than you thought. It’s helpful for people of all income levels to see what’s happening to their money to avoid accumulating any debt.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.