How to Prioritize Your Spending
If you're living on a bare bones budget, or trying to make ends meet, a prioritized spending plan is essential. Prioritizing your spending will ensure that your necessary bills are paid in order of importance. The basic human necessities should always be paid first. If you can maintain shelter, food, and utilities, you can live to fight another day and have the strength to tackle the rest. Although creditors breathing down your back is annoying and stressful, they should always be paid after your essential needs are met.
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Instructions
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1
On a sheet of paper, list all of your monthly expenses (rent, food, utilities, car payments, phone bill, etc).
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2
Number in order of importance, the priority of each bill. In other words, if you only have the money to do one thing, what should it be? Hint #1: rent or mortgage is always first.
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3
Ask yourself, if I can only do one more thing, what would it be? Hint #2: food is always second.
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4
Repeat Step 3 until you've ordered (or prioritized) your entire list.
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5
Rewrite your list in numerical order. (Example: 1, 2, 3)
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An example of a prioritized spending plan would be: 1) housing, 2) food, 3)utilities, 4) transportation, 5) daycare, 6) medications, 7) essential clothing, 8) toiletries, 9) telephone, 10) car insurance, 11) personal loans, 12) credit cards.
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Begin subtracting from your take home pay, the items from your list. (Example: $2000 take home pay - $700 rent = $1300).
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Repeat Step 7 until you've subtracted everything on the list from your take home pay, even if it becomes a negative number.
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If you end up with money left, save it to build an emergency fund. If you end up with a negative number, that means you have a shortfall.
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In case of a shortfall, look for ways to cut your expenses or increase your income by getting a second job or a new job.
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Tips & Warnings
You can cut some of your expenses by: moving to a more affordable area, eating out less, cutting cable or high speed internet, and buying generic products.
Resources
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Comments
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sonni57
Mar 05, 2009
Nice detailed article thanks -
jtrue
Jan 13, 2009
Timely advice on prioritizing spending
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PajamaMommy
Oct 01, 2008
Very useful tips. It really helps to know your budget and know where your money is going.
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gatorgirl182
Aug 29, 2008
More people need to try this, it would elimate debt if you would just take the time to do this! Thanks
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Sarah Wilson CCRP
Aug 28, 2008
This is very helpful information. Thanks for sharing.
