How to Create a Budget Control Plan
Budgeting is never an easy process. Too many people have never learned how to budget their money, so when the bills are spiraling out of control, they have a hard time adjusting their spending habits. Bad habits are hard to break, but happily, building new and better habits is an achievable goal. You can get your budget under control with careful planning and a lot of belt-tightening.
Other People Are Reading
Instructions
-
Start With the Basics
-
1
Write down your paydays and the net amount of your paycheck. The net is how much you receive after taxes and other withholdings. Multiply your paycheck's net income by how many times a month you are paid. This is your monthly income.
-
2
Get all the bills out and list them in order of the due dates. Add them up and write down the total amount. Determine if the bills add up to more than the total amount of your monthly paychecks.
-
-
3
Divide the bills into two columns, assuming you are paid twice a month. Subtract the amount of bills from the amount you receive on payday. If you have a negative number, some hard decisions must be made to make your budget balance.
Make a Plan
-
4
Add up all your credit debt and divide by three. Then divide by 12, giving you how much you need to pay each month to become debt-free in three years. Ask yourself if that is an unreasonable amount to pay every month. If that amount is too high, divide the total of your debt by five, then by 12. A five year plan may be more reasonable. Of course, this simple method does not include interest, but it is a fast way to get a rough look at your debt and plan how to pay it off.
-
5
Adjust your thinking. Money is just a tool. Like any tool, there is a right and a wrong way to use it. Self control and careful consideration are more important than a new outfit, furniture or car. If you have decided that a five-year debt repayment plan is best for your budget, then do not add to the debt by using your credit cards.
-
6
Renegotiate your bills. Call your mortgage company and ask for a loan modification. Call your credit card companies and ask for a lower interest rate. See if your bank or credit union will refinance your vehicle at a lower interest rate without adding years onto your payment plan. The worst that can happen is that they say "No." The best-case scenario, of course, is that they say "Yes," and your payments are lowered.
-
7
Pay off your credit debts. Start with the smallest bill and pay a little extra on it every month until it is paid off. If it is your oldest credit card, do not close the account. Use it once a year to buy lunch and pay that off as soon as the bill arrives. This preserves your credit score, since credit scores are partially based on the length of time the account is open.
-
8
Slash unnecessary bills. For example, if you have the complete satellite dish package, cut back to a basic package and save up to $60 a month. If you drive to work every day, look for a carpool to save on gasoline. If you eat out every day, pack a lunch. At home, eat chicken instead of steak.
-
9
Think creatively. If you love movies but cannot afford to take the whole family every week, a movie rental service is only $8.99 a month with unlimited movies online. If you use the same phone, cell phone, Internet and/or satellite dish company, call and ask if you can bundle them into one package at a discounted rate.
-
10
Live on a cash basis. Instead of carrying your credit cards and debit card, carry cash when you go shopping. When the cash is gone, go home.
-
11
Build a savings account for emergencies. Even a small amount like $10 a week adds up to $520 in a year. As your finances improve, add more to your savings account.
-
1
Tips & Warnings
If you do not know where your money is going, write down every penny you spend for a week.
Use the spreadsheet program that came with your computer instead of expensive money management software.
Bankruptcy is not the end of the world, but if you do not change your thinking about money, you will be back in debt within a year or two.
Debt elimination companies are often scams. Avoid them.
Never pay up-front for a mortgage modification.
References
Resources
- Photo Credit Paying Bills image by ne_fall_photos from Fotolia.com
