Why Having a Budget Is the First Step to Getting Out of Debt
by
Harrine Freeman |
| Harrine Freeman is a personal finance expert and the author of, "How to Get
Out of Debt: Get an "A" Credit Rating for Free Using the System I’ve Used
Successfully with Thousands of Clients. She is the CEO of H.E. Freeman
Enterprises, a credit repair and personal finance services company. She is a
member of the American Association of Daily Money Managers, SPAWN, AAUW,
Toastmasters, NAWW and the Women Network. For more information on how to get out
of debt or to buy her book please visit
hefreemanenterprises.com She can be reached via
email.
|
Many people constantly 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 at you as if you are
speaking a foreign language, 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 I was taught 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. How did that happen you say? Well, although I knew how to budget my
money I didn’t have a clue about how credit cards worked. I thought it was free
money but that is another article. Anyway, the first step to getting out of debt
is creating a budget for yourself. The basic premise for creating a budget is to
know what you have coming in and what you have going out, in other words, how
much money you bring home and how many expenses you have (creditors, loans,
utilities, cell phone, day care, dry cleaners, 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 xpenses you can
readily see in your budget what areas you can reduce expenses to get money to
pay for those unexpected expenses.
Having a budget makes you responsible and
accountable for your finances. Most people don't think about how much money they
spend per week or per month but when you sell all of your expenses written down
on paper it provides awareness of your spending habits.
Once you create your budget you can easily see if
you have too many expenses or if your money is not being managed properly. The
easiest task to accomplish is determining if you have too many expenses, you
simply cut down on your expenses and you will have additional money. To pay down
some of your debts some expenses that can be reduced are: bring your lunch to
work, cancel your pager, cable or cell phone service or get the cheapest plan
available, carpool, catch the subway or bus to work, use coupons when buying
groceries or shop at wholesales stores like Costco or Sam’s Club, and sell
unused items at a yard sale or donate to charity.
If you are mismanaging your money or spending
your money on wants instead of needs that is a little harder to overcome because
this takes willpower and discipline. It takes 23 days to develop a habit so you
have to practice good spending habits everyday. Each week it will get easier and
easier. It also helps to develop financial goals for yourself, such as you want
to get out of debt within a specific time period, you want to buy a house, take
a vacation, whatever you goals are write them down and give yourself a target
date.
Don’t get alarmed if you miss your target date
for a financial goal because your main focus is changing your spending habits.
Remind yourself that you are working towards achieving your goals. It may take
some time but I know you can do it. Being debt free is worth the hard work and
discipline required. Financial freedom is so sweet. Just think how nice it would
be to wake up each morning: not worrying about having to pay a creditor, not
worrying about creditors calling your house asking for a payment, being able to
see yourself in a house or buying investment property or taking a vacation every
year.
So many things are possible when you are debt
free and live on a budget. I make a decent salary and only have one bill my
mortgage and I still put myself on a budget every payday. Sometimes people say
why do you worry about money and I say I always liked to be prepared because you
never know what may happen.
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