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Making a Budget You Can Actually Stick To

[Apr 16, 2008.]


The truth is that you already know that your spending habits are the primary cause of your credit rebuilding problems. But when you’ve looked for advice elsewhere, all you've seen are unrealistic ways to budget, causing you to forgo eating to pay off your debts. While these kinds of plans are going to help you reduce your debt load, they are not realistic, and just as with any restrictive diet, they will cause you to go right back to your old spending habits in a moment of weakness. You need a realistic budget that you can stick to for the long term.

  1. Look at the income that you have – You need to see what kind of money is coming in before you can decide how it should go out again.

  2. Make a list of your bills (but not your credit card minimum payments) and average payments each month.

  3. Add up these regular bills and get a total.

  4. Subtract this total from the income that you receive each month.

  5. If the number that you receive is positive, then you can start to figure out ways to spend this money wisely and put it toward your debt. If the number is negative, you may wan to consider professional help in the form of a credit counseling agency.

  6. With the remaining money, try to set aside a small amount that you will put directly into a savings account or retirement account. This is money that you will not touch unless it's a sire emergency. It doesn't have to be a lot, just whatever you can afford to put away. Even $50 a month will add up to $600 over the course of the year.

  7. With the remaining money that you have in your budget, you will want to estimate reasonable amounts that you can spend on food, gas, health care, essential toiletries, etc. Create a list of these.

  8. You will also want to make a plan of how much you will pay on each credit card each month. Those with the lowest interest rates can just have the minimum balances paid, while the higher rate cards should have the largest payments you can afford.

  9. Post these estimated amounts on your refrigerator, in your wallet, etc. so that you have constant reminders of how much you can spend.

  10. If you find that you're having trouble sticking to your plan, try to figure out where you can cut back in your spending.

What can also help is taking these amounts and placing the cash into separate envelopes at the beginning of each month. That way, when the money is gone, the money is gone.

Budgeting isn't about making painful choices to hinder your spending habits, but rather redirecting your spending to things that you really need each month so that your debts can be paid off in a timely fashion. And once you've done this, you'll be able to put more money into each envelope each month.


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