The Unique Finance Blog

When creating a budget to get out of debt the hardest part is just sitting down and getting started. No one likes to face the fact that they overspend and creating a budget will be a very big eye opener in seeing where and how you overspend.

So, where do you start? The easiest place to start is figuring out how much income you have each month. Take a month worth of pay stubs and figure out what your net (after taxes and deductions) take home pay is each month. Now write that down on the first line of the budget as income.

You want to break down your budget into 4 expense parts, Home, Auto, Living and Miscellaneous. The best way to do this is a separate page for each of the 4 groups, this way as you work on the list you can add items that you forgot, missed or just started to pay. Home will be things like rent or mortgage payments, Heat Electric, etc. Auto will be things like Insurance, gas maintenance. Living will be things such as food, entertainment, clothing, etc. Miscellaneous will be anything that doesn’t seem to fit in the other 3 areas such as credit cards and personal loans.

Now that you have created the 4 groups you will have to start listing what you are spending on each item every month. This is the hard part. I recommend gathering all of your receipts for the last 12 months and putting them on your budget list on a monthly basis. For those items that you don’t have receipts for you’ll need to take a best guess. Now total each item for 12 months divide by 12 and that will tell you how much you spend monthly for that item. Now add all the monthly averages together and that is your monthly expenses.

You now have a basic budget for where you spend your money. What you want to do now is go back over the list and do two things. First see if there is anything you missed or forgot if there is add it to the list and re-calculate your numbers. Second look at your expenses and try to see where you might be able to cut back.

Before you go any further you might want to go get some antacid tablets because I want you to subtract your monthly expenses from your monthly income. This figure will either be a positive or a negative number.

If it’s a positive number then it’s time to look at how to use some or all of that extra money to start paying down your debt. Just start with the highest rate credit cards and send that extra money each and every month until it’s paid off. Then take the savings from the credit card you paid off and add it to your extra money and go on to the next card until your debt free.

If it’s a negative number, you obviously have a problem. You are spending more than you are bringing in and if you don’t do something soon you may end up losing everything. If you are a homeowner now may be the time to look into a refinance to consolidate your debts. This may help you reduce your expenses to be less than your income. You also should take a hard look at what you spend your money on and cut back. Seek the advice of a professional mortgage planner or debt manager. They can help you get a handle on your debt and finances and put you back on track. You will probably have to make some hard decisions on your lifestyle and expenses that you might not want to face. But, if you choose to hide from your problems and say to yourself “I’ll get to it tomorrow”, you may end up finding yourself in Bankruptcy court or even worse living out on the street.

Whatever your debt situation might be, a budget will help you with your finances and will help you save money. It’s never too late to sit down and get your finances in order. Remember, today is the first day of the rest of your life.

Marc Savage is a Nationally Recognized Mortgage Expert and Host of Your Home Your Money on AM 540 WLIE Saturday Morning at 10AM. Marc specializes in helping homeowners who have had a bankruptcy or other credit challenge find payment relief, achieve financial security, restore their credit and receive peace of mind. He is also a founding member of the National Association of Responsible Mortgage Lenders. Visit his website at www.yourhomeyourmoney.org.com for more information or call him direct at 800-592-5626.