Real Life Budgeting to Get out of Debt
Making a Realistic Budget to Get Out of Debt – Many people with good intentions to get out of debt create a budget that is not realistic. Your budget should fully account for your household basic cost of living and the occasional unexpected expenses. The intent of a budget is to control and manage your income and expenses.
Creating a budget also gives you an opportunity to examine your expenses and limit your spending. You will be able to identify sources of excess spending and use those monies to pay down debt.
To create a realistic budget use your actual spending amounts from the last few months. Collect your receipts, credit card and bank statements and complete a budget worksheet for your household. Simply total up how much you spent for housing, transportation, insurance, utilities, food, entertainment, etc and enter those items on the budget worksheet. Make sure to add in any items or services you may have paid for in cash as well. An accurate and realistic budget will help you get out of debt faster and you will have money for savings, vacations and hobbies.
Budgeting to Get Out of Debt Rule #1 – Stop Adding More Debt
Before you can create a budget to get out of debt, you need to first stop adding more debt. Spending more than you earn and buying items with credit will make your budgeting efforts . You cannot predict how much your payments will be each month when more debt is added.
Did you know? The number one rule for consumers undergoing credit counseling is to stop adding debt. Credit counselors know the key to getting out of debt is living on a budget and paying your creditors on-time and in-full every month. When you add more debt and pay for items with credit, your budget becomes difficult to manage, overwhelming and prevents you from getting out of debt.
Reducing Your Spending to Get Out of Debt
To get out of debt faster look for ways to reduce your monthly spending. Using a budget worksheet will help identify expenses that can be reduced or eliminated. There are many ways to reduce spending from shopping around for the best deals, contacting utilities to have your rates lowered and eliminating unnecessary expenses.
Reduce Your Spending – Shopping Around For the Best Deal
Many of your monthly expenses can be reduced simply by shopping around. Shopping around is a great way to spend your money wisely and get out of debt faster. Almost everything we buy is offered by competitors at a lower rate, from cell phone plans, credit card interest rates, grocery items and clothes to loans, insurance and utilities.
Before purchasing anything, you should always shop around and look for the best deal with the most attractive terms. Shopping around includes the small and large purchases of life from monthly cable television pricing to major home improvements like roofing or siding.
Smart shopping for the best deal on fixed monthly fees, like cable and cell pone service, really adds up over the course of a year or years. Likewise, getting the best deal on large purchases, especially on purchases where you need a loan, always shop for the lowest price for equal or better products and services. You will get out of debt faster if you shop for the most attractive terms on everything you spend money on.
Lowering Your Rates to Get Out of Debt
Many of your fixed monthly bills are not really fixed and can creep up without notice over time. Credit card companies are well known for increasing interest rates and adding charges to your monthly statements. Utility and communication companies including cell phone providers, cable TV plans, etc can bump up your rates over time. Some charges are just added to your bill and others are just increased.
To get out of debt faster, take a look at your credit card rates and bills over the last few years. Many credit card companies will increase your interest rates on balances and add service fees. Contact your credit card company and let them know you would like your interest rate reduced, it works. Even if your rate hasn’t increased, contacting the credit card company and requesting your interest rate lowered and fees removed frequently works and has results in your favor.
To reduce your utility rates, take a look at copies of your utility bills over the last few years and see if your rates have increased. You can call the utility company and request your rate to be lowered to the agreed upon plan price when you signed up. Be nice and polite to the customer service representative when requesting a reduction in your monthly rate. Simply tell them you’ve notice your rate has gone up and you would like a reduction. You many have to tell them you are considering changing providers.
Eliminating What You Don’t Need
Depending on your level of debt, you may need to limit your budget to necessary expenses such as housing, transportation, insurance and food. You may need to ask yourself what do you actually need? What is more important to your lifestyle and your future? Do you need to go out to the movies twice a month or should you watch movies on cable? Do you need to go to the fancy salon every few weeks, or will a less expensive haircut do? Do you need premium-flavored coffee served by a barista every morning or will a cup of Joe with sugar and cream be more inline with your budget? Do you really need or use the gym membership? What about those magazine subscriptions – do you really need them? Eliminating expenses you don’t need from your budget will help you get out of debt.
Food – A Budget Expense That Add Up
Many household having trouble getting out of debt often spend large amounts of money on food and entertainment expenses. Eating fast food bi-weekly or daily and frequently going out to restaurants becomes expensive and is difficult to budget for. Even going out to lunch daily with coworkers can become expensive and prevent you from getting out of debt. For example, spending $10 to each out for lunch with coworkers adds up to $50 a week, $200 a month and $2400 a year – and that’s just for lunch!
Managing your spending with a realistic budget will help prevent wasting money and will help stretch the most for your dollar. A budget will help you get out of debt and prevent overspending at the grocery store or shopping too frequently. Setting a certain amount aside for groceries every month will encourage using the food you have before buying more.
Shopping wisely at the grocery store by buying items on sale and using coupons will help you get out of debt. You can make the most of your grocery budget when you shop wisely buying items on sale and using coupons. The less you spend for food, the more you have to pay down debt and have money for rewarding fun activities and the security of savings.
Entertainment – Another Budget Expense That Add Up
Entertainment activities from golf to movies are examples of monthly spending that is easy to indulge on. Especially when socializing with others, it is easy to spend more than your budgeted amount. Depending on your level of debt and desire to be debt free, you may need to make lifestyle changes and live within the limits of your budget.
Sample Household Budget to Get Out of Debt
This sample household budget includes a section to help pay down debt and a checklist to find ways to reduce monthly expenses.
Sample Budget To Get Out of Debt
| Monthly Housing Expenses | |
| Mortgage or Rent | ____________ |
| Insurance – Home or Renters | ____________ |
| Heat – Gas, Propane, Fuel Oil | ____________ |
| Electric Provider | ____________ |
| Cable TV or Satellite | ____________ |
| Internet Access | ____________ |
| Water and Sewer | ____________ |
| Lawn Care | ____________ |
| Other | ____________ |
| Monthly Transportation Expenses | |
| Vehicle Payment | ____________ |
| Insurance – Vehicle | ____________ |
| Fuel – Gasoline | ____________ |
| Parking | ____________ |
| Public Transportation Fees | ____________ |
| Other | ____________ |
| Monthly Food Expenses | |
| Food – Groceries | ____________ |
| Fast Food & Restaurant Dining | ____________ |
| Lunch Money (adults and kids) | ____________ |
| Coffee and Smoothies | ____________ |
| Snacks & Vending | ____________ |
| Other | ____________ |
| Monthly Debt Expenses | |
| Credit Card Payment | ____________ |
| Student Loans | ____________ |
| Personal Loans | ____________ |
| Medical Bills & Out of Pocket Expenses | ____________ |
| Other | ____________ |
| Monthly Child Expenses | |
| Schooling and Daycare | ____________ |
| Babysitting | ____________ |
| Children Activities | ____________ |
| Other | ____________ |
| Monthly Personal Expenses | |
| Cell Phone(s) Service | ____________ |
| Personal Care (haircuts, manicures) | ____________ |
| Clothing – Laundry & Dry Cleaning) | ____________ |
| Clothing – New Purchases | ____________ |
| Entertainment (movies, events, shows) | ____________ |
| Subscriptions (magazines, newspapers, movies) | ____________ |
| Insurance – Life | ____________ |
| Other | ____________ |
| Semi Annual Expenses | |
| Property Taxes / 12 | ____________ |
| Income Taxes / 12 | ____________ |
| Vehicle Registration & Taxes / 12 | ____________ |
| Home Improvements / 12 | ____________ |
| Other | ____________ |
| Note: Some semiannual and annual expenses will | |
| be in other portions of your monthly budget. | |
| Contributions and Donation Expenses | |
| Savings Accounts | ____________ |
| Additional Retirement | ____________ |
| Donations | ____________ |
| Other | ____________ |
| Total Monthly Expenses | ____________ |
| Monthly Income | |
| Net Pay | ____________ |
| Child Support / Alimony | ____________ |
| Other Income | ____________ |
| Total Monthly Income | ____________ |
| Your Monthly Costs or Bottom Line | ____________ |
Get Out of Debt Monthly Budget Checklist
Did you receive extra money to pay down debt with? Yes No, If yes, how much _______
Free Budget Worksheet Download
A budget worksheet will help you understand your spending and maximize your savings. Using a budget is a great way to get out of debt and reduce spending on unnecessary monthly expenses.
Updating and Maintaining Your Budget
Setting up your budget and keeping your lifestyle and spending with your budget is a great way to get out of debt. Maintaining and updating your budget is a proven method to stay out of debt and have money for savings, retirement and security, vacations and other fun aspects of life.
At the end of every month, add up your expenses and compare those to your budgeted amounts. Did you live within your budget this month? Were there unexpected items like car repair or an absence from work? Did you make more money and spend less on gas and groceries? Knowing where you spend your money and maintaining your budget will help you get out of debt faster.
