How To Master Your Budget

Master Your Budget – The Limitations of Debt

When I was looking to build my credit as a teenager and securing my first credit card, like everyone else I never stopped to realize the limitations of debt I would be placing on my life. Its true, if I knew then what I know now – I would probably never wanted to build my credit, at least in that fashion. I may have stopped and given it more thought.

Understanding the Truth About Debt

The truth as I have come to learn about debt is that it is NOT added income available to spend. Sometimes I think we get a card and see it as added funds to our budget. The fact is, IT IS NOT! When I got that first credit card I thought “WOW!” thinking I had more funds to get things with. Debt is future money with interest – YOUR MONEY less interest. We see our neighbors showing off their new fancy car and think, “Gee, I can use one too – this clunker is older than dirt!” So you traipse off looking for a new car to keep up with your neighbor and come back with a new one ON CREDIT.

You are not your neighbor, and they may have saved up for that fancy car and paid CASH for it. They could own that car outright, and because you feel you deserve the same – your new car is not yours, not until you have made all the payments with interest.

When you realize the importance of a budget over accruing more expenses using credit – you can begin to see, the wealthy people know how to manage their money with a budget. Talking about your finances and having a budget is the only way to go for the wise budgeteer.

BUDGETING SAVES!! Budgets allow you to HAVE more and get the most from your income. Now let’s see how much debt you owe.

Listing All Your Debts

On the Simplified Budget Worksheet I provided you, lets move to the bottom third of expenses and list ALL your credit cards, loans, and anyone you still owe. This will show you how much less your net worth is. Use a separate sheet, and then transfer them to the worksheet with the lowest balance FIRST under the “BUDGET” column. Once done, tally up your debts.

Now go back to your statements to find the minimum due this month on each and list it under the payment category.

Snowballing Your Payments

This is the best method in eliminating debt, but it takes time. One by one you will witness them falling off your financial grid increasing your payment to the next one on the list, until they are all gone. You possibly could through more money into your smallest debt on the list and pay it down a little or best yet, pay it off and cut up the card. But wait, we have one more area to look at tomorrow to find out if that is possible.

Imagine the Day You Have NO MORE DEBT PAYMENTS….

This is my ultimate goal waking up one day, after paying all my essential bills for the month having $300 – 500.00 with no place to go but my Savings. I could then build my savings for those rainy days – $500 a month free to save is $6,000 a year.

Tomorrow we will look at the other bills left in the pill and see what really is necessary as a non-essential bill, and what is. Then you will know how much you can afford to apply as an extra payment to the first debt on your list.

Please share your thoughts and opinions so far? Does it make sense? Anything I can add to make it better. I look forward to your comments and opinions below.

How To Master Your Budget

Master Your Finances – Put Essentials Things FIRST

As you start to master your finances, it is important that we put the essential things FIRST and make sure they are paid each month – what’s left is what we will use later to work on paying off our debt.

What are Essentials?

Okay, I know you are thinking – What do you mean by essentials? Very good questions! Essentials are those things that we NEED to pay each month just to live day to day without sacrificing your basic needs:

  • A Place to Live (your home)
  • Food to live on
  • Basic Utilities (heat & electricity)
  • Transportation

Entertainment and dining out are NOT essentials but are excellent tools to used to help you celebrate when you reach your goals. So, once you have your essentials down and know what you need to meet this portion of your budget – go ahead and celebrate. Treat yourself to a Dunkin coffee and donuts, you will have earned it.

List Your Household Essentials FIRST and their Status

So its is time to list out your essentials followed by a (C) if they are current, then the amount you need to pay each month in the second column labeled “Budget”. Here is a list of essential categories which may or may not apply to your situation.

  • Mortgage
  • Rent
  • Food
  • Insurance
  • Car Loan / Transportation

These are the true necessities you have to pay to meet your basic needs. Many things we spend money on are pure luxury items to make us feel good. Personally, I will feel the best when my debt is paid.

Are You Current on These Essentials

Now that you have a list of essentials you must pay each month to meet your basic needs, have you placed a (C) next to those you are current on – hopefully all. In the next column, write how much you owe each month or need to pay in order to bring the item’s current. If they are already current, you will just put your monthly payment or an estimate.

Then tally up your budget column to see how much of you need from your paycheck to satisfy this area of your budget.

That Wasn’t so Bad Now, Was It?

I hope this helps you see where I focus first when preparing for the new month ahead. Download Simplified Budget Worksheet. Your categories may be different – using this worksheet put together your essentials. If you are not current on a particular item, add what you need to bring it current to your normal monthly payment. You will start to see your new monthly budget coming together

Interested to get your feedback and opinions on this article.  Did it help you get started?  Do you have any suggestions?

Master Your Budget

How to Budget for Beginners – Key to Being DebtFREE

My first post here more or less summarized this subject. Debt can happen to any of us at any time, knowing how to budget your money and resources is an art that needs to be constantly practiced and refined to keep debt from infiltrating our lives and consuming us.

Understanding it is Normal to have Setbacks

We are all human so having financial setbacks is normal. Most often it is credit that initiates these setbacks, and before we know it we can find ourselves struggling time and time again. If you are having financial difficulties, it can also affect things that have real importance in your life – your work, your marriage, and even your family. You may find you need to take a second or third job, just to try to keep your head above water. Setbacks play negative roles and left untreated, can destroy our lives. Yet, they are a normal part of life. We need to learn how to best overcome any setbacks.

Setbacks Are Just the Roadblocks of Life

Like anything, budgeting is a process we must learn and things crop up in that process to send us in other directions all the time. Some major setbacks that can happen are:

  • Credit Cards
  • Education
  • Medical / Dental
  • Family

The first big setback I encountered in life was after graduating and starting work, I asked my stepdad how one goes about “establishing credit”. He went ahead and helped me get my first card at the Rockland Trust, a local bank in my hometown. It had a $200 limit. However, over the years that one card led to more cards and soon they were maxed out – taking a personal loan out the first time and paying it back with automatic payment withdrawals from my paycheck. The next time I borrowed money from my stepdad, and ended up taking a second job to pay him back. The result of that setback cut into my family time. Previously, it was a prank phone call that scared me, Realizing at this point being just lost and had to find my way out alone. It caused me to snap at my younger sister, who I realize now had nothing to do with my problem. Then one snowy day my stepdad came out and talked to me, but it was one statement he said that made all the difference, “I love you girls more than you know, but I always thought you and Chris (my youngest sister) would be the ones most likely to succeed!”

Now I felt a new feeling I had let him down with his expectations of me, and I had to figure a way out. Only I could do this now. That night I took a good look at myself, and it has made the difference.

Focus on Exactly What You Owe and To Whom

That night after work and having supper, I went into my room and pulled out all my records and paperwork to see just who I owed and how much. I made a folder for each source with a tab showing who and how much. I also made a list in excel and totaled up the amount. Feeling shocked! Wondering how could I have spent so foolishly, so much? I had a couple credit cards I forgot about and never used – those I immediately cut up and mailed back to the supplier with a letter closing the account. Felt good scratching a couple things off my list, but how was I ever going to pay off what I managed to accrue in expenses, Well, I had to inventory what I actually had to see if I had anything available to put toward this debt line.

Balance Your Available Resources for Survival

Now I had to sit down and figure out just what I had available in the bank and savings, even my pocketbook change. Could I pay off another debt source somehow. A few hours passed in frustration and suddenly I realized I had won a $1,000 IRA through a radio show about ten years back and forgot about it. I checked and it was now worth $1,500.00.

Well, believing that the source of the phone call was real and perhaps had to do with a payday loan (BIG MISTAKE) that I took out to make a payment and was paying back $100 each paycheck with exorbitant interest I went to the bank to withdraw money from the IRA, despite being under 59-1/2 at the time, so the bank took out the necessary tax and penalty for early withdrawal and I paid off that loan – never to go that route again. I also took out enough, nearly closing it, to bring all my cards current.

Next I listed all my monthly expenses in a small notebook (my stepdad showed me his, and how he paid them each month.) Being computer-literate I ended up setting up a worksheet to use for that purpose. I could check off when I paid my monthly necessary expenses; and then apportion the remainder of my income towards my credit cards. I did this for a year, and sitting down to do my taxes the following January 31st, I gasped and screamed, “I DID IT!”

Do As the Wealthy Do – Budget Wisely

Having my first ever “Ah-ha” moment like that I realized that for years before credit cards – our grand parents and their parents before them didn’t have credit cards – they bartered and saved up for what they wanted. The wealthy folks in society don’t used credit cards to buy everything outside their means – they budget what they have and stay within their income. That my friends is the key to being debt free. Budgeting is not easy and setbacks are to be expected – as we practice and learn more, budgeting will become second-nature and you will get better at overcoming those setbacks.

At this point I look forward to hearing your comments and opinions, please share them below for we can all learn together as we master the art of wise budgeting.

Key Elements Master Your Budget

Master Your Budget – 4 Key Elements to Success

Having failed financially in my own life and mind not once, but three times; I have learned to master your budget takes time, patience, and perseverance. You must be willing to pass over things in the process, so later you can enjoy them to their fullest. I want to share the 3 key elements to success in my financial life that have helped me.

1. Knowing Where You Are (Right Now)

When we are struggling to make ends meet every month, living virtually pay check to paycheck, we are lost with nothing to look forward to. You need to stop and really look at where you are in life. Everything has a beginning (or as I referred to it going through my last failure, an Alpha start.

The Alpha start of where I began to master my budget was simply coming up with three lists and moving forward from that point. These lists were:

  • Identify what resources I had right then and there;
  • Determine what my ESSENTIAL expenses were each month (or pay period)
  • Documenting All OTHER DEBT I had managed to accrue.

2. Setting Purpose – Where Would You Like To Be

Okay, now that you have your lists in front of you – perhaps written down in a single subject notebook – you are feeling a bit overwhelmed. I know, I did. Now you need a reason to continue. This is simply as you are starting out – deciding where you would like to be at a given time period. I remember beginning my journey mid-month, and set my first goal for the beginning of the next month (about two weeks). My goal was to make sure I had money to pay all my ESSENTIALS first, and money to pay the minimums at least for all other debt.

3. Breaking Down the Process – Getting from Now to Then

Well, now I knew where I was for the most part, and had an idea where I wanted to be in two weeks. However, it was too overwhelming to go from one end to the other in one step, and no one could ever be expected to reach their goal in one leap. Suddenly it occurred to me, I had been lost for so long, but at least now I wanted to get back on track. I realized it was important to find a way to bridge the two ends with a few smaller, bite-size, achievable portions. Four or five steps in between is quite adequate.

To begin with, you must ask step back and tell yourself – here I am now, I want to be there. What do I need to do to accomplish that and list out in 4-5 steps what must be done. Once you have 4-5 steps to achieve your end goal, take each step and break that down once more. Make a check list under each step and check off as you complete a task.

4. You Must Celebrate Every Step of the Way

As you complete each step and see the tasks being completed first being a quarter of the way, then halfway through the step, and almost there at three-quarters of the way and finally you are one quarter of the way to your goal. Take time to step back and celebrate the milestone – you have earned it! It could be as simple as treating yourself to a cup of coffee at Dunkin.

When you reach your goal, whether two weeks or a month or more away, take time to celebrate big. Shout and congratulate yourself! You have totally earned it – and perhaps go out to lunch with yourself or a friend to celebrate the occasion.

Once you have celebrated, you are ready to get up the next morning and move forward to plan for your next big milestone goal. Always make sure your goal is attainable and measurable.

Now That You Have the 4 Elements of Success – YOU CAN DO IT!

Always strive in life to keep bettering yourself in every area of your life. Finances are one of the more difficult areas, but once you know how to budget wisely, it will only get easier as time goes on. Just keep reassuring yourself that YOU CAN DO IT!

Budgeting is not easy, as finance and money for the most part was never talked about over the family supper table. Our parents just made sure we had a roof over our head and food in our bellies – as far as many of us were concerned, our families were well-to-do, and that is what they wanted us to think and see. Now we know otherwise as we have matured and learned so it is time to be open with our children and show them it is okay to talk about our vulnerabilities over money and help them to accept what they have and budget their finances wisely – it will go along ways in the end.

Next we will break down each of these steps to further define the art of mastering your budget. The ultimate goal is to eliminate all debt from your life, and save more for your future purchases like our grandparents and their parents did before credit cards.