Avoid Financial Debt by Creating and Maintaining a Budget

The first step to avoiding the financial debt is to create and maintain a budget. It's not as intimidating as it sounds, don't worry. First, create a list of your monthly income and a list of your monthly costs. When determining income, list all sources including alimony, child support, side jobs, etc. In calculating expenses, be sure to include housing, food, transportation, utilities, entertainment, etc. To gain an accurate reflection of actual expenses, sit down every night and write down costs, just make sure to save receipts. Find out if your income covers all of your expenses. If the answer is no, then some expenses need to be reduced. Adjust expenses. If it is a small discrepancy, it may mean reducing some minor expenses like cable or a cell phone. If the gap is larger, you may need to downsize your transpotation or housing arangements. If your income covers all of your expenses, you still may want to trim some of the excess fat off your spending habits. This can free up extra cash, so that you may spend it on things such as vacations or college funds for your children. Additionally, consider if you need to add new categories. Some areas that are often ignored are debt reduction, emergency savings funds, and retirement savings. An emergency stash of cash ensures there is an enough cash available to cover unforeseen events (car emergency, etc), should it arise. This will eliminate the need for using credit which can quickly damage your budget. There are several advantages to sticking to your budget. First, most people have set financial goals that they would like to reach in the future. Sometimes it might be a trip, a brand new car, or a college education. A budget can help people save money to make these goals a reality. Many people are crushed by incurring huge debts. Without sticking to a disciplined spending plan, it is virtually impossible to make any headway in reducing debt. A personal budget will provide the framework necessary to eliminate these inflated account balances. If executed properly, a budget will allow you to simultaneously meet your expenses, place money into savings, and pay back outstanding debts. It is for this reason that it is in everyone's best interests to create and implement a budget.