With the economy in decline many Americans have found themselves discouraged with their finances. Slipping into debt can be stressful, but you can turn your situation around. Learning how to budget effectively can help you take control of your financial future.
Most people fall into debt because they live “beyond their means”, basically spending money they do not have. Debt and overspending can become a slippery slope if you can’t control it and set yourself a budget. There are many computer programs and online tools to help you organize your finances, but pen and paper work just as well. The most important part of budgeting is being conscious and aware of your spending habits.
Step one is to determine your monthly income. While this may seem very simple, you’d be surprised how few people know their exact monthly income after taxes. This is especially true if you work on an hourly wage and not salaried, because your paychecks can vary.
Next you will need to know your fixed monthly expenses. These expenses will include your rent, car payment, student loans or pro-rated car insurance. One great tip for cutting back is to consider your savings to be a fixed expense instead of saving whatever money is left at the end of the month.
Your last set of expenses will be your variable expenses; these can be easily adjusted to fit your budget. Your variable expenses include groceries, dining out, entertainment and shopping. If you can’t track your previous months spending habits, try to estimate.
Tracking your expenses can be time-consuming, but being in control of your finances is well worth the time. Online banking has made it easier than ever to track your spending, but this isn’t the last step, as you will need to carefully evaluate and adjust your budget.
Adjusting your budget is where you can get ahead on your finances. While most people are emotionally attached to their lifestyles, if you cannot afford it, it will catch up to you. The easiest way to curb your spending is to cut back on your variable expenses. If you’re spending much more than you can afford you can always consider making bigger changes in your life and cutting back on your fixed expenses. This might mean selling your car for a less expensive one or downsizing on your house or apartment.
Budgeting is a valuable life skill, whether you just filed for bankruptcy or if you’re learning to save up for life’s big expenses. If you are feeling overwhelmed by your debt and feel past the point of budgeting please contact a Rio Grand Valley bankruptcy lawyer to learn about your options.
Jeff Davis is the Owner of the Davis law firm, and a highly experienced Harlingen, McAllen, and Edinburg bankruptcy attorney. To find out more information about a Rio Grand Valley bankruptcy lawyer, please visit www.jeffdavislawfirm.com.