You're a grown adult. Right? How is it then, that this most basic of tasks - the personal budget, has you cowering in the corner afraid of a bunch of papers? It's only a pile of papers that you will knock into shape with a pen, a pad, a calculator and a little determination. Let's get right to it, shall we?
Easy Step #1. Get those documents into some order.
Go to the drawer, find all the latest credit card statements, the store card statements and the outstanding balance on that personal loan. Get all the bills, the correspondence and other notices and put them in a pile. Now go through each piece of paper and consign it to 1 of 3 piles. TRASH, BILLS, CORRESPONDENCE. Be an adult, get angry and just do it.
Easy Step #2. Categorize the BILLS (not house or car debt)
Go to the BILLS pile and separate the documents into household bills and credit cards/loans. The utilities, phone, local council rates and other regular bills need to be sorted as to their due dates and paid as best you can manage. You may have to forfeit some entertainment and some meals eaten out for a while - just accept it, until these are brought up to date and under control.
Easy Step #3. Work on the Credit Cards and Loans
The credit card and loans are treated a little differently since only a minimum payment is required and you have some degree of freedom with your payment amounts. Add up all the outstanding balances for credit cards and other loans. Once that is done, make a pact with yourself to pay down these amounts as quickly as possible both in terms of money and time frame.
Easy Step #4. Look at your income and spending.
Now that you have a handle on the household bills and the credit card/loans amounts, it's time to compare your income and spending. This is where a pre-formatted simple spreadsheet can help (but not necessary if you haven't used one before). Firstly, add up all forms of income (cash in) for a month - salary (less taxes), interest, other income. Secondly, list out all your expenditure (cash out) for the month.
You won't have this data at hand, today, I know. Short of waiting a whole month to get really accurate data you could estimate your spending to your best ability. Don't leave any thing out. Include the cigarettes, drinks, gambling, bought coffees, meals out, everything. Now minus your spending from your income and check out the balance.
Easy Step #5. Allocate the free balance to those unpaid bills and credit card/loan amounts.
Allocate the free balance to the bills and the credit card/loans repayments. If there is not enough free cash to pay them all as they fall due you have 3 options. Spend less, earn more or a combination of both. It's that simple.
Easy Step #6. Commit to Spending Less - Live Within Your Means
You did not get into this mess overnight. Likewise you won't be able to get out immediately - it will take a little time.
Review your spending items and work out ways to spend less. There are many resources available to help at your local library or on the 'Net.
That's it in a nutshell. Face up to the challenge, do the math, make the commitment. Looking back, you'll be so thankful you made the effort.
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