If you have started out your new life together in debt, you may be frustrated and apprehensive about the future. The good news is that you can create a budget to pay off bills, get out of debt and begin saving toward your future goals. While some people find the word "budget" to be synonymous with deprivation, it does not have to be that way. Track your income and your expenses and learn to make good choices for spending your money, then watch your debt melt away.
Compile a list of the amount of money that comes into your house on a monthly basis. Gather pay stubs, banking statements and any other paperwork that you have documenting your income.
Gather a pile of your monthly bills and obligations. Include expenses for which you have no actual bill, such as gasoline for your car, grocery money, and expenses for restaurant lunches. It may help to carry a notebook with you to track your spending for a month, suggests Dave Ramsey, financial guru and author of "The Financial Peace Planner."
Print up or make a budget worksheet. You can find these in financial planning books, on websites such as DaveRamsey.com or Kiplinger or you can make your own. Include every category of spending that you can think of. Write down your fixed expenses, such as your rent and car payment, along with the expenses that vary from month to month, such as your electric bill or grocery bill. Also write down yearly obligations, including tax bills and holiday gift-giving expenses.
Using 90 percent of the money that you make, fill in the boxes on your budget worksheet. If you have any amount of money left over, you will use it to pay down your debt. If you find that you will have too much month at the end of the money, reevaluate your variable spending categories. For example, you may be able to cut your heating bill by planning to wear sweaters and turning down the heat. Another possibility is to cut your gasoline bill in half by carpooling or bicycling to work several days per week.
Save the 10 percent that is left over, suggests CNNMoney.com. Saving money now can help keep you out of debt later, as you can use your savings to fund extras such as vacations, eliminating the need to put them on credit. You can also use your savings as an emergency fund. This will help you avoid using a credit card to pay for an unanticipated dental bill or for a new hot water heater.
List your debts in order from smallest to largest. While making the minimum payments on everything else, send in as much money as possible to your smallest debt. Once that first debt is satisfied, begin sending the extra money to pay off the second smallest debt. Continue paying off each debt in turn, always applying the amount of money spent on the old bills toward the bill that you are currently trying to eliminate.
Track your spending carefully over the next month. You may find that you cannot keep certain expenses as low as you had planned, or that you don't need as much money as you thought you would. After the first month, move the numbers around as necessary to keep yourself on a realistic budget. If necessary, tweak the numbers again after the second month, or as needed.
- Kiplinger: Build Your Budget
- The Financial Peace Planner; Dave Ramsey; 1998
- CNNMoney.com: Money 101 Making a Budget
- Try to hit the ATM only once a week, recommends CNNMoney.com. This can help you keep track of how much money you are using on incidentals, and will also force you to limit the amount you spend on luxuries.
- If you cannot reconcile your income to your expenses, you may be in need of credit counseling. A credit counselor can help you negotiate with your lenders to temporarily lower credit card payments. You may also be able to defer a payment or two to allow you to catch up.
Michelle Kulas worked in the health-care field for 10 years, serving as a certified nurses' assistant, dental assistant and dental insurance billing coordinator. Her areas of expertise include health and dental topics, parenting, nutrition, homeschooling and travel.