How to Get Out of Debt - Make a Budget
The first thing that just about every expert will recommend that a person do when it comes to getting out of debt is make a budget. The reason for this is simple. It is almost impossible for you to keep track of your money if you do not have an organized budget to refer to. While there are dozens of computer programs that you can use to help keep track of your income and expenditures, all you really need for a budget is a pen and a piece of paper. It may not be fun, but it is a vital step.
When you are ready to get serious about getting out of debt, a well-thought-out budget is the first thing you should tackle. The first step is to list each of your recurring bills. It is crucial that you not skip any of them, no matter how small they may be. Regular bills like your mortgage, utilities, insurance, cable, groceries and anything else that you pay every month will need to be listed. You should also list how much money you spend on average on things like entertainment and other indulgences so that you can take them into account.
The next step is to create a list of your income. You should be sure to list any additional income that you may be receiving aside from your regular employment. If you are receiving an annuity, money from an insurance settlement, child support, income from freelance work or any other source, you should make sure and account for it in your budget. Knowing exactly how much money you have will make it easier for you to decide how much you can afford to spend on paying down your debts every month.
One of the mistakes that many individuals make when it comes to creating a budget is in not being realistic with regards to the amount of money they spend on unnecessary items. It is easy to assume that you will simply stop eating out or going to the movies. When the time comes to actually put this type of plan of action, however, it can be very difficult. While you should cut down on unnecessary expenses, you should also be honest about where your money is going in order to develop a solid plan for paying off your bills and getting out of debt. You should also take care not to include income that is not guaranteed.