Budgeting For The Future

How to Budget for the Future

Living Debt Stress less

Worried senior couple checking their bills at homePeople across Australia are struggling to pay their bills. The burden of debt has caused increased stress levels in relationships which have resulted in innumerable arguments. Many people struggle under the burdensome load of debt for years without making any progress.

If this sounds like you, know that there is hope. There are many things you can do to lower your debt load and take control of your finances. Getting out of debt will not happen overnight; however, if you work towards it, you can obtain financial freedom. The techniques used here are not new. They have been used for many years and are proven to help you get rid of debt. Living debt-free means that you do not spend more than you earn.

You must learn to live within your means if you are to experience financial freedom from debt. Learning to live within your means does not mean giving up everything you love. It does not mean wearing second-hand clothing, it does not mean giving up your espresso. What it does mean is that you are responsible with your money and work to pay off your debt.

Controlling Those Expenses

The first thing you must do is to develop a budget you can live with. Start by writing down your monthly expenses. This means listing all of your monthly payments, the amount you spend on groceries, gas and other living expenses and the amount of money you want to save each month. Many people do not know how much they spend on these things. If this sounds like you, keep track of your expenses for a month and use them as a guideline to help you create a workable budget. When you develop a budget, list your net income. If you occasionally work overtime, do not include it because it is not guaranteed. Instead, list your base net earnings.

Then, you will need to write down fixed payments, such as your car payment, your rent or mortgage payment and any other bills that have aThe words Over-Budget on a scale, illustrating financial problems such as debt, deficit, over spending, lack of savings, bankruptcy and other economic trouble set payment amount. Next, you will need to write down the amount of money you want to pay towards your credit cards or any personal loans you have. This amount should be more than your minimum payment so you can get them paid off. Finally, you will need to estimate your living expenses (i.e. groceries, gas, clothing and entertainment). This should help you see an overview of your finances.

You will also want to include the amount you would like to save every month. Many people do not include this in their budgets and when an unexpected emergency occurs, they go further in debt. To help avoid this, set a percent that you will save and place it in a savings account as an emergency fund. If you are new to saving, you may want to start by putting 3 percent of your net income into a savings account. As you become accustomed to this amount, slowly increase it until you are putting 10 percent back in savings each month.

Wonky Economics

Let’s take a look at this scenario and see why charging a large purchase doesn’t make sense unless it is an emergency. If your net income for a month is $3,000 and your monthly payments plus spending is $2,500, it leaves you with $500 extra each month. If you decide to purchase something using credit that costs $4,000 and the payment is $400 a month, you would automatically assume that you are within budget and still have an extra $100, right? Wrong! You actually spent $3,500 more than you had to spend. When you look at this scenario, it just doesn’t make sense to charge large expenses to your credit card, does it?

If you are having difficulty staying on budget, you may need to have a third party keep you in line. They will help you determine if what you want to buy makes financial sense. For example, is it worth buying designer clothes and going in debt? Or is it better to get and pay for your education so you can afford these things in the future? A third party will ask these hard questions and help you improve your personal finances.