Keeping a budget is not an easy task, but it is essential to get out of debt and stay that way. In a year full of political uncertainty and an economy that does not seem to be getting better due to an unforeseen pandemic, it is more important than ever to make sure that you and your family are on solid financial footing. If you have debt, it is time to get it under control, and if you don’t have a set budget, it is time to get your spending under control so you can start saving set yourself and your family up for a secure financial future. How do you go about setting up a solid budget with your current funds with debt, bills, and still have money left to live? Here is a road map to follow so that you can set yourself up for a stable future.
1. Make a list of all of your expenses and bills:
Setting up a budget when you have not been sticking to one before may seem like an overwhelming task to undertake, but it is achievable if you are willing to get organized. Take the time to make a list or spreadsheet of all your bills and expenses. This includes weekly living costs, so you will know how much you need to budget for living costs in your new budget.
2. Decide what bills and expenses you need as well as what you can cut:
Now that you have your list of expenses, you need to decide what bills you need and what you can cut. You should also go through your subscriptions and make sure you are getting the best price for everything. A few things subscriptions and services you might want to look at for pricing and necessity are your internet, phone, and cable bills, as well as any other online subscriptions you may have such as Netflix, Amazon, Hulu, etc. Decide what you need and compare the prices you are paying for the services you are receiving with other companies for the same service to ensure you are getting the best deal. You can also see if any online bundle packages are being offered for the online services you have that can save you some money on the monthly fees and get a discount on any of the streaming services through your phone, cable or internet provider. All of these small differences add up to make a big difference in making room in your budget for changes.
3. Separate your debt into categories: “In Collections” and “Good Standing:”
Now that you know all of the monthly expenses you need to keep and that you are getting the best prices you can on everything. It is time to look at the debt side of the budget. Make one list of all the bills you have in good standing, how much you owe, how much the minimums are, and when they are due. The bills in good standing will be added into the budget as bills are paid off each month. If you have room in your budget, try to overpay them so you can pay them off faster and not pay as much interest.
You can also look into options for debt consolidation, such as refinancing or balance transfer options to cut down on the interest you will be paying each month. This also makes it so you will be making fewer payments every month. This can be helpful because saving on interest and making fewer payments can free up your budget and create availability to overpay the minimums. This will give you more opportunity to rid yourself of the debt in a shorter period of time!
-Next, if you have any debt that is in collections, make a list of how much you owe on each debt, keep the paper bills close in an organized file for negotiation.
4. Settle debt in collections:
When dealing with debt in collections, you want to make sure you have all of the information you need about the debt before calling the debt collection agency. Make sure you have the last bill you received (if you don’t have it, try to go online and download it) because the debt collection agencies don’t always have the correct information. You don’t want to negotiate against a debt you don’t owe or end up paying more than you need to. You also need to make sure you get the settlement amount they agree to in writing before you pay them anything. They will try to pressure you into paying over the phone by saying that the deal they agreed to will expire if you don’t pay them when they want you to, but that is not true. Don’t let them bully you stand your ground, and you will come out on top with negotiation.
Once you have the settlement amount and get the paperwork from the debt collection agency, you can either set it up to pay the debt off in one payment or set up a payment plan. This will be the next step in the negotiating process for you depending on how much the debt is and how much you can pay off at once in your budget. That is up to you to decide. If you set up a monthly payment plan, they will be added to your new budget.
-If you don’t feel comfortable doing these negotiations on your own, you can hire a debt settlement agency to negotiate for you. Just make sure the agency you work with does not tell you to stop paying your other bills to settle those also because that will hurt your credit.
5. Organize your bills:
Now that you have all of your bills and payments, organize your monthly budget, so you don’t miss any payments using a spreadsheet. The best way to set up your spreadsheet is to organize your payments by the due date, so you know when your payments need to be made throughout the month. Make sure you also set up a monthly living expense budget for yourself, so you don’t use your credit cards again now that you are paying them off.
6. Set up a savings account and emergency fund:
It is also essential to set up a savings account and emergency fund for yourself if you don’t already have one. Your savings account is there to build a foundation for your financial future. The emergency account is there for the last minute medical bills, appliance break down or any other emergency that you would otherwise not be able to cover and possibly end up in debt trying to cover because you have no other choice. These accounts are critical parts of building a stable financial situation for yourself as you move forward with your new budget and debt-free future.
7. Go over your new budget to make sure it fits into your current income:
Make sure your payments fit into your monthly income. If you still have more going out than coming in, you still need to try to cut out more payments, find lower prices, or lower how much you are saving. As you pay down your debt, you will be able to roll your payments over into either other bill payments or more savings. Try not to add any money to your living expenses until you are debt-free. You also want to make sure your savings and emergency funds reach your goal amounts before you add any more money to your living expenses. These are the most crucial parts of setting yourself up with a strong financial base and a debt-free future.
8. Stick to your budget and don’t overspend:
It takes a lot of time and effort to set up a strong budget and to get to yourself out of debt finally. Now that you are on a stable path to get yourself on a steady financial path make sure you stick to it! It is not easy to spend less and save, but it is worth it when you come out of it financially free.