Three easy steps to save money and get out of debt
A spending plan is another tool that reveals the impact that goal setting could have on your personal finances. A spending plan, or budget can help you get out of debt.
Financial goals will not necessarily have a dollar amount affixed to them. This will require that you either generate more income or reduce expenses or possibly, if you already have monies allocated, shift monies within your plan. In any case, your spending plan will let you know if your goal is financially possible.
Additionally, a spending plan can help you:
- Stay out of debt.
- Identify areas for potential savings.
- Provide a cushion for unforeseen expenses.
- Save money for long-term goals.
- Avoid impulse spending.
If you haven’t already put your spending plan together, do it now.
Step 1 – Write It Down
- Estimate your monthly take-home income and expenditures.
- Gather information from your paycheck stubs, most recent statements, and available receipts.
- Look through your check register and/or credit card bills for purchases you may easily miss.
- Divide annual figures by 12 for monthly amounts; semi-annual figures by six, etc.
- Make "best guess" estimates when necessary.
- Add your own specific categories.
Step 2 – Monitor Your Spending
- Track all purchases and payments.
- Record all cash purchases in a small notebook.
- Save all receipts for review.
- Enter your payments and purchases into your spending plan. (Try this daily or weekly in the beginning.)
Step 3 – Review Your Progress
- Compare your actual spending to your spending plan.
- Identify areas that may require adjustments.
- Try to find areas to reduce, for example, you can find a credit card with a lower interest rate.
- Examine your spending to reduce or eliminate some expenses
Step 4 – Make Changes
- Adjust expenses and/or income to reach your long-range financial goals.
- Continue to maintain a monthly spending plan.
- Occasionally reward yourself for your successful money management!
Your goals and spending plan will change from time to time. The change signals growth, which may cause growing pains. Don’t be discouraged; it’s part of the journey towards financial independence and becoming debt free.
Keep an updated spending plan and before you know if your goals will be a reality.
Mike Schiano, The Debt Buster, received a bachelors degree in Political Science from the University of Central Florida in 1987 and earned the prestigious Certified Professional Manager designation in 2000. Since 1992 he has been involved in bringing personal finance education to families across America through his work with various companies.
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