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In many cases you can design and stick to a simple envelope budget system to get your bills under control. A simple plan shows you how much money you have and how much money you spend. Sticking to a realistic plan allows you to pay off all your bills and save for the proverbial rainy day.
Begin by listing all of the income you receive. In order to better calculate monthly income, multiply your regular weekly salary or income by 52, then divide that number by 12. (For those who are paid bi-weekly, multiply by 26, then divide by 12.)
You must take extra caution to not over estimate incentive earnings, such as gratuities, overtime, bonuses, or commissions. This monthly amount is the total you will have available to both exist on and to pay down your bills.
Next, precisely detail all of your expenses, bills, and any other expenditures you have. Leave nothing out. Start with the necessities of life such as mortgage, auto payment, sensible and necessary food, minimal clothing allowance, and utilities. Now dig deep in your mind to detail every other necessary expenditure you must incur.
You have compiled your total available monthly income, which amounts to $2,500.00. The total of your bare necessity living expenses amount to $2000.00. That means you have $500.00 available for bill pay down using the envelope system .
Now, you must set up an order of repayment and live by it. The success of your financial survival depends on it.
Once a bill is paid off many people begin to think they are free to spend the excess $500.00 on personal luxuries. WRONG! The secret is to continue the $500.00 monthly pay-down on any remaining obligations, upping their payments respectively until all are paid in full.
Only then will you be financially free and able to enjoy the fruits of your struggle. By that time, you will also find that you can live more frugally and that you actually can live without some of what you previously thought were essentials. If this is so, then you must now bank or invest some of these excess dollars.
Then, the next time you consider incurring debts you won’t have to, because the cash will be available in the bank. If there is no money left, it is because you are spending more than you earn and you cannot reasonably repay your creditors in full over the next 12 months. Consider either a compromise agreement with creditors or a bankruptcy petition.
Financial planing is an important aspect of your financial health and the better your plan the quicker you will be out of financial trouble. A well managed budget can become your all important tool especially when it comes to money management.
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