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STEP 8: Creating a Budget
Action 3: How To Make A Budget



Knowing how to make a budget or spending plan is an essential step in any solid get out of debt goal.


If you have been following our Debt Ditch Solution you have already worked on establishing your financial goals. Now let's work on getting there.


First Steps To A Budget

Gather all of the bills you must pay every month:

  • Mortgage/rent
  • Utilities, like heating and electrical bills
  • Telephone and cell phone bills
  • Credit card bills
  • Other loans or debts
  • Insurances, such home, car, health and disability, life

List the due dates for payment of each of your bills and mark them on a calendar. If you have been following the Debt Ditch Solution steps you will have already listed your credit card payment dates and minimum payment amounts in our first action step (look here to review that "how to get out of debt" step.)

There are some expenditures that are not fixed like groceries. The best way to assign dollar amounts to this kind of expense is to track your spending for a few weeks. Keep all of your receipts for everything you buy for 2 weeks (or a month if you really want to be thorough) and add up how much you have spent on things like groceries, entertainment, transportation and "sundries".

Then begin to assign dollars to expenditures. Use The 60% Solution suggested by financial expert Richard Jenkins that we outlined previously. Here it is again:

How To Make A Budget Guidelines:

  • 60% to committed expenses - expenses that you need to pay in order to live. That includes things like mortgage or rent, food, car payments and utilities.
  • 10% to short term savings for irregular expenses. Unexpected expenses such as car repairs and unplanned home maintenance expenses fall into this category.
  • 10% to long term savings and debt repayment.
  • 10% to retirement savings.
  • 10% to "fun money". Entertainment expenses, vacations, and eating out come out of this pocket. Of course, if you are heavily in debt, this may be an area you need to take from to help repay debt.

Use these percentages to assign dollar amounts to your monthly expenses. We have provided free household budget worksheets for you to use. Print them out here.

How To Make A Budget: The free budget worksheets include columns to list the exact amounts you spent on each budget item, plus how much you were over or under your budgeted amount.

Knowing how to make a budget is not a 'one off' experience. Your family's perfect monthly budget will take a couple of months to develop. The column on the far right of the household budget worksheet allows you to adjust and establish a new budget amount for each item. Just insert the new number and you have a revised spending plan.

As you see how much you were over or under your budgeted amounts, you can adjust the budget to accommodate higher necessary expenses or see clearly where you need to put the brakes on your spending habits.

checkmark bullet  Now that you have some excellent ideas on how to make a budget, look here for information on how to assign expenditures to your paychecks.




FYI ...

To achieve financial freedom, ideas such as: listening to good advice, learning how to make a budget, understanding credit repair possibilities, avoiding the scams, and generally becoming more knowledgeable of the credit card business, can all play a role in eliminating credit card and other debt. There is A smarter way to manage your money.











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