Managing a budget begins at a young age, generally as soon as the teenager gets their first job, and with the guidance of parents or guardians. However, other people are not that lucky and never learn because they had no one to set them on a firm financial foundation early in their life. Unfortunately, that person must walk through fire several times, get burned and financially hurt before they finally learn how to manage their money on a budget. Those who do not work with a budget spend more than they make and never actually put figures on paper because it is too hard of a pill to swallow. Many people cannot even account for where their money went.
Budgets in black and white tell the true story of a person’s finances. Managing a budget involves far more than putting all bills on slips of paper, putting those sheets of paper in a bag, shaking the bag and drawing a slip out. “Oops, sorry Mr. Creditor, but you do not get paid this week, your account was not brought out of my brown paper bag, better luck next week.” Creditors do not work like this and neither should you.
Managing a budget is a serious and time-sensitive matter because your bills have due dates. It does not matter if you pay a bill on time or the bill is late, your actions show up on your credit report and stay there for at least seven years as a negative or positive mark.
Life always throws monkey wrenches into life and just when we think we have all finances figured out, something happens. To assure success with a household budget, it needs top priority. Resources need managing with precise movement. There are some things people can do to ensure their budget gets off on the right foot and stays that way for the duration that they need a budget, which is probably forever. A budget is the only way in which one can gain and keep control of their income and current debts. An individual must always be aware of their expenses, and they cannot do this if they do not list. Making a list of debts helps to eyeball the damage and formulate a successful, get out of debt plan.
- Always forecast your budget. It is important to take frequent and brief looks into your financial future, so you do not fail, due to oversights and going off track.
- Keep communication lines open with household members if old enough to realize how important money spending within the household is and the importance of getting temporary bills paid off as soon as possible
- Take ownership of your household budget as this gives you the responsibility for success
- Every month make an assessment of your income and expenses
Make a real pencil and paper list of the typical household expenses. These are expenses that never go away anytime soon, such as, mortgage, car payment, utilities, cell phones, insurances, taxes and other items that make a difference in a person’s life. Then list the debts they are trying to pay off such as credit cards, store accounts, doctor bills, and so forth. Place these debts in the order of importance (realizing that every debt owed is significant)
1. 10% to church always comes off the top if you believe in and want to tith
2. 10% goes into a personal savings account
5. Car payment
7. Cell phone usage
8. Food, pet food and necessary supplies
Your list may reflect some different entries, just remember to prioritize all debts, such as payment to the mortgage company never goes to a collection company. Once you write all debts large and small on paper, add the figures together and subtract that number from the monthly income. If a person recognized that their expenses are greater than their income, they need to cut back in some areas of living, or they need to work harder longer hours. Sometimes a second job is necessary for a short while.
These items are of obvious importance to be paid first because a homeowner never wants the bank to foreclose on their living space. Mortgage companies and car loans insist on insurance on homes and cars until paid in full. Never let a mortgage firm place Hazard Insurance on a home as this costs a lot of money. Everyone always wants to make sure they have heat and air conditioning. They cannot prepare meals, get ready for work and live comfortably without energy. Well, this is possible but, it is most difficult in our current society.
This list includes every known current expense a person has, including any accounts held by a collection company. Collection firms, harm one’s credit if that person finds themselves in the hands of one of these companies. Never settle on a debt if possible and always pay accounts in full. Never give these companies the ability to deduct money automatically from a checking or savings account, and never turn the control of your budget over to a harassing credit collections firm.
If an individual lives from paycheck to paycheck, they may not be able to make this second list until they are in a better financial position. This list includes obligations they may feel they must be meet. This list is an excellent list, but hardly necessary when trying to get out of debt. Unless they are essential necessities to a person’s daily living existence, they probably need to be put on hold. Sometimes people feel they cannot do this. If it bothers a person too much then by all means, they should try to include these things into a monthly budget.
- Birthday Gifts
- Anniversary presents
- Car Maintenance
- Manicures and Pedicures
If an individual has enough funds that they can pay for these things as they come up this is good, if not, put money aside for a few months in advance and when the time comes, the extra money for nonessentials is available. The last option is, just call and wish the person a beautiful day and leave it to go at that. You would be surprised to know that people do understand because many rowing the same boat.
Once an individual becomes stable in their finances and can afford to do this, it is a good idea to pay all quarterly bills for one year in advance or, at least, six months.
Remember that a budget is a private and individualized way in which that allows a person’s creditors to get paid promptly. Never, ever, allow any lender to put constraints on who gets paid first and how much money the creditor gets paid, except for companies holding loans against your home and car.
Consumers need to be in communication with creditors, especially if the person has a problem making a payment. Creditors are generally going to work with the person and the emergency situation they find themselves in at that time, even recommend applying for unsecured personal loans to assist with financial strains. Creditors are not mind-readers and do not know what the person’s intentions are in paying them. Call creditors at least every month and let them know intentions and plans until the debt is paid in full.