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Budgeting Money

Learn budgeting basics for effective debt management

There is a reason that businesses use receipts and record books to closely track how much money is coming in and out. Keeping organized will allow you to make future financial decisions on full information.

If you have problems with debt management, it might seem to you that no matter how strict you are with money, it just disappears. At the end of each month, you might be fretting because you can’t pay your bills, and you don’t understand where all of your money went. Perhaps you have thought about enrolling in Advantage CCS credit counseling services, either in-house or online. No matter what your situation, you can personally benefit from sticking to a monthly budget as part of your debt management plan.

Impulse purchases are one of debt management’s biggest foes. We live in a culture where we are bombarded with media advertising all the time. Wait for the bus, and you’ll see an ad for a new purse. Stand in line at the grocery store, and chocolate, bath sets, and household goods tempt you. Hail a taxi, and you’ll see an ad for a Rolex or a pizza atop the vehicle. American culture dictates to us that we must buy, buy, and buy.

Eliminating impulse buying is the first step of a sound debt management budget. You don’t need to get a latte because you walked by a coffee shop. You don’t always have to grab Indian food with your co-workers when the tuna sandwich sitting in the fridge in the lunchroom will do just fine. You don’t need four new magazines – you can read them at the library. Keep track of your impulse buys for just one week, and it’s likely that you’ll find dozens of non-essentials on which you spend your hard-earned cash.

After identifying and eliminating non-essential purchases from your budget, it’s time to examine your monthly spending habits in greater detail. Sit and think about everything you spending money on or buy in a month.

Some items your list should include are:

  • Rent or mortgage payments
  • Gas and electric bills
  • Telephone service, Internet service, cable TV
  • Medical bills and/or health insurance payments
  • Transportation costs and repairs
  • Groceries
  • Household necessities
  • School tuition or college loan payments
  • Entertainment and non-essential items
  • Credit card bills
  • Monthly saving set-asides

Add up your total monthly spending figures. Now, determine your monthly income after taxes. Compare the two figures. If your numbers are close, or if spending exceeds earnings, you’ll need to enroll in credit counseling and work out a debt management plan.

Steps to building a realistic budget:

  • Setting goals – Goals for your money will help you make smart spending choices. Ask yourself: “What do I want my finances to look like in one year?” Decide what’s important to you and then start there. Goals will help keep you motivated as well.
  • Categorize income and expenses – Review your billing statements and paychecks closely. Identify your net income and gross income. List all of your monthly expenses and the periodic expenses that you know of like your water/sewage bill, property taxes, etc.
  • Separating Wants vs. Needs – Ask yourself: “Do I want this or do I need it?” Set clear priorities for yourself and the decisions become easier to make. Decide what truly belongs in your budget and what you can “live without” for a while.
  • Create the budget – Use our free budgeting tool (Online Budget Advisor) to create your budget in a few minutes. Make sure that you are not spending more than you make. You need to learn to live within your means or you’ll be in debt forever. Balance your budget to accommodate everything you need to pay for.
  • Analyze spending vs. income earned – Match your spending to when you receive your monthly income. The worst thing to do is have something big like your mortgage payment due before you even get paid that month. Decide ahead of time what you’ll use each paycheck for. This will protect you from going into debt further because you won’t rely on credit to pay for your monthly living expenses. This is how most people end up in debt and needing our assistance.
  • Don’t forget to include periodic expenses – You know that things will “just come up” – unexpected school expenses, new water heater, or a new refrigerator. Set money aside to pay for these expenses so you can afford them without having to use a credit card.
  • Saving strategies and the future – Getting on track with a budget can take a month or two. You’ve lived all this time without a spending plan, so give yourself time to adjust. Don’t be afraid to ask for help if things aren’t falling into place. Contacting a certified credit counselor at a Non-Profit credit counseling agency could be a lifesaver!

Budgeting doesn’t have to be hard or take up all of your free time. With free online tools such as Online Budget Advisor or Mint.com, you can create a budget within a few minutes and find out where your money is going every month.

A budget will show you where you can make cut-backs to free up some money. An example would be to eat out less or start bringing your lunch to work instead of going out to eat for lunch. Small sacrifices like the ones mentioned will help you save money and you can decide to either pay down your debt or save it for a rainy day.

About Advantage CCS –

Headquartered in Pittsburgh, PA since 1968, Advantage Credit Counseling Service, Inc. is a national non-profit 501(c)3 counseling agency that has been successfully helping consumers get out of debt for over 45 years. If you’re struggling to make ends meet, our team of certified counselors are standing by to help you find a solution that’s right for you. No matter what your current financial situation may be, remember you’re not alone. We can help!



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