Baby Steps to Debt Freedom
There is only one sure fire way to get out of debt. The income must exceed the outflow – or to put it plainly, you have to make more money than you spend. This can be accomplished by either increasing the amount of income (by getting a new job or additional jobs) or by decreasing expenses.
For most people, the best place to start is cutting expenses. It sounds easy, but there are some steps that need to be taken to get you on your way.
The first thing to do is to keep a record of what you are currently spending. Carry a small (hand sized notebook) around with you for a full month. Write down every thing you spend, no matter how big or how small. At the end of the month, total up all that you have spent.
The next thing you need to do is divide you’re spending into categories. Housing, utilities (electric, gas, water, garbage), telephone, groceries, entertainment, auto expenses, insurance, medical, and emergency are just a few if the categories that are normally used.
After you have totaled the amounts you are spending, and divided out how are spending, it is time for the painful part of the procedure. The categories must be cut.
I usually start with excesses – it is important to spend each and every dollar in the best possible way. If you are single, it might cost less to eat out (at small diners or restaurants) as apposed to trying to cook and shop for a single person. As for families, it is almost always more cost effective to eat at home.
The best way to cut food costs is to plan ahead. Make three menus (each one for one week) that include recipes and shopping lists. Rotate the three menus to keep the family from getting too bored with meals. It will also help to cut costs if you prepare lunches instead of buying at the office or school.
The next big spending items in today’s gadget driven market are the electronic toys and services. Take a good, HARD look at the value of your internet service, cell phones, and television programming. If you need these, then keep them. You may be able to cut back on the packages and save that way. If you don’t absolutely have to have the items then get rid of them.
There are some things I encourage people who want to get debt free to spend money on. It is important to save money. If you can’t do that now, then make it a goal. Plan on setting aside part of your tax refund or holiday bonus to start a savings account. If you save $10 at the grocery store, add that to your savings. A little here and there will accumulate quicker than you might expect. And don’t forget to set aside some money for entertainment. Getting out of debt is a lot like dieting, if you cut everything out all at once then you are more likely to cheat. Plan a little for entertainment, but limit the amounts you spend.
Setting a budget isn’t like writing in stone. I recommend you look over the budget every few months – tweak the categories and your spending habits – until you are living in the freedom of a debtless life.
