It is essential that you try and come out of debts if your debts are continually rising. This is important as after debt reduction not only your financial life but also your family and social life, improves. One of the most important ways in which you can proceed towards debt reduction is by planning a budget that helps you identify your problem areas where you are spending too much and also will help you stay motivated about debt repayment.
A few things that you have to consider when making a budget are as follows.
1. What time frame you will be considering?
You must first decide the time frame that you will be using for your budget. The time frame that you consider can be monthly or yearly or even quarterly. It is best for you to use the monthly budget. This is because mostly all your bills come once a month and thus using a monthly budget will be most beneficial for you.
2. What is you total income?
One of the first things that you will need to consider when making your budget is how much money you earn. You are to determine exactly how much money do you have incoming. This should include not only your monthly income but also the income that you make from other sources such as investments or additional jobs.
3. What is the amount that you spend?
Now you must calculate how much money you spend. It is important to note that there are some expenses that are fixed. Such expenses do not change over the months. These include expenses such as food bills, rent, etc. Some other expenses are variable expenses that change every month. You must understand that these expenses must be recorded precisely to get the total expenditure. Thus, it is essential that you include all major and minor expense in the budget that you make.
4. What is the surplus?
After you have found out your total income and your total expenses you are to find out how much is the surplus. To get this amount you are to subtract your total expenditure from your total income. The amount that is left behind is the total that you have in order to pay off your debts as well as to save for your future. This is the amount that you are to allocate to paying off your different debts. In case this amount is a negative figure, then you must consider ways in which you can reduce your expenses and increase your income so that you can opt for speedy debt reduction.
These are a few questions that need to be considered when formulating a budget.
by Martha Jackson.budget, debt, expenditure, food bills, minor expense, monthly budget, planning a budget, problem, repayment, variable expenses