The bills just keep coming. Your paycheck doesn't get any bigger.
You seriously need to reduce debt, you tell yourself. But where do you even start?
By creating a budget. It's the way to get your finances – and your life – back under control.
Just how do you do this?
- Start with your earnings. Write down how much money you receive each month from your paycheck and other means, such as alimony or child support. Be accurate. You need to figure out just how much money you have to work with each month.
- Figure out and record you monthly expenses. These are the must pays: rent or mortgage, child care, utilities, insurance, property taxes, minimum credit card payments, transportation costs, food, prescriptions and phone bill. This does not include the stuff that is nice to have, such as cable TV or a $4 cup of coffee each morning.
- Look at how much you have spent in the past. Review receipts, credit card statements and your checkbook to see just what has left your accounts over the past several months. This will help you be realistic in your budget and also find places to reduce spending.
- Review your nonessential expenses. Look at categories such as eating out, entertainment, clothing, gym fees and cosmetics to start.
- Draft your spending plan. Include the essentials. Now, try to make cuts. Can you reduce your insurance costs by switching to a higher-deductible plan? Can you switch to generic prescriptions?
- Add in those extras -- pet care, Netflix, haircuts, spending money and such. Add up all the expenses and subtract from your monthly income.
Financial experts recommend having 20 percent left after all the bills are paid. So, if you bring home $3,000 a month, your monthly obligations shouldn't exceed $2,400. The remainder of the money is supposed to be for savings or to pay down debt.
But what if you don't have any money left at the end of the month? Then you must act. Find a second job or a better-paying first job, start babysitting the neighbors' kids or hold a garage sale. Also, you must reduce your expenses.
These are tough things to do, and you could need to consider some sort of debt-relief program. An Ohio attorney who works with personal-finance issues could offer some prudent advice, as well.