If your budget isn’t working as well as you would like it to, it may mean that it’s time to cut back on some things. The question that’s often asked is “How do I know WHAT to cut?”
If you’re like most people, you look at your budget and believe there’s nothing to cut at all. You may have moved the numbers around a number of time, but always end up with the same result of not having enough money to cover your expenses.
This can lead to a lot of worry and stress. How will you pay the rent/mortgage? What about food? And the credit cards? There’s no way that you can pay them.
You know that you need to make cuts to your budget, but how do you decide what you should cut. The following steps help you know what you need to have in your budget.
Before you get started, make sure that you have a workable budget. Before you know what to cut, you have to see where you spend.
Cover Your Living Expenses
The first thing you should do is make sure that your living expenses are covered. These include items such as rent/mortgage, utilities and food. You may be able to cut back a little on your food budget, but in many cases, you’ve already done that.
Pay Your Creditors
Next, add the payments that yo need to make to your creditors every month. These include vehicles, credit card and medical debt. Just list the minimum required payment at this time. You want to make sure that your basic budget covers all of your required expenses.
Determine Wants Vs. Needs
Now that you have your basic expenses covered, you next have to determine which items that you really need vs. those you “think” you need.
For example, if you included dining out in your budget, that isn’t a need. That is absolutely a want. You may have included clothing in your budget. That’ a need but you may be able to lower the amount that you budgeted those for the kids by shopping consignment stores and/or sales to stretch your dollar.
When my husband and I were working to get out of debt, we created a brand new budget. The first items that we listed wee the things that we needed in order to live. We then added in the debts that we owed. Finally, we looked at how much we had left to spend and decided which “wants” we would like to add back in and which ones we were willing to give up, just so we had additional money to pay off our debt.
It was a challenge for us, too and I didn’t like it. However, by doing so for a couple of years, my husband and I were able to eliminate our debt. Now money isn’t something that causes use stress. Our budget is simple. We never have to worry about paying our mortgage or putting food on the table.
When it comes to your finances, there are times when you have to make tough decisions. We all have the things we want, but if you’re having financial difficulty, you will have not choice but to cut back wherever you can.
Small sacrifices that you make now can pay off with big rewards later.
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