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simple tips to create an effective budget plan

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legal warning: The information here should not be understood legally as financial advice. If you believe anything on this site is in error, please contact me. I am always open to corrections, new ideas, and new opinions...

Hi.  In keeping with the last post’s ending about the importance of keeping a budget, no matter how simplified the budget, the following guest post was submitted outlining a few steps to get going in the right direction.  In the next post,  we’ll get back to housing solutions.

Author’s Bio: Sophie Kinsella is a contributory guest columnist for various websites and communities including Oak View Law Group and CMFA . She has completed her Graduation in Finance and is currently working with an Investment company located in California. She has written some great articles on topics like bankruptcy, investment opportunities, debt management plan and more.

People are generally afraid of formulating a budget plan but it is an essential part to manage your finances. Consumers who did not plan a budget they generally incur insurmountable amount of debt as they start spending recklessly. If you are struggling to pay off your debt then formulating a debt management plan can help you eliminate your debt. If you hire a debt management company then the credit counselor will evaluate your financial situation and create a budget plan so that you can pay off your debt with ease. If you are preparing your own budget plan then here are the following things that you need to keep in mind: 

1. Calculate your owed amount:

Try to calculate your total amount of debt you owe to the creditors along with the interest on it. Write down amount of debt your need to pay back in descending order of the interest rate. You need to keep aside a potion of your income so that you can start paying off your debt. Put extra money towards high interest loan so that you can eliminate it immediately.    

2. You need to plan your budget according to your financial state. Therefore, track your income and expenses as it will help you prepare a stringent budget plan. You can maintain an excel sheet where you can incorporate your daily expenses as it becomes easier to track your monthly expenses.    

Items

Week #1

Week #2

Week #3

Week #4

Monthly Expenses

Groceries

Transportation

Electric bills 

Medical expenses

Emergency exp. 

Entertainment

Total weekly expenses

This chart will help you check whether your expenses exceed your income. 

3. Curtail your extravagant lifestyle:

When you plan your budget then your prime objective should be to pay off your debt. You can curb your lavish lifestyle to utilize the money to pay off the debt. Avoid eating at a plush restaurant when you can arrange a good sumptuous dinner at home. You can reduce you unnecessary expenses like gym memberships, splurging on branded clothes and curb your entertainment expenses. The money you save can be used towards paying off your debt.   

4. Open an emergency fund:

You can set aside a portion of your income in the saving account as it can be used in time of financial crisis. If you have an emergency fund then you don’t need to skip your debt payment to pay for the unexpected expenses. 

Budgeting is about managing your finance in an organized manner therefore you don’t need to panic while planning your budget. It will help you secure your financial future and liberate you from debt.


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