Wednesday, September 27, 2017

Making a Budget and Sticking to It

How can I avoid incurring debt?

If you are working to eliminate your debt, creating a realistic budget and sticking to it will be essential.  Setting a budget can also help you to avoid debt in the first place.  Anyone who is overwhelmed by debt needs to get an accurate picture of their finances by mapping out regular expenses.  Once you have a complete look at your debt load and income, you can better assess whether you can eliminate your debt through budgeting or you need to consider the possibility of filing for Chapter 7 or Chapter 13 bankruptcy.

Avoiding Debt

Avoiding debt is a critical step towards attaining a strong financial future.  You may be able to stave off bankruptcy by avoiding new debts, or you could start off on the right foot after bankruptcy by thwarting the buildup of new debt.  Follow these tips to prevent debt from becoming a problem:

  • Do not charge more than you can afford;
  • Create a budget;
  • Limit the number of credit cards you use;
  • Keep a record of all purchases.

Make a Budget

It can be easy in our busy lives to lose control of our finances.  Making a budget is one of the greatest tools you can use to reach your financial goals.  You should think of your budget as a planning device.  Start by writing down all of your monthly expenses to determine what your funds go towards.  Take a hard look at what expenses you may be able to eliminate, but be sure to take into account even the minor expenses, like new clothes or your daily coffee, as these costs can add up.

With the list of your expenses complete, you should then notate how much money you make. Your income may come from one source, usually your job, or could include multiple sources, such as investment account dividends.  You can then subtract your expenses from your income to determine how much money you are left with once your liabilities are paid.  If this figure is zero or close to it, you will need to alter your budget or contact a bankruptcy attorney to discuss the possibility of eliminating or restructuring your debts.  


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