Debt management software can make what is probably the least favourite topic of anyone who is in debt into a just about. I know I struggled with this for a long time. Budgets seem to be the preserve of accountants. For a lot of people budgets seem too grand for the small personal finance issues that they may have. The best way to think of budgets is that you are bringing the same techniques that huge corporations use to manage their money to bear on your own personal finances.
I can appreciate why budgets are intimidating. Most of the time finding a starting point is the hardest part. Once you have found that starting point then where do you find the information to go into the budget. Then once you find the information how do you go about plugging it into the budget to get any meaningful information that you can use? Finally after all your hard work and after having creating a budget how do you stick to it?
Fear not. There is a simple solution to all of the problems outline above. Debt management software. Debt management software packages will allow you to take the pain out of making a budget and will show you in simple terms how making one small change can have a huge impact on your debt situation.
But before we get ahead of ourselves we need to look at the basics of budgeting. To truly understand and appreciate budgets we need to focus on the theory behind budgeting and the elements involved. We are going to focus on 1. Where to start your budget 2. How to gather information for your budget 3. How to pull it all together
1. Where do you start your budget?
Your budget should be a reflection of who you are and how you live your life. If you have never had a budget before then there a few key elements that you will need to understand before you start building a budget.
How you design your budget is very import to its success. The budget itself should incorporate all elements of your income and expenses. It has to be accurate.
All your expenses should be included.
Future possible expenses need to be accounted for and allowance made for them.
Start today – at this point in time – don’t say you’ll wait until the end of the month to start your budget. Do it now.
Remember that a budget is a work in progress and is never right first time so stick with it.
2. How to gather information for your budget?
The problem that most people have is that they have too much information. Bank statements, till receipts, utility bills, most people are faced with a deluge of paper.
In order to cut through the mass of paper find your most recent credit card and loan statements. Use these as the starting point for the information for your budget. These statements give the most recent and up to date information that you need. Old statements show what you owed in the past not what you owe now. You need current information on your current outstanding balances.
This may mean calling credit card companies or banks and asking for a statement but so what? The information will be crucial to getting your budget moving in the right direction.
3. How to pull it all together?
Now for the fun part – filling in the blanks. The simplest way to put your budgets together is to take a debt management software budget template and simply fill in the blanks. Debt management software can help you with this.
What I’ve outlined in the steps above simply give you a picture of your current financial situation/budget. This allows you to see whether or not you have a positive cashflow at the end of the month.
What you now have to do is to examine and identify areas within your current budget that you can make savings. It is these savings that can be used to pay down your debt. This can be done by breaking down each expense into three categories
B. Not essential but important
C. Not important and not essential.
You need to breakdown your expenses into these three categories. When you have broken them down you need to identify the expenses that you can eliminate. As you can probably imagine most if not all your expense savings are going to come from items in category C – Not important and not essential.
What goes into each category is entirely a matter of personal choice but in order to make significant changes you are going to need to make significant sacrifices.
OK so at this point you should have a picture of your existing financial situation based on the numbers entered into the budget template. This is where you currently stand financially.
Now what you need to do is to fill in the debt management software budget template again except this time use the new – reduced spending figures that you have created based on your decisions about your expenses.
When you have entered the new numbers into the template you will have a budget plan. This will give you a spending plan to guide your future spending decisions.
It is this new Budget that will be your allow you to make significant progress on your debt. As I said earlier the chances are that your first attempt at budgeting is going to be wrong. You will make mistakes with it. The key thing to remember is that your budget is a work in progress and that you should be continually looking for ways to improve it.