How to Stay Debt Free with a Personal Budget

November 18th, 2009 by Administrator

If you are reading this, you are most likely searching for a way to get control of your finances. Producing and committing to a monthly budget has always been one of the ideal methods to do this. A sound budget is a fundamental tool for managing money, one that has allowed me to live well even on limited funds. Organising my monthly budget is one of the most crucial things I do every month, this has allowed me to consistently meet all expenditures, grow my savings, and reduce debt.

I map out my budget for the coming month on about the 20th of the current month. That gives me a heads up about what’s down the road. It’s not a good idea to develop a budget after getting paid because, too often, that flush feeling of getting a paycheck leads to uneccessary and spontaneous spending before the paycheck ever reaches the bank.

Start your personal budget by determining all the things that must be paid that month like rent, electricity bills, insurance policies, loan repayments and telephone bills. These are the crucial things that I must pay to keep a comfortable roof over my head. I like to pad these requirements to make “money back” after paying the bills and, if costs increase circumstantially, I’m always covered.

Next, my budget is subjected to a list of discretionary things I need to cover but could live without if absolutely needed. An example are monthly savings deposits, credit card repayments and donations. Don’t get me wrong, some of these things are also important, but in case of emergency they can be excluded. By paying credit card companies the maximum instead of the minimum, I keep my credit score high and my debt low.

My budget does not include the cost of living such as food and entertainment. These expenses get covered by what’s left over and that’s that. Some months involve lots of beans and rice, slow-cooker meals, free or cheap entertainment, and only one inexpensive piece of clothing . This strategy of handling my monthly budget has worked out very well over the long term as long as I observe it religiously.