How to develop a budget you can live with
Image source: ABowlFullOfLemons.net
We’ve talked here before about how after filing Chapter 7 or Chapter 13 bankruptcy, getting on a budget can help you make the most of you financial fresh start. But if you’ve never tried living on a budget before, you may struggle to develop one that you can live with. So today, we’ll take a look at how to budget better!
If you’ve never established a budget before, you may go overboard and make it too stringent. Think of a budget as a financial diet. If you’ve ever tried to lose weight, you know that it can be a struggle to find a method that works for you. The same goes for your personal finances. Budgets aren’t one-size-fits-all and you must develop a system that works for you!
#1 Know the Difference Between Need and Want
The first step in a budget is prioritizing things that are not optional. First is rent (or mortgage) and utilities, then groceries, student loans, insurance (health, auto, home) and your car loan (if applicable). These are all of your financial obligations that keep a roof over your head, lights on and food in your belly. Everything else is a “want” that you can cut back on if you have to.
#2 Don’t Go Crazy and Try to Wipe Out All Your Debt at Once
If you’ve just come out of a Chapter 7, you’ll likely have many of your debts eradicated. But there will still be some left like student loans. You may be tempted to ditch all your debt by using extreme methods to clean your financial slate completely. But like with dieting, extreme tactics can burn you out and result in you abandoning your resolutions. Take a slow and steady approach to debt reduction.
Four steps to devloping a household budget
Image source: ResolveMyTaxes.com
#3 Save and Plan for Emergencies
One of the things that can derail our budgets and financial stability is an emergency. Whether it’s a major car repair, an illness that costs us money for treatment or results in wages lost from time off of work, having a reserve can make all the difference in keeping your head above water or drowning in debt. Try to set aside 10% of your pay in savings as a buffer against unforeseeable cash needs.
#4 Be Realistic
Your budget should be livable. If your main source of stress relief is watching movies, cutting your Netflix subscription isn’t necessary. If you smoke, this is a major expense, and one that’s difficult to deal with. Cut back gradually and you’ll improve your finances and your health without driving yourself crazy. The same is true for eating out and other indulgences. Instead of remaking your whole life, scale back and then allow yourself time to adjust before you scale back more.
#5 Don’t Budget to the Penny
If you budget down to the last dollar, indulging in a latte when you’re having a really great (or really awful) day can throw you off. As with a diet, one bad day can lead you to another and then another. Having a certain amount of cash that’s available for unexpected expenses or the occasional splurge will allow you to stick to your budget without feeling like you don’t have room to breathe!
If you are struggling with your finances, are plagued by collection calls and need a fresh start, contact the law offices of John T Orcutt for advice on North Carolina bankruptcy!