Learning to budget your expenses and income is one of the most important ways you can get help with debt problems. But debt in its very definition works against budgeting and of course most of us have more experience with debt and its results than we have with the budgeting process.
Essentially a personal or family budget consists of mapping your current expenses versus your current income. It shows how much extra income you have (if any), what your expenses are, and when they occur. By following a budget, you can avoid some of the pitfalls that come with debt.
Debt thrives in ignorance
Do you know how much debt you have? Do you know how much debt will cost you during your lifetime? By creating a budget and following it for the lifetime of each credit card, you will see the cost of your debts. Do you have any idea what it costs per month for you to live? A budget will allow you to see what your essential expenses are and how much you are spending on the less essential items.
Avoid Late Payments
By budgeting you can schedule your debt payments so that they are not ever late again. As long as you follow your budget your payments will always be on time. But you can also be proactive in paying off your debts when you budget. You can apply an additional amount to your debts in your budget and pay them off earlier. Going a little further, you can electronically schedule the payments of your budget items at you local bank which makes it so that you never have to worry about physically making the payments again. Just make sure you have sufficient funds in your account when the payment is made.
Avoid over extending yourself
How do you know when enough is enough in spending? A budget tells you. Can you afford the Credit card payment? Can you afford that new car payment? A budget tells you exactly what you can afford to pay each month.
We all think we have an idea of how much money we have each month. This idea can be right on, but more often than not we forget how much we have spent or how much we have yet to spend because we owe it in debt. Creating and following a personal or family budget will help with debt problems and bring you closer to your goal of being debt free.
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