Until about 10 years ago, I never followed a monthly budget. Every time I sat down to pencil in my income and expenses, I realized I didn’t earn enough money to have any funds left after paying rent, car payment, utilities, and credit card bills.
So, I’d ditch the budget and keep on juggling utility payments — and charging everything on my credit card when I ran out of money a week before payday. For years, I transferred the same high credit card debt from one zero-balance offer to another.
That’s no way to live. But that’s the only way I knew.
Then a friend gave me financial guru Dave Ramsey’s Total Money Makeover book as a gift. I’d listened a few times to Ramsey’s radio show, and I was always amazed when people called in and told him how they’d paid off tens of thousands, even hundreds of thousands, of dollars in debt within a few years or less. If they could do it, why couldn’t I?
So, I read Ramsey’s book, followed his plan to get out of debt, and paid off $8,000 in credit card debt in 18 months. The best thing I did to ditch the debt lifestyle was create and stick to a budget.
If drawing up a budget sounds complicated, try these easy budget tools to see how simple it is to keep track of income and expenses:
I started with the Quick-Start budget and still use it today. Here’s how going by a budget enhanced my financial and emotional well-being and can help yours too…
1. I paid off my debt
When you know where every dollar goes, you’ll find opportunities to apply extra money to your debt. I didn’t wait to make one big monthly payment to a credit card. If I saw an extra $20 or $50, I made a quick payment online. All those little payments, along with the bigger ones, added up until I reached my goal: zero balance.
2. I was less anxious
When I feel anxiety, it’s usually due to a lack of information. For example, maybe I’m waiting for an answer, explanation, or outcome. It’s the same with money. If you don’t know where your money is going every month, or even how much you owe, you can’t make an action plan to eradicate debt. A budget offers a visual image of your monthly spending plan and habits so you can pay off targeted debts.
3. I changed my spending habits
I stopped using credit cards until my credit card debt was paid. Instead, I withdrew cash from the ATM and allocated amounts for groceries, toiletries, restaurants, and other things. Then I placed the money in separate, marked envelopes and did my best to stick to my limits. I still use my debit card for utilities and gas but most things I pay for with cash. This method makes me selective about which activities or items I deem worthy of my hard-earned cash. As a result, I spend a lot less.
Now that you know how necessary a budget is to paying off debt, choose one of those budget forms mentioned above, punch in some numbers, and get an idea of where you stand. If you’re behind on a few utilities or other bills, do whatever you can to pay them off fast so you can start budgeting while you’re caught up.
Maybe you’ll have to sell a couple of items, brew your own coffee for a month or cook every meal at home. If it’s more difficult for a month or so, don’t get discouraged. You’re changing your life, so grab a pencil or start typing numbers into an online budget program. Who knows? Maybe you’ll kick off next year debt-free.