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Getting control of your money and learning how to start a budget to to crush debt can be terrifying and overwhelming. Breaking the big picture down into smaller steps makes it so much easier and increases your ability to take control and stick with it. Now, take a deep breath. You can do this! I promise!
5 Simple Steps to Start a Budget:
Gather all of your credit card and loan information (statements, account logins). Next, put together a list of all of your balances, minimum payments, and interest rates. I love using Mint (it’s free) for this because it gives me one place to check everything in real time and I can watch my balances decrease!
Have a family meeting with your spouse/partner. This should be an honest conversation about your debt. Talk about the things you want to achieve once your out of debt and set goals. Maybe you want to save up a down payment for a house or start putting more towards your retirement. Set goals that will keep you out of debt and start making you more money. Make a commitment to stop using credit and to work towards crushing your debt.
Set up your monthly budget. I personally use You Need a Budget (it’s free or you can upgrade to EveryDollar Plus) for this. Another popular budgeting option is Every Dollar. Or, maybe you want to use a paper budget. Most important is that you do what works best for you and what you are comfortable with! The key is that you want to allocate EVERY dollar that you have coming in into a budget category. This is called “zero-based budgeting.”
- First, set up budget categories for your monthly “must pays” first – your mortgage, utility bills, food, etc.
- Second, set up categories for your minimum debt payments (credit cards, car loans, student loans).
- Next, set up categories for your incidental items. These are the items that you are going to look at hard to cut back or eliminate! We’ll talk a little more about that in a minute.
- And last, put any extra cash towards your debt with the smallest balance. This is called the Debt Snowball Method.
Monitor your budget. Make sure you are tracking ALL of your spending, down to the very last cent! Put every transaction (whether made with cash or a debit card) into a category. You need to make sure you are keeping an eye on your categories and how much you are spending.
Review your budget. When we first started budgeting, we would do this every week. We would look at our categories and see what our spending was and had a conversation about it. In some cases you might need to move money to a different category as you get used to how much you need in each of your categories. Don’t get frustrated by this. I promise it will get easier! The big thing you want to do when you are reviewing your budget is look at areas you can cut back on to throw at your Debt Snowball.
Phew, finally! I know that seems like a lot. But, I promise it gets easier and once you get momentum going it actually gets FUN (well, kind of!). In the end, you will be so happy you decided to start a budget and crush your debt!
Have questions? Comment below or feel free to email me at firstname.lastname@example.org. I’m here to help you get your journey started!
What steps did your family take to start a budget? What has or has not worked for you? Leave a comment below!