Budgeting Debt For Financial Success

Seven Steps to Debt Management will allow you to Achieve Financial Freedom from Debt

Without a sound Debt Management Financial Plan to manage your debt and expenses, a business is doomed to failure - managing your personal finances is no different. A sound personal financial plan is crucial to both your financial and emotional well being. Our Debt Management Professionals have prepared a simple and easy to use budgeting process for you. This debt management and budgeting process will show you how to thoroughly develop a financial plan and lead you on the road to being debt free and having financial freedom.

1. Debt Management: Make a Complete List of your Monthly Income.

The budgeting process always starts with a monthly income; one's income will show how much one has to spend each month.When developing your monthly income, make certain to include take home pay from your job, any bonuses that you receive, dividends and interest income from investments, tax refunds from the government, gifts from other family members, and any other type of income you may require during the particular month. If you would like a comprehensive income budgeting tool, please call your credit counselor at National Debt Counseling Corp. They can be reached here: Debt Help. Or, you can visit our web site, www.debtpro1.com , and complete one of our online credit counseling applications. One of our credit counselors will be happy to help you complete your income budgeting worksheet.

2. Debt Expenditure: Make a Complete list of your Monthly Expenses.

Just like the complete list of an income, one must make a comprehensive list of his/her expenses. When you make your list of expenses, it is important to break them into three distinct categories, fixed, flexible, and discretionary.

A. Fixed Expenses

Expenses that do not change from month to month. Good examples of fixed expenses are your mortgage or rent payments, a car payment, insurance premiums (such as life insurance, car insurance, or health insurance) or any other expense that does not vary from month to month. Once you have gathered all of your fixed expenses, you need to make a total of your fixed expenses for use a little later in the process. However when seriously considering debt management, things like Home Insurance and Auto Insurance can be reduced with proper shopping.

B. Flexible Expenses

Expenses that vary from month to month.Typically, you can control your flexible expenses to a certain extent. Flexible expenses include items such as groceries, utilities, clothing, restaurant expenses, haircuts, fuel and other items that change from month to month. You should be able to see that you do have at least some control over your flexible expenses. Again, total all of your flexible expenses; we will also use this later in the process.

C. Discretionary Expenses

Discretionary expenses are not necessary for your survival and may be the cause of many of your financial problems. Good examples of discretionary expenses are Entertainment Expenses, Vacation Expenses, movie, alcohol and socializing, and club memberships. Be Sure to total all of your discretionary expenses, these are big debt contributors.

3. Prioritize: Put your Expenses in Order of Most Importance

If your expenses exceed your income, you will be in a position where you will need to use credit cards to pay for your income's shortfall. This is how most people get into credit card debt. It is important to monitor your use of credit to pay these expenses. The long-term effects of borrowing to pay for your current expenses can be very hazardous financially. Your credit counselor at National Debt Counseling Corp will be happy to provide you with a credit card worksheet to help you track your credit card debt. When you have totaled the monthly payment on all of your credit card debt, make sure to include this total in your total of fixed expenses discussed in point 2a above.

4. Netting Debt: Subtract Total Monthly Expenses from Total Monthly Income.

Subtracting all of your monthly expenses from your monthly income, will allow you to clearly see if you are going to have financial difficulties. If your expenses exceed your income, you will have a negative expense to income issue. This means that you are spending more than you are making. This is the typical cause of excessive credit card debt, and financial misery. When spending more than you make, you likely finance your budget shortfall with your credit cards. If you do not stop this trend, your credit card debt will grow until you max out your credit cards and hit a debt end!

If you do have a negative expense to income issue, you need to consider which of your expenses you can reduce or which devt causing expenses you can eliminate. Start with your discretionary expenses and then move on to your flexible expenses to see what expenses you can reduce or even which expenses you can eliminate.

If you would like a comprehensive expense budgeting tool, please call your credit counselor at National Debt Counseling Corp. They can be contacted here Debt Management . Or, you can visit our web site, www.debtpro1.com, and complete one of our online credit counseling applications. One of our credit counselors will be happy to help you complete your expense budgeting worksheet.

5. At the end of each month go over every expense that you incurred

Look for additional ways to reduce excessive spending. If you hold yourself accountable for your debt situation, you will always reach the goals that you set for yourself. If you don't hold yourself accountable for reaching your goals, you'll find that you never reach them. This is an important element of a debt management or of a credit counseling program. There is no secret to financial success, only determination. The beauty of a consumer credit counseling or debt management program is that you are held accountable for the goals that you set for yourself in terms of becoming debt free.

When you are reviewing your expenses at the end of each month, remember to set spending limits and goals that that are attainable. You did not get into debt in one day and you will not get out of debt in one day. Any worthy goal takes time to achieve. Once you get the hang of the budgeting process and see that you are making real progress, you may want to go through the budgeting process quarterly, instead of monthly, as long as you continue to make progress.

6. Try to put 10% of your monthly income into savings

A 401k and IRA savings plan will have additional tax benefits.
By saving 10% of your income you will learn one of the greatest secrets to financial wealth, the compounding of interest. If you save 10% of your income each month, your money will start to work for you in short order. With compound interest of 10%, in 5 years you will be earning about 60% on the money you set aside the first year.

      When you consider your savings plans, first make certain that you completely fill your 401k and IRA savings plans. This will allow your savings to accumulate tax free. This will accelerate the growth of your assets by 20% to 40%, depending on your tax bracket.

      After you have filled your tax deferred savings plans, any additional savings that you can make should go into a regular savings account. This could include a money market account at a bank (a very secure but low yielding investment) or some type of investment account (a much less secure but typically higher yielding asset over the long run).

      Also, remember that any reserve that you create will help to insure that you do not have to live paycheck to paycheck.

7. Divide total expenses by the number of Monthly Paychecks.

By dividing your total expenses (obtained by adding your fixed expenses, your flexible expenses and your discretionary expenses) by the number of paychecks that you receive, you will see whether your paycheck is sufficient to cover your expenses If it is, you should be in good shape. If it is not, you may have to rely on other sources of income or you will need to reduce your expenses. Again, if you need to reduce your expenses, you must look to your discretionary expenses first and then your flexible expenses second. If you cannot reduce your expenses, you may want to call National Debt Counseling Corp and speak with your credit counselor. We will help you develop your budget at no charge. Or, you can visit our web site, www.debtpro1.com, and complete one of our online credit counseling applications. One of our credit counselors will be happy to help you complete your income and expense budget worksheet.

If any of this Credit Issues or Debt Situations describe you or your current situation, Credit Counseling may be the Credit Solution you need. If so please inquire with us about Credit Counseilng , we will gladly provide you with Professional Credit Counseilng Information to help you get your credit issues back in order.