Wednesday, 2 November 2011

Eliminate Credit Card Debt through Effective Budgeting

Creating a family budget is easier than to sustain it for people in financial stress. Creating the budget is futile if all you do is file it away never again to see the light of day. When working to eliminate credit card debt, however, both creating and maintaining a realistic budget is crucial to a successful outcome. Below are a few tips for making your budget plan work for you and to help you find relief from your financial stress.1. Review your budget frequently. Institute a pattern, say creating a budget review on the 15th and 30th of every month as a minimum, more if circumstances change dramatically. Remember, your budget is not etched in stone, rather, it is a flexible document, one that must adapt to changing circumstances.2. Budgets should be prepared in pencil so that as circumstances change they are easily modified. Increased or decreased income, an increase in the cost of utilities, food, clothing and other necessities will have a considerable effect on your budget.3. If you are not meeting a spending goal, then review it and alter as needed. One way to modify is to not set yourself too many goals. Part of effective budgeting is to prioritize your goals. As you are working to eliminate credit card debt, your goal must be to find the money to pay down your debt. Only then can you focus on what is important.4. Do not use another person’s template for your budget plan. While it is okay to begin with a general acceptable outline for your budget, it is important to remember that your finances are unique to you. So create your own budget plan based on your expenses and what you want to achieve.5. Always keep your financial goals in front of you (do not put them away in a drawer); they will motivate you to stick with your budget plan. I recommend that you use sticky notes, write one goal on each note and stick them where you will see them often, the bathroom mirror and the refrigerator door are two good spots.While first learning to budget effectively it is quite possible that you will backslide; if you do don’t worry. Explore the cause objectively and then re-start your budgeting again. At some point, we all have moments where our budget gets thrown off line. When that happens you simply need to adjust it accordingly. When NASA sent men to the moon, the planned course required constant, small course adjustments in order to reach the target. Budgets are no different.A perfect way of protecting your budget is to set up 3 savings accounts, one for emergencies, another for your yearly expenses and the final one for yourself. The emergency savings will prevent accidents, break downs and any other unexpected expenses from damaging your monthly budget plan.Your annual or semi-annual expense account covers things like taxes, insurance premiums, holiday spending and special occasion spending that you know are obligations. Then divide the total amount by 12, and each month deposit that amount into your savings. The annual account spreads the cost of known annual expenses over 12 months in anticipation of the known single outlay of cash needed once a year.The account for you is just that! It provides you with a source of money for a wide variety of possibilities. You may want to use this account for retirement savings, for investing, for vacations, or for some other discretionary purchase. Of course, this account should only be established when your debts are under control.For people in financial stress because of unmanageable debt, the best way to find money to relieve that stress is by reducing those obligations. For people in financial stress, with large, uncontrollable credit card debt, budgeting is an important first step in eliminating credit card debt altogether. Budgeting during stressful times has the added benefit of becoming a habit, one that will keep you out of financial trouble in the future.

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