Budget time: Something you love to hate

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I don't know anyone who enjoys living on a budget. I do know some that believe this necessary evil is what helped them get out of debt and is keeping them debt free. Yes, putting yourself on a budget does sound like a grim thing to do, but if you want to get a handle on your spending it's an absolute necessity.

In the post, "Finding the cash to pay down debt," I talk about the importance of keeping a spending journal for the month and how you can use that exercise to find the extra cash you need to pay down debt. After you get that debt pay-down started, you can solidify your decision to get your finances under control by developing a budget based on what you find in the analysis of your spending. List all the 1s and 2s. They will become the core of your budget. Decide which 3s you want to leave in as part of spending.

Your budget should start to look like this:

Mortgage or Rent

Electric/Gas/Oil

Phone

Water

Credit Card Debt Payoff

Continue this list until you have all the needed items listed with an estimated dollar amount next to them. Put that budget into a spreadsheet on your Excel or other financial software. Each month add a column for the month with your actual expenses on the line items so you can track how close you are staying on budget. Add line items to the bottom of your budget for things you spend that are not in the budget. If you don't have financial software to work with, then do this on a piece of paper. Not having the proper software or not knowing how to use it is not a good excuse.

About every three months, review your spending. If certain budget items increase in cost, you should adjust your budget to match what is actually needed. You'll need to come up with a way of paying the difference. While the easiest thing to do is to cut back on debt payoff, look carefully and see if something else can be cut first. The quicker you get that debt paid off, the quicker you'll have money for things you want.

You may find that some of the items you've been spending on that are not in the original budget could be cut rather than the amount going toward debt payoff. Of course, it's up to you and what you feel comfortable living with. While there is some pain to staying on a budget and foregoing wants, the rewards will be tremendous once the debt is gone.

Lita Epstein has written more than 20 books including the "Complete Idiot's Guide to Improving Your Credit Score."

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