How to Stay Debt Free with a Personal Budget
If you’re reading this article, you’re probably interested in looking for ways to control your finances. Developing and committing to a monthly budget has always been one of the ideal methods to do this. Having a solid budget is important for managing your finances, one that has allowed me to get on with my day to day life even on limited funds. One of the most important things that I do every month is planning my monthly budget, this has allowed me to systematically meet all expenses, grow my savings, and reduce debt.
I normally organise my budget for the coming month close to the end of the month. This will prepare me of what’s down the road. It’s not a good idea to prepare a budget after getting paid because, too often, that flush feeling of getting a paycheck leads to nonessential and impulsive spending before the paycheck ever reaches the bank.
Start your personal budget by listing all the things that must be paid that month like rent, electricity bills, insurance policies, loan repayments and telephone bills. These are the critical things that I must pay to keep a comfortable roof over my head. I like to pad these essentials to make “money back” after paying the bills and, if costs increase circumstantially, I’m always covered.
Next, my budget is subjected to a list of discretionary things I need to cover but could live without if absolutely needed. An example are monthly savings deposits, credit card repayments and donations. Don’t get me wrong, some of these things are also essential, but in case of emergency they can be excluded. By giving credit card companies the maximum instead of the minimum, I keep my credit score high and my debt low.
My budget will not include the cost of food, clothing, or entertainment. These things get covered by what’s left over and that’s that. Some months involve lots of beans and rice, slow-cooker meals, free or cheap entertainment, and only one inexpensive piece of clothing . This strategy of managing my monthly budget has worked out very well over the long term as long as I observe it religiously.