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Debt Management

Credit Counseling

Budget Basics

Creating Your Budget

The Step-By-Step Implementation Of A Spending Plan

Step 1

Print Consolidated's Income Worksheet

When combating a tidal wave of debt the first step is to list all sources of monthly income including gifts, bonuses, tax refunds, cost of living increases, dividends, and interest income, etc.

Step 2

Expenses are separated into three categories: "fixed", "flexible", and "discretionary".

Print the Credit Card Debt Worksheet to add up all you credit card debt.

A fixed expense is one that remains the same each month, such as a mortgage or rent, a loan payment, insurance premiums, etc.

Total-up all fixed expenses.

Flexible expenses are items that you control the amount of money spent.

These include household and grocery items, clothing, utilities, etc.

Total-up all flexible expenses.

Discretionary expenses are items that are not necessary for survival. If your expense to income ratio is out of balance and you are spending more money than you earn, items from this category should be eliminated or cut back.

Total up all discretionary expenses.

Step 3

All expenses are totaled and then subtracted from the total income figure for the month.

Print the Expense Worksheet

Step 4

Next, divide total expenses by the frequency of income or the number of paychecks the household receives each month. This will tell you how much money to set aside each paycheck. If the expense total is greater than the income total, you are off track financially.

Step 5

You must begin to prioritize expenses. Keep track of when you use credit cards. Then ask yourself if you want to borrow every month for these expenses.

Each month, enough savings should be set aside to cover fixed and some flexible expenses. This reserve method will save you from living paycheck to paycheck.

Review the spending-plan each income period to start. At the end of each month, compare actual expenses against what you budgeted. As time passes, you may want to only perform this comparison on a quarterly basis.


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