Do you have a family budget?
When times are tough, we tend to apply a knee-jerk reaction to our bill paying; we pay those creditors crying the loudest. While using this strategy may keep the phone from ringing, it isn’t a financial plan that is sustainable for the long haul. Not to mention the fact that just paying those creditors that complain the loudest makes it difficult to pay down all of your bills.
Stop right now and take a moment to create a family budget.
A family budget doesn’t have to be complicated. You don’t need to know how to use financial software, be proficient at excel or even use the latest money apps to create and adhere to a budget.
Here is all you need:
1. A list of your regular monthly income.
2. A list of your monthly bills (those that reoccur each month and those one-time expenses that you owe).
3. Paper and pencil and a calculator.
There are two schools of thought to help you determine how to best allocate your funds, the first is the 50/20/30 method:
50% of your income is allocated to your monthly bills; the necessities like home, food, gas, utilities, credit card payments, etc.
20% is set aside for saving so that you can pay a little extra on a credit card bill or student loan, save for a car or for retirement.
30% is used for those nice-to-haves like dinner and a movie, new shoes or a weekend away.
The second strategy, and perhaps simpler is the 80/20 rule:
20% of your income is set aside for savings (both short term and long term)
80% of your income is used for everything else; bills that are required and those little niceties like a fancy coffee or tickets to a concert.
When creating a budget, make sure that your assumptions are realistic. Better to be conservative in your thinking than hopeful, followed by disappointment.
NOTE: Notice that both plans recommend saving 20% of your income each month. If you set this up using automatic withdrawal either through your Human Resources department or your bank, the money will be whisked away into your savings before you are even tempted to spend a penny.
If you are currently in a situation where your expenses exceed your income even when you forget the savings allotment, it is time to ask for help. Connecting with a third party, an impartial expert who has experience dealing with debt, will help you prioritize your financial obligations. Experts can even help you contact creditors to negotiate lower interest, long payment terms or even partial debt forgiveness.
When you sit down to create your budget and the first thing you notice is that your income is less than your bills, pick up the phone. Don’t let another day go by without getting help. Ignoring the situation or continuing to just pay those that complain the loudest will only create a more challenge debt situation in the long run. There are people available who can help.
We recommend that you tell your creditors how much you have budgeted for the reduction of their debt. If you tell a creditor that he or she can expect payments of only $25.00 a month and you are good to your word you are likely to get more tolerance than if you don’t. But do not make promises that you do not keep. Once you commit to a sum you must stick with it.
Southern Illinois Bankruptcy Attorney law firm Bankruptcy Advocates is located in Carbondale and serves a wide geographic community including Carbondale, Murphysboro, Marion, West Frankfort, Johnston City, Benton, Herrin, DuQuoin, and Pickneyville. We are a debt relief agency. Our southern Illinois bankruptcy attorneys help people file for relief under the Bankruptcy Code. The first consultation is always free. Give us a call at 618-549-9800 or email us at [email protected] to speak about your case or legal matter. Convenient appointment times are available.