If you find yourself in financial turmoil, assessing your situation might seem like the last thing you’d want to do.
But, having a realistic perspective on your own fiscal well-being can keep you from entering the never-ending debt cycle.
While it might seem overwhelming at first, creating a budget can be as simple or as complicated as you want it to be.
Get your finances back on track by creating a personalized budget checklist.
1. Outline your Expenses
Creating a budget is exactly what it sounds like. You need to know how much you’re spending, and you need to balance that with the income you’re collecting.
To have a healthy budget, your income should exceed your expenses. If this isn’t the case, you need to figure out how to either reduce your bills or increase your incoming revenue.
Sitting down and itemizing your static and dynamic expenses can help you understand where your money is going.
Certain expenses, like rent and car payments, aren’t likely to change very much over time. If you need to reduce your spending, you can start by cutting back on auxiliary purchases.
Extra expenses like entertainment and shopping can be easily reduced to balance your monthly budget.
If you’re even more diligent, you can cut down on grocery expenses or food costs by cooking more at home and limiting takeout and unnecessary snack purchases.
For at least one month, write down every purchase including the amount spent. Taking an honest look at your regular spending habits can help you to pull back bad behaviors and create a healthy and functional budget.
2. Make Debt a Priority
Nothing will keep you from advancing economically like a batch of debt.
Whether you’re dealing with student loans, credit cards, or personal debt, you need to get a handle on what you owe as soon as possible.
If you don’t have the income necessary to start paying off your debts, there are other ways to make a difference.
While it might seem counterintuitive, borrowing additional funds can help you reduce your overall debt.
In some cases, older debt accrues interest more quickly.
If handled strategically, taking out a new line of credit can help you to reconcile existing debts, while also buying you enough time to pay off your balance before being hit with high interest rates.
Additionally, you can alleviate your debt burden by moonlighting. Obtaining an extra job, or even just a few more hours each week, can help you make a dent in your total balance.
When it comes to getting your finances back on track, having a clear idea about your big-picture goals can help you stay focused and driven to fix your income ratio or outstanding debts.
3. Set Goals for the Future
Nothing will motivate you to pay off debt like working towards a concrete goal.
Managing your finances is much more intimidating when you feel like you’re heading into the unknown. Coming up with a practical solution for your economic struggles and goals is like putting on a life vest before you jump into the water.
Think about what is most important to you, and use that as motivation to either save or earn more. This could be debt reduction, a major purchase, or even building an emergency fund.
For this part of your checklist, break your main goal into smaller objectives. If you’re plan is to save $3,000 in one year, calculate how much you’d need to put aside to make that happen.
Set up an automatic transfer for each payday. If your paycheck is a bit thin for that right now, think about other ways that you could make up the difference.
You might be able to offer your services for a ride-sharing app, or maybe there is something you can create and sell on Etsy. If you’re really in a bind, selling your assets could help you get back on your feet.
If you really want to get on top of your economic situation, there are a million ways to get started. Save yourself the stress and begin with a concrete, practical checklist. The sooner you start checking those boxes, the quicker you’ll be financially stable and independent.