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The first steps
Creating a budget isn't rocket science. It really only takes three steps. First, you need to determine where your money's going now. Next, you need to set goals that can help you achieve your long-term financial objectives. Finally, you will need to track your spending so that you will know whether or not you're staying within those guidelines.
Use apps or software
The computer and the Internet have taken much of the sting out of budgeting. There are software programs available for use on a PC and numerous smart phone apps designed to help you with everything from tracking your spending to creating a budget and paying your bills on time. One of my personal favorites is Mint.com. It's a website, a smart phone app and computer software. Mint is very simple to use. You type in the numbers of your checking and savings accounts, credit cards, personal loans and investments and it takes over from there. With Mint, you can see all of your finances at a glance. It will send you alerts via email if you overspend in any category. It will even email you if it finds a financial product that's better than one you're using.
Don't make yourself crazy
There is a drawback to using a smart phone app or your computer to monitor your spending. It can cause you to be over zealous in attention to details. The important thing is to first figure out which categories of spending you could and should cut and concentrate on them. Once you’ve accomplished this, you can pay more attention to your other financial details.
Look out for "cash leaks"
When you take money out of an ATM once or twice a week and then spend the cash without accounting for it, you have "cash leaks." You need to track cash spending as carefully as your bills. Once you have identified any "cash leaks," you can save extra money by eliminating them.
Don't spend beyond your limits
It's very dangerous to spend beyond your limits. However if you do, you're in good company. There are government figures showing that households with incomes of $50,000 or less are spending more than they bring in. If you are doing this, it will only add to your debts and make it even more difficult to become debt-free.
Try not to spend more than 90% of your income. Use the other 10% to save for your big-ticket items or to pay off your debts.
If your debt has gotten out of control
If you're laboring under a huge mountain of debt, budgeting alone may not be enough to help you get out from under it. Stronger measures may be required such as consumer credit counseling, a debt consolidation loan or debt negotiation.
The only one that can reduce your debt
Options such as consumer credit counseling, a debt consolidation loan or “snowballing” your credit card debt can only help you long-term. The problem is that none can do anything to reduce your debt. However, debt settlement – especially if you hire a professional debt settlement company – will not only consolidate your debts, it can actually reduce them. In fact, a good professional debt settlement company is usually able to reduce a client's debts by thousands of dollars to help him or her become debt-free and in much less time than any other option.