DUNIA Magazine

“So the first thing to do is to sit down and write out a budget…”

By Sharon Arrey, MBA Finance and Accounting

With the unemployment rate at a record high of 9.6 %, many families are doing the smart thing – borrowing less, saving more and looking for the best possible ways to pay off revolving debt such as credit card and car loan debts.

Budgeting is one of the sure ways every family should implement to pull itself out of debt and become more stable in today’s uncertain financial times.

Main Step to Becoming Debt Free: BUDGET

Developing a family budget is one of the best things you can do. With a good money management strategy in place, a family can get the maximum benefit from the money that comes into the household, enabling them to keep track of monies that come in and out of the household. Without this, money often takes least realistic or non-productive paths directed by the flow of human emotions and momentary cravings – whether it be for cloths, shoes, movies, or dining out. A household budget diverts the cash instead through a well thought out plan to where it best benefits the members of the family. This ensures that bills are paid on time and creates an opportunity to save more money on a regular basis. When done consistently, a well planned family budget prevents problems even before they occur and makes more money available each month, eventually leading to the elimination of debt.

Here are a few tips to help you budget effectively:

Take little steps

So the first thing to do is to sit down and write out a budget, it could be a weekly, bi-weekly or a monthly budget. It may sound funny but if you start with a $50-a-week-spending-money to be used strictly for gas, feeding and cut back on entertainment like eating out, movies, shopping you’ll be surprised at how far $50 would go –  a long way. True, the 1st few weeks will be challenging. Little steps like writing down a weekly menu, making a grocery list and learning to cook at home rather than eating out or investing in microwave-able meals, make it more fun! See how this creates a stronger family bond while saving you money.

Use Home budgeting software

There are many different kinds of personal finance software available that can make it easier to set up a budget. It is important to select the right software, also be sure to find software that enable new categories to be added if desired. Some websites offer free budgeting software, look around for one that best suits your individual family needs. Some online software includes: budget tracker, budget planner, mvelopes, etc.

You could also use budget form templates or a basic excel spreadsheet.

Make Cash based payments

With the average American family in at least $3,500 in credit card debt, it is clear we need to go on a debt diet and shake debt off even more. Credit cards should be for emergency use only. Spend only the money you have. Adopting cash based payments makes budgeting more realistic and very efficiently helps families quickly get out of debt.

Have solid financial goals

This means adding short and long range plans for the money you save e.g. saving money for education, for a car, for a home or for retirement should be given the greatest priority.

Budgeting leads families to get into the habit of saving money. Once members begin to see the numbers adding up in the savings account, the desire to save money then increases, often becoming a lifetime habit.