How to Set a Budget And Stick To It
Looking back over my life it’s obvious that I did not do a good job handling money. As I got closer to retirement I realized that if my bad behavior continued I was destined for a retirement of Top Ramon and cat food huddled under a heating pad trying to live through another Montana winter.
How To Retire Debt
My first step was to determine how much debt we actually had and how we were going to have to put ourselves on a money diet. I looked at all our expenses that didn’t change, mortgage payments, car payments, newspaper, trash and insurance. Then I looked at bills that varied from month-to-month. Things like electricity, water, phone, cable and food. If found that with the latter there were some savings available.
Making Cuts and Getting A Raise In Pay
Every dollar I could cut out of the budget became a raise in pay. So we cut cable, cut the newspaper. That small sacrifice put about $100 extra spending into the budget that could be applied to bills. We then looked at our food bill. We were not sticking to a list, not taking advantage of meals that produced leftovers for future meals. We took advantage of coupons and sales. We found we could still eat healthy and save money. This added another $100 to bill retirement.
Our first goal was to begin to retire credit card debt. We started with the cards with the smallest balances. If the minimum payment were $25 we would try to pay $75. In about 10 months you’ve paid off a $1,000 credit card. Then we would transfer that same $75 plus any more to the next card and so on. It took a couple of years to pay off all the credit cards.
Bad Things Happen to Good People
One of the discouraging things that always happen to your budget is unexpected expense. Car problems, tires, medical, anything else that can go wrong probably will. The more debt you have under control the less stressful these will be because you will at least have some money available to tackle these setbacks. But get back to your budget as soon as possible.
Monitoring Your Expenses
One thing I did that really helped is sign up with Mint.com. This is a web site where you can monitor bank accounts, credit cards and it keeps track of what you spend and where. It’s been very helpful in keeping me on track in making sure that money will be there for our retirement.
We also started a Roth IRA. A Roth allows you to contribute after tax money (your take home paycheck after taxes) and when you take the money out the principle and the interest can be taken tax-free. Check this out with your accountant and see if it’s a good fit for you.
Some Final Thoughts
Chances are your debt was not accumulated in a day and it won’t be retired in a day. However, the good news is that you don’t have to sacrifice forever. If you can live for a short period of time like most people won’t; you can live the rest of your life like most people can’t. Money doesn’t make your life better; it just makes your life easier. Do you have any budget tips to share? Comments below.