Building a Solid Credit Foundation – Budget Mastery
Budget Towards Good Credit
Budgeting is the fundamental role for getting and keeping good credit. By doing so, you are building a solid credit foundation to build your future on. No one really offers this in a credit repair program, and if it is an option, it would be in your best interest to set yourself up for success in the future by choosing that plan. Here’s how to start mastering this budget thing. Keep reading if you want to learn how to budget towards good credit.
Creating The Budget
In order to start a budget, you will need all your bills and either your bank statements or pay stubs. On a piece of paper write your income for the month at the top and list your monthly expenses below with the amounts due and their due dates. Using an online program or app can benefit as well since bill reminders can be set up and possibly paid for with the touch of your finger. If you want to learn a little bit more about the fundamentals of budgeting, be sure to check out Budgeting 101, or check out this article about the best budgeting apps.
A list of bills may include but are not limited to:
- Mortgage/Rent – $780 Due 01/01
- Daycare – $1299 Due 01/01
- Electric – $182 Due 01/05
- Water – $45 Due 01/08
- Internet – $44 Due 01/10
- Cable – $60 Due 01/10
- Phone – $225 Due 01/14
- Trash – $75 Due 01/15
- Car 1 – $323 Due 01/18
- Car 2 – $414 Due 01/18
- Insurance – $128 Due 01/21
- Medical Insurance – $850 Due 01/22
- Life Insurance – $81 Due 01/24
- Student Loans – $25 Due 01/28
- Credit Card Minimums – $1006 Due 01/30
- Groceries – $330
- Gas – $250
- Pet Food – $50
- Baby/Kids Essentials – $125
- Baby/Kids Appearance – $50
- Household Items – $100
- Personal Appearance – $250
- Eating Out – $250
- Entertainment – $150
- Clothes – $150
- Miscellaneous – $500
Money Left: -$199.84
List anything and everything that you purchase each month in numerical order by Due Date to ensure you pay everything on time. Make sure to include all sources of income including employment, retirement and interest income at the top of your list. Draw a line underneath the last bill to total everything up. Now simply deduct the bills from your income and write this number under the line. You will either have a positive or negative amount at the end of the month.
Making Budget Cuts!
If budgeting for a month is a little too much for you, then split it up and create a weekly budget and go from there.
Budgeting this way will leave you knowing exactly where you stand financially each month. If you are left will little to no money then you know you need to make some changes to your spending habits and cut back on some luxuries. That could mean sacrificing cable, eating out, clothes, personal appearance, and/or entertainment expenses until you are financially able to afford it again. Also, pay everything with cash or auto draft your payments to avoid depending on credit and negating what you’re trying to accomplish.
Five of the easiest places to make budget cuts are with Entertainment, Eating Out, Cable, Personal Appearance, and Clothes. If these expenses are high then this is where you want to look at cutting back for awhile. Review your receipts for these categories for the month. When you divide them into weekly amounts, this may be an eye-opener for you. Some people don’t actually realize just how much money they are spending in these areas. These things are luxuries – you don’t need them to live, survive, or function.
By cutting these loose strings, you are now saving money, time, and gas! You are no longer -$199.84 in the hole since you decided to cut back. There is now a surplus of $600.16 that you can use towards paying down your credit cards or stashing it away for your Emergency Fund.
Try “This” Instead of “That”
- Try staying at home to watch Netflix or Hulu while eating a home-cooked meal rather than going to the movies. A trip to the theater for a family of four can cost over $100 if you include popcorn, snacks, and a drink for each person!
- This goes for eating out as well, whether that’s fast food or a fancy restaurant. You may think it’s convenient but sometimes fast food places are just as slow as an empty restaurant, especially when you have the wrong order. Prepare lunches and already cooked, frozen meals for dinner for the week, and all that leaves you with is an easy breakfast to cook in the morning. No more hassles!
- Most cable companies no longer hold you to a contract, so canceling with them completely and signing up for Netflix or Hulu at $10 a month will help with your budget. But if you can forgo the $10 subscription each month, you can put the savings towards bills or debts and use your phone or tablet instead.
- Your hair and nail salon visits can take a break while you catch up. An $8 OPI nail polish will last longer than it will take you to master budgeting. Hold off as long as possible for your cut and color. Try styling your hair differently or look like a beautiful hot mess – it’s only temporary!
- Clothes last for a very long time when taken care of. Some stores, like Target, have everything you need when shopping for household items. To keep you from wandering around and picking up items you didn’t intend to buy, wait until you have a large enough order to qualify for free shipping and order online! Keep a list, and do not deviate from it.
Following The Budget
Typically, writing your budget on paper each month and hanging it on your fridge makes following it much easier. Or maybe you prefer to have it folded around your debit and credit cards in your wallet in order to see it every day and remind you to follow it. Following the budget is the stepping stone towards improving or maintaining a good credit score. Many people learn about credit the hard way. It’s never too late to contact us to start off on the right foot towards a better financial future.