Creating a budget surplus is the single best step you can take to better your financial situation. It allows you flexibility and less stress. 70% of Americans live paycheck to paycheck because they do not have a balanced budget. Consumer Finance Expert Dean Wegner offers a few tips to help you get started:
1. The first thing is to see if you have a surplus or deficit. People get into credit card trouble when they have a deficit.
2. Write down all incoming money. Pay checks, rebates, refunds, reimbursements, everything that comes in, add up every month.
3. Your goal is to end with a 20% surplus each month and to eventually save 3 months of survival money. You will need 3 months survival money in a money market account. That way if you’re ever in a financial emergency, you have 3 months to get back on your feet.
4. How to calculate your survival money: Count how much money is spent each month. This will be the total amount that is out-going every month. At the end of 3 months divide this number by 3 and that is your survival number.
5. Divide your out-going money into 2 categories. The 1st is hard expenses and the 2nd is soft. Items like rent or a car payment is fixed, or hard expenses. Soft expenses include items, such as groceries, that can change every month.
6. Look at all your hard expenses and attack each item with the intent of lowering. If it’s rent, ask your landlord to lower. If it’s a cell phone bill, call and ask to lower. If a car loan, attempt to refinance a lower rate or payment.
7. On your soft expenses, make a goal to lower each by 20%. So if you’re spending $500 a month on average on groceries, work to get this to $400.
8. The function of counting incoming and outgoing money is compared to a business profit and loss statement. Add your money coming in and subtract the out going. The positive money that is left is called is your profit!
9. If you have no revenue and a deficit you will need to work hard and soft expenses to the point where you have a surplus. This could be a life changing event depending on your deficit. Work hard at this.
10. If you have a surplus and revenue it’s time to disburse intelligently. Pay down all credit card debt to zero. Start with the smallest balances first to clean up house and then the largest with the highest APR next. Then you can start sending money to your survival number account and you’re on your way to financial fitness!
