No, I don't mean overindulging in your favorite beverage. The hangover I want to discuss is the mountain of bills hanging over your head after you've overindulged in gift-giving. If you don't have that problem, good for you! But many of us used that plastic a little too much leading up to the holidays.
Now it's time to take a serious look at budgeting - get rid of the holiday debt and try to better plan for next year.
First Comes The Budget
You need to sit down and figure out how much money you have coming in, and how much needs to go out each month. Sounds simple, but it can be a painful process….and there’s no getting around it. The good news is, you only have to do it once and then tweak the numbers as needed.
Collect all of your bills, account statements and receipts for the past month. A good budget starts by tracking where your money has gone. Going forward, using software or the internet may help keep better track of your money, but for now we’ll assume you’re starting from scratch. Start listing your expenses in columns for “needs” and “wants.” Group the items by categories such as food, housing, utilities, clothing, medical expenses, and so on. You can do this with pencil and paper, use a spreadsheet program, or find an online budgeting tool. Destinations offers a simple tool called BudgetSmart and is getting ready to offer a very robust program called MoneyDesktop for free from within our online banking.
What do you actually need?
Needs are generally expenses that have to do with food, shelter, basic clothing, transportation and previous debt commitments that must be repaid. As you make your list, be aware of those expenses that may vary from month to month, such as your electricity bill. When you list those expenses, write down a range for the expense (Electric Bill $100 - $200 per month, for example).
EVERYTHING ELSE is a want. Wants can only be fulfilled when you have paid for all your needs and have money left over. Make sure you're honest with yourself about needs versus wants. You may be a fashionista and think you need that great pair of shoes, but the fact is, you already have lots of other shoes and that great new pair is just something that you want.
If there is no money left over, you may need to reevaluate your “needs” and look for ways to cut expenses in those areas: move back in with your parents for a while; take in a roommate; cut down on groceries by eating less expensive food and using more coupons; or drive less and walk more.
The bottom line: live within your means!