It’s a suffocating feeling, when you are barely able to keep your head above water, when it comes to your finances.
A year ago, I met a gentleman (we’ll call him John) who was barely staying afloat and close to giving up, when it came to his bills. Behind on everything but his mortgage, he knew it would only be a matter of time before he fell behind in those payments, too. “I was one step away from filing for bankruptcy,” John confided. “I didn’t want to go that route, but at that point, I really felt like I had no other choice.”
John shared his struggles with a close friend, who encouraged him to call GreenPath Financial Wellness. When I first spoke with him and listened to an overview of his situation, I knew right away that we could help with a proper budget and scheduled a debt counseling session.
A Life-Changing Meeting
We were able to identify several things in his budget that he could reduce, such as groceries and changing his cell phone package. There were also things that John was willing to cut out completely, such as cable and work lunches.
By the time we were finished, John’s budget was completely balanced and he had decided against filing bankruptcy. Most importantly, he was committed to reviewing his budget further and looking at other areas to cut.
“It changed my life, both financially and mentally,” said John.
Seven Steps To A Successful Budget
Budgeting can be a simple and straightforward process, but it takes interest and commitment. Establish a successful budget with these steps:
- Discuss Values. Determine what is most important to the people involved in your budget or spending plan. By understanding these values, you can make decisions that will provide you with the most satisfaction.
- Set Goals. Begin setting goals by discussing with family members what each one may want to do with their money. An example of a goal might be to save for a child’s education. Have each member list the goal and a deadline. Work on the most important goals first. Put money aside in your budget for your priority goal. Remember, to achieve your special goal, you must treat the money as a bill to be paid to you.
- Determine Income. Figure out your net pay, or the money that is left over after deductions. The money that makes up your income can come from sources such as salary, allowances, social security or child support. Do not include overtime pay.
- Determine Expenses. What are the expenses in your budget? Consider fixed, variable and periodic expenses. Fixed expenses consistently stay the same every month (e.g. mortgage or rent payment), variable expenses vary from month to month (e.g. electric bill, credit cards), and periodic expenses are not due every month (e.g. trash service and utilities).
- Create a Plan – Design a spending plan so that your income will allow you and your family to have what you want and need. If you find that your income does not cover your expenses, re-evaluate your plan and decide what categories can be changed.Our free Budget Smart software is a good place to start, or try ECCU’s online home budget calculator.
- Keep Track of Expenses – Keep a record of expenses to see where your money is being spent. By comparing your estimated expenses with what you are actually spending, you can evaluate whether or not your plan is working.
- Evaluate Your Plan – Periodically evaluate your spending plan. Is the plan still helping you meet your needs and achieve your goals?
Remember that budgeting is the cornerstone of your family’s financial plan and a guide to help you achieve your goals.
As a member of Educational Community Credit Union, you can take advantage of the GreenPath Financial Wellness program, a free financial education and counseling program. GreenPath counselors are available Monday through Thursday 8 a.m. to 10 p.m. (EST), Friday 8 a.m. to 7 p.m. and Saturday from 9 a.m. to 6 p.m. To use this service, simply call 1-877-337-3399 or visit GreenPath online.