This is written by Good Nelly.
A realistic budget! It solves a lot of issues of personal finance. It is the first step of financial planning.
But often we struggle to plan one and think about how to plan a realistic budget, and the condition worsens when you are already behind on bills.
How to start a budget when you are already behind on bills
First of all, stop worrying! Now, check out how to get ahead when you are behind on bills and want to be current on your bills.
Basically, you have to do 2 things: Planning a realistic budget and organizing your bills.
How to plan a realistic budget
What is a realistic budget? It is a budget that helps you to save a significant amount without struggling much.
For example, you may decide to save $5000 every month but it may be too difficult.
So, you need to plan a realistic budget with which you can meet your necessities and save a substantial amount every month.
Do you know how to budget your money following the 50/20/30 rule? It is not that difficult.
What you need to do is, allocate 50% of your paycheck for your necessities, 20% for your bill payments, and 30% for your personal use. However, you can also save from your allotted 30% to improve your financial situation.
To plan a budget, first of all, take into account your overall income from all sources. Then, make a list of your fixed and discretionary expenses. Now, distribute 50% of your income amongst your expenses.
When you are behind on your bill payments, you may have to allot a certain portion of your remaining 30% (from your personal use) to be current on bill payments.
Create a ‘debt’ category in your budget
When you are behind on your bills, create a separate category named ‘debt’. Allot a certain amount, as much as possible, so that you can clear your bills fast.
Just continue making minimum payments on your bills and select at least one bill to make an additional payment. Doing so, you can clear that bill fast.
Use a portion of your remaining 30% of paycheck to be current on your bills.
Identify the problem areas in your spending plan
When you plan a budget and assess it, you’ll find that in some categories you’re spending more, which you can reduce.
For example, you may be spending about $3 every day on coffee that you can reduce. You can very well make the coffee at home and have it while driving to the office.
Often such small changes help you plan a budget that you can follow and at the same time, help you save a significant amount every month.
How to get ahead when you are behind on bills
Follow these tips to be current with your bill payments:
First, you need to know how much you have to pay off in each of your bills. So, make a physical file or a spreadsheet and list all your due bill payments, your utility bill payments, and credit card bills along with the rate of interest.
When you receive your physical bills, keep them in one place. Make a separate file for each item and keep all these files in one place.
Decide on a date
Decide a date when you’ll make your bill payments. Make it close to your paycheck day so that you can make the payments on your bills before the due date.
If you have to manage quite a lot of bills, then you can decide 2 dates and arrange your bills as per the due dates.
The date should be at least 3-4 days before the due dates on your bills.
How to pay your bills on time and never fall behind
Here are a few tips to stay current on your bill payments:
- Allot a specific time and make all bill payments online – better if you mark it in your ‘To Do’ list
- Make a habit to check bills regularly
- Check whether or not the bill payments are updated properly
- You can opt for direct debit from your chosen bill payment account – It will help you avoid late payments
If you plan a realistic budget but still it is difficult for you to manage your bills or if the outstanding balance is very high, you can opt for bill consolidation. You can enroll for a counselling session with a consolidation company and discuss how to consolidate your bills and repay them.
However, even if you opt for professional help, you’ll have to plan a realistic budget and save a substantial amount that you need to give to the consolidation company every month.
Another thing, revisit your budget plan and make modifications whenever required. It will help you attain a good financial future.
About the Author: Good Nelly has been associated with DebtCC Community for a long time, and writes financial articles in order to help others manage their finances and solve their monetary problems.