A Budget That Stands The Test Of Time

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If you attempt to create and stick to a budget but soon find yourself veering off course and plummeting into a spending free fall, it may be time to chuck your current budget for a more realistic financial road map. By being honest with yourself and making a few hard decisions, you can develop a realistic budget that stands the test of time and offers you debt help.

Take the following steps to create a realistic budget:

1. Do some soul-searching. Budgets don't work for a reason. If you're having difficulty sticking to yours, take a close look at your financial objectives and ask yourself a few questions. Do you truly want help with debt? If so, what's holding you back? You may find that you don't have well-defined financial goals, and this lack of clarity is leading to limited dedication to your budget.

Identify some concrete goals for getting out of debt, such as being able to buy a home, go back to school or take your dream vacation. Having a clear purpose in mind gives you a good reason to pass up a spending spree the next time one comes along.

2. Add up your income. Start your budget by totaling all of your net income and then subtracting 10 percent. Use the resulting figure as the amount you can spend. So if you bring home $4,000 a month, record your income as $3,600. Tucking away the 10 percent before any spending is done helps ensure that the money is funneled into savings or to pay down debt.

3. Take a microscope to your spending. If you want to become financially solid, it's necessary to record all of your spending -- from the dollar you spend on vending machine soda several times a month to the $450 you plunk down for your car payment.

To get the most accurate total, record all of your spending for a month. Also, add up all occasional expenses in a year and divide them by 12, tacking that amount onto your monthly spending total. Then add 5 percent to cover any unexpected one-time expenses.

4. Do the math. Take a deep breath and subtract your spending from your income. If you're in debt, the figure is most likely negative. While it's not a pleasant number to look at, it is the source of your debt. Consider this total as a troublemaker to be eliminated, and it will be easier to slash spending.

5. Carve out expenses. Keeping in mind your goals for the future, be merciless in your effort to cut out expenses. When doing so, look for those expenses that truly aren't necessary. You'll be surprised at just how many such expenditures you have. Keep cutting until you balance your budget.

6. Celebrate. When you reach certain goals along the way, stop to celebrate your financial accomplishments. Celebrating will keep you motivated to stick to your budget.

Developing a realistic budget may take some fine-tuning on your part, but being free from debt is well worth the effort.

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies' Home Journal, Parenting, Entrepreneur and The Los Angeles Times.