Money. Oh what a necessary evil you are.
Finances. Bills. Expenses. Are your palms getting sweaty at the thoughts of those words?
I know the feeling. At just 25 years of age, I filed bankruptcy. No joke, and you know why? Because I had a ridiculous amount of credit card debt that I could not pay back. As embarrassing as that is to admit, I feel my story could help others.
I got my first credit card right when I turned 18. In just one short year, I had over $12,500 in available credit at my disposal and a car payment on a car that kept breaking down. By the time I filed for bankruptcy, the amount had nearly reached $35,000 in credit card debt. I was using credit cards for groceries, gas, medical expenses, car repairs, going out to eat, shopping, etc.
Simply put, I was living beyond my means.
When my bankruptcy was final, it was a relief. Prior to filing I had NEVER had a late payment. I'd been raised to fulfill my promises and live up to my obligations. I stressed each month to make ends meet, but I didn't see the big picture before it was too late.
I now have a much more healthy relationship with money and finances. I can attribute that mostly to limited credit use and sticking to a budget.
Having a family budget doesn't have to be scary! You know what is scary? Not having a budget. Seriously. Credit cards historically have the highest interest rates and highest fees imposed for late payments, going over your balance, and more.
If you are like many parents, by the time you had your children you had perhaps a student loan or two, a car payment, a couple credits, etc. Depending on your exact situation, that pregnancy and delivery might have incurred some major medical expenses for you as well. Now comes the expense of diapers (even if you cloth diaper, the initial cost isn't cheap!), formula or a breast pump (both big expenses!), and oh yeah, all those "things" everyone tells you that you need for your baby.
So how do you go about starting a budget? I started with just a piece of paper and a pencil. I wrote down my monthly net (after taxes / take home) income. Then I wrote down all my fixed expenses like rent, car payment, and auto insurance. Then I wrote down my fluctuating expenses like utilities, minimums on credit cards, and an estimate of what I spend on groceries, gas, etc. Hopefully in the end, that net income is more than your expenses column. With what is left, designate an amount for miscellaneous expenses and an amount for savings.
There are many resources available on the internet for spreadsheets and printables to make your own budget as well. I found the thing that helped me most was to go back through a couple months of bank statements and really see where I was spending my money. Wow, convenience store trips for snacks and energy drinks really added up in my young age!
Do you already feel like there may not be hope? Stuck just paying your minimums? Or you just don't know how to begin the process of paying down existing debt? There are some great calculators out there online, but one great tool I've found is this one over at CareOneCredit.com.
You simply enter the amount you owe, the amount you charge on the card each month, the amount you pay each month, and the interest rate. Then you can see graphs and tables that will tell you how quickly you can pay off that debt. Accelerate your payment amount by $50/month and see how much you can save in interest!
I strongly believe the best way to either stay out or get out of credit card debt is to stay accountable for your purchases and track it with a monthly budget. Don't get discouraged if you stray off course. Just know you may have to trim your budget elsewhere.
What better time to start than NOW? In the NEW YEAR! Do you have any questions about budgeting? Would you like to hear more about budgeting and saving? I'd love to hear your responses, comments, and questions!
I received compensation from Net Focus Media for writing this post.