If there was an adult version of sesame street it would have a feature: A is for auto which costs 600 a month, B is for budget something you probably don’t have.

So I heard on the radio the other day that of Americans with credit card debt 90% of them do not have a set budget for the month. Is that really surprising though? Alright so now that we cut up our cards, and got rid of temptation, lets set up a budget.

The steps to setting up a budget are actually easier than you might think.

1) Sit down an make a list of all the things you spend money on each month that are set in stone. All of your bills, housing costs, etc…basically anything that has a set monthly cost.

2) Make a list of expenses that are NOT set in stone. What you think you will need for food, gas, unexpected expenses. Now is the time to be honest with yourself. How much do you REALLY spend on food and going out? How about on random purchases?

3) List all of your income. For most people this will be one source, married couples 2 sources. But some people have multiple jobs, whatever, just write it all down. Now add them together.

Now we are going to do a little math, everyone brace yourself.

Take the total from #1 and add it to the total from #2. Now subtract that from #3. There are two possible outcomes here:

1) The result is positive
If you are not lying to yourself about how much you spend on a monthly basis, then great, stick to this and use that extra money to pay down debt. If you seem to still be accumulating debt its time to go back and revise your values about what you are ACTUALLY spending.

2) The result is negative
Uh oh. This is where that lovely credit card debt came from. Its a pretty simple equation, if you spend more than you make you will go into debt. Now is the time to go back through and see what can be cut out. Chances are you will find that you can cut out a decent amount of food and entertainment expenses. If not, then its time to restructure your finances to do what it takes to make ends meet. This might mean canceling cable or some other sacrifice, but in the long term if you do not take care of it now, then you will have to make that many MORE sacrifices later on.

The overriding budget golden rule is this: decide how much you are going to spend so that it is within your budget and then stick to it. Keep track of it. Check up on it daily.

Ok so you now know where your money is going, tomorrow: how to get rid of that credit card debt that is there already…

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