Step 2 To Pay Off Debt: Detemine Where Your Money Goes
The next step in paying off your debt is to figure out where your money is going. We all have the same complaints - "I make enough money but I'm not sure where it all goes." The following steps will give you a precise idea of what happens to it.
First, start off with an exact period of time in mind. It can be a month, three months, a year, etc. You have to be able to track all expenses during that time, along with all income. If you cannot find receipts, or track everything, just start today and save every receipt for every penny you spend for a month.
You need to list all sources of income, and all expenditures. That also means you need to come up with categories for each source of income and expense. Once you list and add everything up, subtract your expenditures from your income, and that will give you either a surplus or deficit. Now you will have an idea of where your money went.
Once you complete your sheet, say for a month period, continue to repeat the process for a few months. You will be able to gather the data from each month and notice trends. Do you notice you spend more in certain months, on certain items? Maybe you can cut back a bit on credit card usage. Perhaps you didn't realize how much you spend on entertainment each month. Use this data to calculate percentages for each expenditure and see what you can do to reduce them each month.
Up next....goals!
First, start off with an exact period of time in mind. It can be a month, three months, a year, etc. You have to be able to track all expenses during that time, along with all income. If you cannot find receipts, or track everything, just start today and save every receipt for every penny you spend for a month.
You need to list all sources of income, and all expenditures. That also means you need to come up with categories for each source of income and expense. Once you list and add everything up, subtract your expenditures from your income, and that will give you either a surplus or deficit. Now you will have an idea of where your money went.
Once you complete your sheet, say for a month period, continue to repeat the process for a few months. You will be able to gather the data from each month and notice trends. Do you notice you spend more in certain months, on certain items? Maybe you can cut back a bit on credit card usage. Perhaps you didn't realize how much you spend on entertainment each month. Use this data to calculate percentages for each expenditure and see what you can do to reduce them each month.
Up next....goals!
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