Step 4 To Pay Off Debt: Create a Budget

The final step in this series is to create a budget. You have done all the leg-work in the previous steps and this should be the easiest. The budget will help you determine what expenses you may need to eliminate, income you may need to generate, or inform you that you really are doing well.

Plan ahead and think about where you would like your money to go. There will be variances, but you will see most of your money going exactly where you need it to go. It will be up to you to stick to it, and after all this hard work, why wouldn't you?

Use the previous data to calculate future income and expenses. Start off with a budget that covers one month. It helps to use a spreadsheet or software like Quicken. Include your financial goals, whether they include paying off debt or increasing your savings. Evaluate the amount of debt you owe, the amount of income you will earn, and how much you can pay towards the debt. Divide the amount of debt you own by the dollar amount you budget and that will show you how long it will take to pay off the debt. If you want to pay something off sooner than another, realign how much you pay toward each individual bill.

Once you create your budget, keep an accurate log of where your cash-flow really goes. Each month, review your log and make adjustments as necessary. Also, determine your net-worth each month, as it will show you if you are heading in the right direction. Positive reinforcement goes a long way toward motivation.

Best of luck!