07/01/2006
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I was recently asked a simple question, "What's the fastest way to get out of debt?"
Unfortunately, the answer isn't so simple. In my experience, getting out of debt takes time and a solid plan. I think the biggest mistake that I endured was trying to follow a monthly budget. No matter how sincere my intentions, I always ended up with more month than money with this type of budget.
Most of your bills are due once a month, but your income may come in every week, every two weeks, or every other week. If you are a two-household income, managing alternate paycheck schedules may even become more complicated.
Bottom line, if you keep budgeting on a monthly basis instead of budgeting based on the timing of your paycheck, you will also have more month left than money. Because some months have four weeks and others have five, budgeting on a monthly time schedule becomes ineffective.
Hint: if you are a two-household income, budget weekly based on the average of your incomes.
Life became so much more tolerable when I budgeted my money based on the timing of my income. In fact, I felt as though I took control back from my creditors when I made this subtle shift. Yes, I owed them and I had to pay them in a timely fashion. It took about three months before I could see the real momentum of my budget but my progress started having a tangible and positive affect. Finally getting this debt off my shoulders appeared possible after I consistently split up my payments based on the timing of my income.
Some points to consider:
-- Figure out how much money you need to set aside each pay period for bills based on the timing of your income.
-- Begin thinking in terms of when you get paid, not when your creditors want you to pay them.
-- Design a sensible plan for how your paycheck will be allocated each pay period.
Oftentimes, creditors are billing you at the same time per month making it impossible to make ends meet. Call these creditors and/or utility companies to request a different billing cycle that will better suit your income stream. As you pay off one balance, adjust this again and again until you find a rhythm that is right for you.
If you spend only 1-2 hours a week paying bills and managing your checkbook, you are not becoming a master at your finances. It takes time to design a plan and to work it. If you do anything consistently every week, it becomes a habit and eventually you will become really good at it.
Another key factor is to stop overspending. Remember, you are in control of how you spend your money. Spend it wisely. To make substantial progress with your budget stop spending more than you earn. This may seem obvious, but implementing this concept into practice isn't so easy. As an example, if you intend on spending $60 at the grocery store, then don't spend $75 If you allocate $25 for gasoline this week, don't fill up the gas tank.
Finally, take a hard look at your income and determine if there are ways for you to make more money at least until you have your finances in check. If you have poor budgeting habits, making more money isn't going to be silver bullet to answering all your woes. Unless you change your spending habits, you will find yourself in a vicious cycle and working really hard to get there.
Here are some options:
-- Consider a part-time job. The 10-20 hours you work between now and the end of the year might help you pay off a credit card balance so that you can get ahead of the curve.
-- Ask for a raise at your current job. If you believe that you are underpaid based on the current value in the marketplace, do some research and go to your boss with the results. Salary.com offers a free Salary Wizard to give you a rough estimate of what people are being paid in your position based on geographical location and education level.
-- Move closer to your job or find a job closer to home. If your commuting costs are rising and your salary is staying flat, maybe it's time to re-evaluate the real cost of getting to and from your job.
-- Get an employee referral bonus. Many employers now offer an incentive to employees if they refer a prospective employee who gets hired. In some cases this could be $1,000 or more! If you help your employer find the skilled workers they need, this could benefit you without your having to work very hard. Check with your company's human resource department to see if they offer such a program.
A commitment to working a budget that will alleviate the fear, frustration, and worry will be worth the freedom that comes along with it. The first step to making this journey is to design a sensible plan and track exactly what you spend each day.
The online program, One Paycheck at a Time eTools, is a monthly subscription-based service which helps you to become debt free, paycheck to paycheck. The eTools guide you to your goal by giving you Web tools to:
-- Design a personalized plan based on your income and expenses;
-- Manage spending choices in just a few clicks;
-- Measure your success as you track your progress;
-- Get savings tips, ideas, inspirational stories along with a monthly newsletter.
You deserve the most sensible, motivational, and interactive budgeting resources available online. Don't just budget your money, become debt free, One Paycheck at a Time.
One Paycheck at a Time Inc. is the leading source for sensible debt reduction solutions. Its products include the One Paycheck at a Time paperback (ISBN: 1591133327), as well as an ebook format, and the eTools program. The author of the book and president of the company, Kimberly A. Griffiths, has been through the vicious cycle of debt herself and has made it her personal goal to share her experience to help others. More information can be found about the company and its products at www.1PaycheckataTime.com.
© 2006 Kimberly A. GriffithsThe views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal, financial, or medical professional.