Living on a budget is one of the most effective ways to know what you are spending and, consequently, keep your debt in check. However, if you’ve never put together a personal budget before, understanding how to prioritize it can be confusing if not challenging. Here’s a look at the steps you can take to prioritize your budget and, in doing so, make your dollars stretch as far as possible.
How to Prioritize Your Budget
1 – Start with your essential living expenses.
Do you know how much you essential living expenses total per month? If not, this is where you need to start prioritizing your budget, as these are the expenses that clearly will have to be covered first. As you calculate this total, be sure to include the costs of rent/mortgage payments, utilities and even food/grocery bills.
If you rely on your vehicle to get to work, then be sure to also include your vehicle-related costs in your calculations for your essential living expenses.
2 – Add up your other debt obligations.
Do have (and use) credit cards? Or do you have other debt obligations, such as student loans, tax debts, etc., which have to be paid every month?
If so, then adding up these costs will be the next step to take in prioritizing your budget. As you do this, it can be helpful to look some bank statements for previous months just to be sure that you have captured all of your monthly debt obligations/costs (and have accurately assessed their monthly amounts).
3 – Figure out how much you are spending on non-essential items.
Do you know how much money you spend on other non-essential stuff (like dining out or doing fun things)? These non-essential costs can be more elusive to capture, and they tend to be the ones that people may not even realize they are losing a lot of money to.
So, as you are prioritizing your budget, take a look at how much you have spent over the last 6 months or so on nonessential items (and, if you have time, figure out how much you have spent on specific items/activities). This can present some opportunities to determine where you may be able to cut back on your spending and, consequently, open up some more funds to pay down debt, invest in your savings, etc.
4 – Regularly review and adjust your budget to meet your changing needs/situation.
Once you have a working budget in place, it’s important to understand that this budget is not a static thing – as your life circumstances change, reviewing and updating your budget will be crucial to:
- Appropriately covering your new essential expenses
- Avoiding serious debt.
If, however, circumstances out of your control – such as unemployment or a new health impairment – catapult you into serious debt, knowing when to get professional debt relief help can be the key to getting a financial fresh start ASAP.
Denver Bankruptcy Lawyer Jon B. Clarke Can Help You
If you are overwhelmed by seemingly insurmountable debt, contact the trusted Denver Bankruptcy Lawyer Jon B. Clarke for experienced help pursuing your best debt relief option.
We encourage you to complete our Business or Consumer Debtor Analysis Form. You can also get answers from Denver Bankruptcy Lawyer Jon B. Clarke by calling our firm at (866) 916-3950 or by emailing us using the contact form on this page.
From our offices based in Denver, Castle Rock and Greenwood village, we take pride in providing people throughout the state of Colorado with the highest quality debt relief legal services.