This is the very first step in getting out of debt and setting a working foundation for controlling your income and expenses. know where every dollar goes (everydollar.com and it is free). know exactly what you are spending all of your money on and when vs your income and live by this budget, do not spend more than you take in. Be on the same page with your spouse.
The foundation for saving, establishing emergency fund, getting out of debt, etc starts with a great budget. it is important to list all assets and liabilities then break down a budget and its’ expenses into lines and categories (you can use the free service Ramsey has called everydollar.com) that you currently spend money on-everything. this includes your daily cup of coffee or newspaper or whatever-you must know where every penny is going.
Every dollar will track all that for you. it general speaking takes about 90 days of running a budget to see if it is successful. your mentor will help you to develop that budget and manage it and to help free up dollars to put toward your debt. the goal is not to exceed that monthly amount you set out to pay for each line of your budget and to make sure everything in the budget is accounted for and a need, not a want. every dollar you save in your budget can go to debt snowball and savings and helping your family. a couple examples of want vs need are:
Buying a car for yourself-someone I know in their 20’s recently took out a 7 year loan at 350 a month to buy a $19,000 car cause it is used but newer. on top of the debt that car will lose its value at a rapid pace, not making them any money at all. That 350 per month could be much different if they paid maybe 3 to 5k for a decent used car a little older, making sure to take it to a mechanic so you know it is in good shape, then you have no (zero) car payments and can save that 350 a month over those seven years. Can you imagine saving that 350 instead of spending it? especially if you are real young, this can really get you off on the right foot. Then there is the example of someone who makes several car payments then wants to buy a home-it will never happen because of what they call debt ratios-the mortgage company looks at these ratios-the amount you spend monthly compared to your income. it it is too much, you won’t qualify for a home.
So it is very wise to look at these kind of examples and do the right thing-no debt while establishing emergency fund and savings.
