The new year is always a good time to look over your budget and make sure your spending is in order. If you ran into some problems last year then today is the today to fix that problem for 2012. Repeating the same mistakes will leave you in a constant debt hole with no way out.
If you’re learning how to budget money as an adult that may mean your parents didn’t have good money habits either. This is dangerous because children often inherit these ways of spending and repeat a cycle that isn’t good for anybody.
The first step is to take a look at your after tax income for the year. Evaluate this and make sure you’re taking home as much as you think you are. If you’re paying too much in taxes you can change your deduction with your employer.
As a general rule you shouldn’t spend more than one third of your income on housing costs. If you’re finding this is stretching your budget plan then try making a few changes. Try to squeeze a little money off of your insurance or utilities. You could also try relocating to a cheaper house if you rent or refinancing your mortgage if you have a high rate.
Interest rates are low now and it could end up saving you a lot of money in the long run if you bought when they were high! You could also try getting a room mate if you have the space.
If you have any credit card debt you should work on getting rid of that as soon as possible. If there’s no cash in the budget to help pay it down quickly consider a part time job or side work to make enough to get rid of this debt. Depending on your debt load this could put several hundred dollars a month back in your pocket.
If you have the debt separated on many different lines of credit you could try consolidating it to one line. This could give you a better interest rate and a time frame of as much as a year of no interest if you get a good deal! That’s more money that goes toward the principal since much of your monthly payment is interest and not the actual balance.