With the recent economic downturn, the most severe recession since the Great Depression, credit counselors and bankruptcy trustees have been kept busy by the many people who have found themselves unable to deal with their mounting debt. Those who have filed for bankruptcy or entered into a consumer proposal with a bankruptcy trustee are forbidden from obtaining credit for several years. When you have no more credit, you have no choice but to exercise financial responsibility and not overspend.
If you get in the habit of paying for things with a credit card or a debit card instead of with cash, it becomes easy to lose touch with what your spending represents to your overall financial picture. When you have a finite amount of cash that will not be replenished until a later date, you become more reticent to spend it. As much as charging things is convenient, if you can't manage your budget using these payment methods, then you need to switch to cash. With cash, the consequences of spending are immediate.
Staying on track with your budget doesn't happen by accident. You've got to have a plan. There's an easy way to stick to that plan: cash jars or envelopes.
The system is easy to set up. Start your budgeting by figuring out your monthly earnings, after deductions. If your income varies month-to-month, work out a low budget and a high budget. Then tally up all your regular, fixed expenses, like car payments, housing, debt payments, and anything else that costs the same amount every month.
With your bills taken care of, the remainder is what you spend on living expenses, like food, clothing, transportation and entertainment. Now calculate how you slice up the rest of the pie and distribute it among each category. Convert the monthly figures to weekly amounts, and put the cash in the jar or envelope.
It may occur to you that the ends of weeks and months don't always line up with each other. In fact, they seldom do. With any budget figures, you can work out the equivalents by converting everything to an annual amount, and then dividing by 12 to get the monthly amount, and by 52 to get the weekly amount.
The easiest way to keep all these numbers straight is to use a spreadsheet program on a computer. If you know the basics, you can easily create budget worksheets you can adjust as needed. However, it's just as effective to work out your calculations on paper. If doing math at all doesn't appeal to you, that's going to be a problem. Managing money requires basic numeracy skills.
What makes the cash jar system so effective is that it makes spending money tangible again. You either have the money, or you don't. If you run out, you must suffer the consequences and wait for the next week's replenishment. You begin to evaluate purchases differently. If you want instant gratification, you know you'll have to make a sacrifice down the road.
When you seek credit counseling or the services of a bankruptcy trustee, you will need to adopt a system like cash jars or envelopes and make it work in order to make sure your debt gets paid down. You'll change your behavior, change your thinking, and change yourself.
If you get in the habit of paying for things with a credit card or a debit card instead of with cash, it becomes easy to lose touch with what your spending represents to your overall financial picture. When you have a finite amount of cash that will not be replenished until a later date, you become more reticent to spend it. As much as charging things is convenient, if you can't manage your budget using these payment methods, then you need to switch to cash. With cash, the consequences of spending are immediate.
Staying on track with your budget doesn't happen by accident. You've got to have a plan. There's an easy way to stick to that plan: cash jars or envelopes.
The system is easy to set up. Start your budgeting by figuring out your monthly earnings, after deductions. If your income varies month-to-month, work out a low budget and a high budget. Then tally up all your regular, fixed expenses, like car payments, housing, debt payments, and anything else that costs the same amount every month.
With your bills taken care of, the remainder is what you spend on living expenses, like food, clothing, transportation and entertainment. Now calculate how you slice up the rest of the pie and distribute it among each category. Convert the monthly figures to weekly amounts, and put the cash in the jar or envelope.
It may occur to you that the ends of weeks and months don't always line up with each other. In fact, they seldom do. With any budget figures, you can work out the equivalents by converting everything to an annual amount, and then dividing by 12 to get the monthly amount, and by 52 to get the weekly amount.
The easiest way to keep all these numbers straight is to use a spreadsheet program on a computer. If you know the basics, you can easily create budget worksheets you can adjust as needed. However, it's just as effective to work out your calculations on paper. If doing math at all doesn't appeal to you, that's going to be a problem. Managing money requires basic numeracy skills.
What makes the cash jar system so effective is that it makes spending money tangible again. You either have the money, or you don't. If you run out, you must suffer the consequences and wait for the next week's replenishment. You begin to evaluate purchases differently. If you want instant gratification, you know you'll have to make a sacrifice down the road.
When you seek credit counseling or the services of a bankruptcy trustee, you will need to adopt a system like cash jars or envelopes and make it work in order to make sure your debt gets paid down. You'll change your behavior, change your thinking, and change yourself.
About the Author:
Call the experienced and friendly bankruptcy Scarborough trustees, dedicated to helping people regain control of their lives and find financial security.
No comments:
Post a Comment