How to get out of debt: Part 2

Setting priorities for a Budget!

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Setting priorities for a Budget!

A budget is not going to work as long as you are impulse buying, so if you haven’t already, please read Part 1: Stop Impulse Buying.

As I was learning when I was making up my budget, everyone is different.  If you are really far in debt as we were, your budget will probably not work right away, and will need to be refined.  When I did our first budget, I found that we were overspending big time, and couldn’t find anywhere to cut back.  Several things that I thought were a need, were actually wants, and it took us a lot of time to figure out what was a need and what was a want.

To make up the budget, you have to seriously think, “What is the one thing that I can’t live without?”  Could you live without a home?  It is hard to picture yourself there, but yes, there are lot of homeless people out there.  So, what do you need more than anything else?  Food!

Food is your #1 priority!  If you are not eating properly, you can’t work, earn money, and be able to pay for everything.  You may end up homeless if you don’t eat properly, and fast food is not the answer.  I used to love my fast food, but the chemicals, GMO, and processing gave me more food intolerances than you would believe.  Basically I am now allergic to almost anything that comes from a factory.  You need to eat healthy home cooked meals to get out of debt.  So you need to budget not more than 1/3 your net income for it!

Actually, you will probably find that home cooked meals cost less than what you are spending on junk food now.  If you need to, get a cook book on quick and easy meals.  Cooking is much easier than you think.  For example, put some meat in a hot frying pan for 3 minutes, flip it over for another 3, and then put it on a cookie sheet in the toaster oven for 10 minutes.  Most toaster ovens have a timer, this way I don’t burn things.  If you poke the meat and it bleeds, put it on another 10 or so minutes depending on the size.  Put some rice in a rice maker with some water, cut up some lettuce, tomatoes & cucumbers, and add salad dressing.  Dinner is done and wasn’t that easy?

So, what is the next thing you need?  You guessed it before – a home.  You need a home to get ready for work to earn money to pay for everything, but you need to make sure that it is within your budget.  Again, you should not be spending more than 1/3 of your net income on your home.  That 1/3 of your income includes your mortgage payment, strata fees or rent; plus electricity, telephones, cable, and other utilities.  If you are spending more than 1/3, then you really need to look at where you can cut down on this.  You really need to ask yourself, do I need cable TV?  Do I need all these options on my telephone line?  Do I need high speed internet?

What’s the next thing that you need?  Transportation to work, stores, etc.  You probably want to limit your transportation costs to less than 10% of your net income.  That 10% should cover your bus fare, or car payments, auto insurance, maintenance and fuel.

Oh, and you obviously need clothing…  However, you can usually find free stores, thrift stores, etc. so I didn’t list this as a priority, you can probably find something cheap to wear if you need.  I think social assistance will even fund some clothing to go to an interview to get a job.  Remember, they want you to get a job and get off assistance, so they will do what they can to help you.

One more thing….  You do need some form of recreation & entertainment, but you can usually find a lot of this free or cheap at a community center as well.  For my wife and myself, walking the dog, and a TV with basic cable, and Netflix satisfies most of our recreation & entertainment needs.

Almost everything else that you might think is a need is probably not a need but a want, and you can probably do without.  Think about it, and I will be back with some more tips next time.

Next:  Who are you making this budget for?

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