Step 2 – Prepare a Budget
Using the expenses you’ve documented, plug those numbers into a spreadsheet column or your budget app. Then enter all sources of income for the month.
Hopefully, you have a positive balance after entering all the numbers… if your balance is negative this is going to be a very painful process. Your goal here is to use the extra money at the end of the month to both pay off debt and build savings.
If you’re in the negative, you need to look at ways to seriously cut expenses or get a second job for additional income.
You’re aiming for at least 5-10% of your income left over at the end of the month and start a savings account for ‘unexpected expenses’. Unexpected expenses are things like home and car repairs, new appliances as needed, etc. You will eventually want to build this to 3-6 months income. If you have more than 10% use it for paying off credit cards.
