Chapter 3
Building and Sticking to a Budget
In This Chapter
Calculating your monthly spending and income
Dealing with deficits (and surpluses)
Distinguishing between high- and low-priority financial obligations
Making your budget work month to month
W
e know. You hate the idea of a household budget. However, a budget is
a basic and important money-management tool for getting out -- and
staying out -- of debt. So if you're serious about improving the state of your
finances and avoiding future problems, you need to lose your antibudget bias.
A budget is nothing more than a written plan for how you intend to spend
your money each month, how much you'll contribute to savings and retire-
ment, and so on. A budget helps you live within your means. It doesn't have
to be scary. When you're drowning in debt, a budget is your financial life raft.
In this chapter, we show you how to create a monthly household budget and
monitor your compliance with it. If you can't afford to pay all your obliga-
tions in a certain month, we tell you which debts to pay and which to put off.
We also warn you against using certain types of loans to generate extra cash.
Over time, if you stick to your budget and follow the rest of the advice in this
book, your financial situation will improve. But even when your financial out-
look is rosier, you should continue to manage your money by using a budget.
Otherwise, you may get careless about your spending or begin using credit
too much, and your debt may creep up to dangerous levels again.
Living on a budget also makes it easier for you to
Build up your savings so you have money to fall back on if you're hit
with a big unexpected expense, if you lose your job, or if you have to
take a pay cut.
