Below you will find a quick snap shot of the first few steps of Balancing Our Blessings. More detail can be found here.
Step #1 – Facing the harsh reality (the big picture)
This one is NOT meant to be fun or really even encouraging. It is meant to open our eyes and set our resolve to find balance!
Set your sheet up (computer or hard copy) by listing your debtors down the left hand side. For now, we are only looking at things you pay monthly OUTSIDE of normal household expenses. By this, I mean car loans, credit card payments, etc. Things that have a total balance due. BUT leave out the house at this point. Check your statements to see what the payoff amount is and note that to the right of each debtor. Total that column. THIS IS YOUR STARTING POINT! This is what you must pay off to become ‘debt free’. Now that your eyes are opened, set that aside and don’t think too much about it for now. You have likely found your motivator to move forward!
Step #2 – Finding out where you are now
This one isn’t really meant to be fun either. You will need the tools you used in step one AND access to statements for ALL of your monthly bills – mortgage/rent, utilities, car payment, credit cards, day care, etc. (anything outside of food, gas, other necessities at this time). Don’t forget the items direct debited from your account!
As in the previous step, set your sheet up by listing all of these items down the left hand column. You will then have four columns to the right. Your sheet should look something like this:
Past Due Date Current Date
Mortgage
Electric
Gas
Phone
Cable
Credit Card
Car PmtCar
Ins.
Now, fill in those columns using the most recent statements available. The date columns should reflect the original actual due date of each bill. Total each column. This is what you currently owe others at this point. Pull in another tool…a HIGHLIGHTER. Highlight all amounts that are due prior to your next payday.
Step #3 – What’s in the bank?
This one may or may not be just as scary as the previous steps, but we need all of this information to Balance our Blessings! Have faith and move forward…
IF your checkbook register is up to date and balanced, YEA for you as this will be easy. All you need to do is make note of the current balance and put your feet up for a few minutes while you wait on the rest of us!
If your register is not up to date and will be semi easy to do so, stop and get it up to date and balanced NOW! Once you are done, write the amount down.
If you have the tendency to wing it (yes, there are those who do this!), you will have to estimate on this step. Pull up your account balance online and subtract what you think has not yet cleared. Then subtract another small cushion amount for those few things you likely forgot. Write the amount down.
Step #4 – How does it shake out?
Take the amount you wrote down from your account balance and subtract out what you NEED until payday for groceries, gas, diapers, etc. Notice I said NEED! This new balance is what you have to work with for this next step.
Look at the amount, is it as much or more than the highlighted amounts from Step #2? If so, stop and right out the checks to pay all of those amounts – you are in a good place! Now wait for the rest of us!
If the amount you came up with is NOT as much or more than the highlighted amounts from Step #2, you have a bit of work to do here. Take a look at the items highlighted. Are there items that can be extended? For example, can you call your electric company and get an extension or work out a payment plan? Once you have worked out arrangements with those that you can, re-examine the shake out. If you are now good, write out the checks and hang out for a minute. If you still don’t shake out even or ahead, you will have to make some tough choices. Decide your priorities. If something can’t be paid, what can you live without? Personally, I would let my credit card go unpaid before I lost my electricity. Make those hard decisions and pay what you can NOW.
You still have enough money left for your necessities until pay day, right?! Now, take a deep breathe and release. You just completed the yucky part of getting in balance!
Step #5 – Setting Up Your Monthly Spending Plan
So…you know where you are, you know what you owe and you know what you have available, right?! Here’s the next step. This is where you will really start seeing some things come together and where there is work to be done.
Your Monthly Spending Plan is where you will “spend” all of your money on paper. You will allocate amounts to where they need to be or where you want them to go. Trust me…money will go regardless of where you would “like” it to go if you don’t set up a plan! So…get your tools back out!
At the top of the page, enter the amount of monthly income your household receives. If this varies due to you being hourly or on a commission plan, use the low average amount of income. This is how much money you have to allocate.
Next, down the left hand column, list all of your expenses – your monthly bills, gas, groceries, etc. Don’t forget to have a listing for savings! This can be general savings at this point unless you are ahead of the game and want to get more specific – emergency savings, long term, vacation, etc. Be sure to include items like car maintenance, medical expenses and such as well. Remember, it doesn’t have to be perfect at this point as you will be tweaking it! It does have to balance, though!!
To the right of each item/category, place the allocated amount of income needed. If you are unsure, use the average of the last few months. At the end of this exercise, you should come up with ZERO unallocated income!
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