Debt relief

Having trouble making ends meet?

There are many events in life that cause people to experience financial hardship. Some events include divorce, job loss, serious illness, or even mortgage reset. Or maybe you just made a few bad financial decisions.

Regardless of the cause, you may, for whatever reason, have trouble paying your house note, car note, or other bills. But there are ways to turn things around. First, take a closer look at your income and expenses. And create a budget if you don’t already have one.

Personal budget

If you do not already have a monthly budget, here are a few ideas to get you started:

How to create a personal budget

• Gather your financial statements. This includes bank statements, utility bills, and any other source of income or expense.
• Record all of your income sources as a monthly amount.
• Create a list of monthly expenses. This includes your house note, car note, insurance, groceries, utilities, entertainment, retirement or college savings. Basically, anything you spend money on.
• Break expenses into two categories: fixed and variable. Fixed expenses are those that stay relatively the same each month. They include expenses such as your mortgage (or rent), car payments, cable, internet service, trash pickup, credit card payments, and so on. Variable expenses are the type that will change from month to month (groceries, gas, entertainment, dining out, and so on). This category will be important when making adjustments.
• Total your monthly income and monthly expenses. If your end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate debt faster. If you are showing a higher expense column than income, it means some changes will have to be made.
• Make adjustments to expenses. If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense. If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to reduce spending.
• Review your budget monthly. It is important to review your budget on a regular basis to make sure you are staying on track. After the first month, take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.

If you are still unable to pay your bills on time after cutting expenses and sticking to your new budget, you may need to seek additional help in the form of a debt consolidation loan (see below) or consumer credit counseling (U.S. Department of Justice list of approved credit counselors).

Sources: U.S. Dept. of Justice, About.com, FTC