The first thing you need to do to control your spending and to get out of debt is to determine and understand how you got into debt in the first place. After you have understood where/how your problem started then you can create a plan to solve your problem. The next step is to create a budget. Keep track of your spending by carefully documenting your expenses for a month or two to determine a spending pattern.

     Document your expenses in the following sample areas:

- cable
- vehicle expenses/maintenance
- clothes
- dependent/health care
- education
- entertainment
- groceries/personal care
- hobbies
- insurance: car, life, property
- loan payments
- medical care
- miscellaneous
- mortgage/rent
- newspaper/magazines
- travel/vacations
- utilties

     Ensure all expenses are included, even including the small ones. Remember, the small expenses will eventually add up to be a large expense. You will then be able to see how your money disappears and account for where it is spent. The next step is to determine the areas you think you are over spending and to note if you are spending more than the amount of income received each month. Afterwards, determine which expenses need to be reduced to match your income. If you are not able to reduce your expenses to match your income, then additional income is needed. You will either have to obtain another means of employment or change to another job offering a higher salary. On the contrary, if you are able to reduce your expenses, then use the extra money to eliminate any debts you may have or to invest for future expenses and/or retirement.

     Always document your expenses regardless of the method of payment. Even though credit cards delay the payment until a later date, you need to be sure you have the money to pay the bill when that date arrives. If you know you will have the money, then your records will indicate a negative cash flow. A negative cash flow is fine as long as you will have income in the future to offset the expense.

     The purpose of a budget is to control spending in different areas. Example: if during the month, you spend more on medical care than expected, reduce your entertainment expenses to compensate. Prioritize your needs and stick with it! What is more important, paying for a hobby and/or an uncontrollable habit or paying for groceries and utility bills? Only you can decide!

     Consider using a financial organization program such as Quicken® or Microsoft Money® to track your expenses efficiently and accurately. A sample budget worksheet to start the budget and debt management process can be found at http://www.manageyourmoney.com/Budget_Worksheet.xls.


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