How do I get caught up on my debt?

Question

I don't own a credit card, just bills are piling up. My monthly bills are more than I take home each month. I'm so behind, and I don't know what to do!

Answer 1

Get on a budget so you know how your monthly expenses and take home income compare.  You can download a free budget workbook from:  http://www.bills.com/guide/

or use an on-line tool at: http://www.kiplinger.com/tools/budget/

Here are the steps to establishing a budget, in general you will be comparing your monthly income with your monthly expenses;

1. Determine your monthly take home (after tax) income.  If you work in sales or on some type of commission make a conservative (low) estimate of your average income.  Then remember to save during the high income months for the low income months.

2. List your monthly expenses; Essentials first such as housing (rent or mortgage), groceries, utilities, car insurance, car payment, car gasoline.

3. Utilities and groceries will vary from month to month so determine a conservative (high) average amount.  I include anything bought at a grocery store in my grocery budget; food, cleaning supplies, kitchen and bathroom supplies.

4. Amortize your car insurance over the period of coverage, for example if you pay $600 for 6 months coverage the monthly expense is $100.  So put $100 each month in savings so you are ready for the next payment when it comes due.  A budget will help you begin to save for future purchases rather than paying for past purchases.

5. Include money in the budget for car maintenance, home repairs and medical needs, these expenses come along and will ruin a budget if you don't have something saved up.  I save $50 per month per vehicle for maintenance.  Include some amount for clothing ($50 per month), activities, gifts and holidays.

6. One other important step to take is to record your spending for a month or two.  Most people are surprised by how much they are spending for some items; eating out, groceries, snacks and treats are typical.  Controlling your spending is the other side of the budget balancing equation.  Eliminating spending on non-essential items may be enough to bring your expenses within your income and allow you to catch up on your bills.  

After eliminating unnecessary spending if monthly expenses still exceed your monthly income it's time to start reducing larger expenses.  Do you live in an apartment and can you move to a less expensive one?  Can you get a roommate?  Are you making payments for a car that is more than you need?  Even if a car is worth less than the loan it may be worth taking it back in for a less expensive model you can afford.  

When you've done everything your can and expenses still exceed your income the next step is to increase your income by finding a new job, taking on part time work etc.

God bless.

Answer 2

Find ways to either increase your income or decrease your expenses.  A second job or overtime at your first job are obvious chances to do that.  

-Some other options are turning off the cable bill (its not worth being able to watch cable tv if you get evicted from your apartment).  

-Clip coupons and stop eating out.

-Carpool and consolidate trips to save gas money

-Consider getting rid of your junk (garage sale, EBAY, etc)

-Plan ahead when it comes to groceries and make a shopping list and stick to it!  Its amazing how many impulse buys are out there waiting to happen.

Most importantly sit down and map out your expenses.  Know when things are due and get things paid on time.  Make a budget and stick to it!  Good luck.

Answer 3

I woul dlike to recommend that you look into purchasing, checking out, or borrowing the book: Dave Ramsey Total Money Makeover. It will change your life and how you persue financial security. And its an easy and fast read. You can also go to www.daveramsey.com to learn more about him, and there is actually alot of helpful info on the site if you don't end up with the book. Good Luck!