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Budgeting Tips for Household

Posted on in Bankruptcy

Everyone has different incomes and different financial obligations. Something not everyone has, though, is a plan to maintain financial stability and budget money according to their income and expenses.

Liz Weston of MSN Money has published a great method for creating a budget for housing, groceries, and other necessities based on any income, called the 50/30/20 budget. Follow these budgeting tips to avoid financial trouble and bankruptcy.

  1. Start with your income after taxes have been taken out. These taxes include withheld income tax, wage-based taxes, disability tax, and Social Security and Medicare taxes. Be sure to include, however, expenses such as 401k contributions, health insurance premiums and union dues in your after-tax income.
  2. Try to limit all necessary expenses to only 50 percent of your after-tax amount. These expenses are typically monthly payments like food, tuition and minimum loan payments, utilities, transportation, housing, insurance, and child care. Credit card payments and child care are important necessities that must trump shopping trips and restaurant dining.
  3. Allow any additional items to be paid for with 30 percent of your after-tax number. This is the income that can be spent on shopping trips, restaurant dining, vacations, and gifts. Items like cell phones and cell phone bills may overlap in the 50 percent and the 30 percent categories because a cell phone may be necessary, but extra features are usually not needed.
  4. The final 20 percent of your money should be put in savings and used to repay debts. After using the first half of your money to pay off minimum bill payments, use this last 20 percent to pay off additional amounts to diminish the debt more quickly. This last portion can also be put away in savings for later use as an emergency fund or retirement money.

To maintain the first half of your money to be used for necessities, here are a few items that can help you save money:

  • Food: Off-brand is okay, it's the same food but a little bit less expensive, always look for sales, buying certain items in bulk can save money in the long run, and always search for coupons.
  • Utilities: make sure the lights get turned off, there's no reason to blast the AC or heat, and unplug cords-they suck electricity even when they are not in use.
  • Transportation: carpool, or check out public transit options in your community.
  • Insurance: shop around and look for the best deal, and don't buy insurance for things you don't need.

If you have already found yourself in deep financial trouble, follow these steps and contact a bankruptcy attorney to help you out. Newland & Newland attorneys are located in Arlington Heights, Libertyville, Crystal Lake, Chicago, Waukegan and Itasca, Ill. and are ready to help you.

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