Budgeting is one of the most effective ways to prevent debt overload, but can also be used to get out of debt. Budgeting doesn’t cost a dime, but does require commitment and a strong ability to rise above the temptation to buy unnecessary items.

In a nutshell, budgeting requires consumers to spend less than they earn. Unfortunately, many Americans are not familiar with the term ‘household budget’ or the concept of living within their financial means. Failure to spend less than earned often results in massive credit card debt, real estate foreclosure, and personal bankruptcy.

In a perfect world, budgeting would be taught the moment children are old enough to understand the concept of money. However, in a world of abundant advertising consumers are constantly encouraged to spend, spend, spend.

Marketing agencies are given massive budgets to create TV, radio, print, and Internet ads convincing consumers that owning a flat screen high-definition TV or cell phone that can be programmed to turn off lights while away from home will somehow improve their wealth status.

The economic recession forced most Americans to re-evaluate their spending habits. As credit card companies slash credit limits, many consumers who use credit cards for everyday purchases are faced with personal economic turmoil.

Creating a budget can help consumers solve financial woes because in order to create a realistic budget, individuals are forced to take a hard look at where their money is being spent. Most people are aware of how much money they require to pay rent or mortgage payments, automobile loans, and insurance premiums, but are often unaware of how much money they spend on impulse buys and items they really don’t need.

Several options are available to create a budget. Some people use a pencil and paper to create an income vs. expenses list. Others use a spreadsheet such as Excel, while others invest in budgeting software or subscribe to money management websites. Many credit card companies and banks include household budget calculators to help consumers track expenses.

One of the most helpful budgeting strategies is to track all expenses for at least one month. Include every penny spent including newspapers, magazines, coffee drinks, fast food lunches, haircuts, manicures and pedicures, clothing, movie tickets, candy bars, and charitable donations.

After listing all expenses, determine which items can be eliminated. If you are spending $100 a month on morning lattes consider making coffee at home instead. If your wardrobe needs require you to use credit cards to afford the purchase, consider shopping at local thrift stores or engage in clothing swaps with family and friends.

Groceries are one of the largest expenses for families. Food expenses can often be slashed in half by taking time to create a weekly menu, scouring grocery sale ads and combining sale items with manufacturer coupons. Grocery costs can also be substantially reduced by joining food co-ops and shopping at Farmer’s Markets.

Using credit cards for daily purchases can quickly destroy budgeting efforts. People often fail to realize that interest accrues against unpaid balances. Unless you are able to pay credit card balances in full each month, it is best to leave them at home to avoid temptation.

Individuals consumed with debts may benefit from entering into credit counseling. It never hurts to have a trained professional review spending habits and offer suggestions for getting out of debt through budgeting. Consumers facing financial hardship should seek out non-profit credit counseling services which base fees on a sliding scale according to earned income.

Budgeting can help anyone overcome excessive debt, as well as help consumers avoid accumulating debt in the first place. Budgeting can help individuals live within their means and implement savings plans for the future.

Those who avoid budgeting and engage in frivolous spending habits are destined to live paycheck to paycheck and may very well end up in the poorhouse. Don’t let this happen to you. Take action today and learn the art of budgeting so you can enjoy a fruitful retirement.

Author Bio: Obtain more budgeting tips from author and investor, Simon Volkov. His website includes a thorough personal finance article library offering debt relief solutions and bankruptcy alternatives at www.SimonVolkov.com.

Category: Finances
Keywords: budgeting, household budget, budget, credit card debt, financial hardship, personal finances, debts