Create a Budget Surplus

The First Step Toward Debt Elimination

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How do you create a budget surplus? Simple, by spending less than you make! However, it may not be as simple as it seems, especially considering our "I want it now, instant gratification society".

Alternatively, you can create a monthly surplus by simply making more money. The choice is yours, but it may be easier to focus on spending less than you earn, so here’s some budgeting surplus tips to help you out.

How to create a budget surplus…

  1. Start a Budget. You need to know where you are now, in your spending, so you can develop a plan to get to where you want to be (i.e. a monthly surplus).
  2. There are also many budgeting tools you can use to help. You can use the old pen and paper method, the envelope method, online budgeting programs or a combination of budgeting tools. Use what works best for you; but use something.
  3. After putting together your budget, if you find that you’re making less than you spend, find ways to spend less. Learning to spend less starts with changing your mindset concerning spending.
  4. Think about spending your money in one of two categories: Expenses that are essential (e.g. mortgage, rent, insurance, etc.) or expenses that are discretionary (e.g. entertainment, new clothes, etc.).
  5. Reduce your discretionary spending first. Find creative ways to be entertained for less money (e.g. rent a DVD instead of going to a movie). Don’t take another vacation until you’ve reached your goal. Go shopping in your own closet. Exchange outfits with a friend. Plan your meals before grocery shopping. Eat out less often.
  6. Change your habits. This includes cutting out some of the little indulgences you may have gotten used to - like that daily coffee latte. This will require both discipline and sacrifice. This may be your most difficult step and may cause you some pain. But just remember, there are two types of pain in life, the pain of discipline and the pain of regret. The pain of discipline weighs ounces, but the pain of regret weights tons.
  7. Then if you’re still short, find creative ways to make extra income. Get a part-time job, perform a free lance service, or start a business on the side, rent a pickup truck and place an add on www.craigslist.com to do hauling.

Remember, you can’t start your debt elimination program until you create a monthly budget surplus.

The basic financial principle behind every debt elimination program is the less principal you owe on your debts, the less interest you pay. So by using your monthly surplus to pay more money on your principal, you pay less interest and your debts get paid off faster.

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