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Personal Budgeting: Use a budget to fix your debts on your own

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Why a Personal Budget is the First Step in Getting Out of Debt


Your debts are too high. You can't make all of your payments, but you don't want to go bankrupt.

You want an alternative to bankruptcy that will help you deal with your debts. What is the best bankruptcy alternative?

The answer is simple: fix it yourself. How? Start with a plan.

If you were going to build a house, you would make a plan. You would make a list of everything you needed to build the house; you would figure out what it would cost; and then you would build the house.

Finding an alternative to bankruptcy is done in exactly the same way. You start with a plan, called a budget.


Don't stop reading! The word budget can be intimidating, but it isn't! A budget is simply a list of all of the money that comes into your house each month, and all of the money that goes out.

To make a budget, get a piece of paper and start writing. Or, do it on your computer with personal budgeting software. You can use our Excel Spreadsheet Personal Budget Template or download our Adobe pdf personal budget if you want to do it on paper.

If this is the first time you have tried to make a personal budget, you may have trouble figuring out what you spend each month.

You could start by looking at your bank statements and credit card statements for the last few months to get an idea of your average monthly spending. Or, carry a pencil and piece of paper or notebook with you for the next two weeks and record everything you spend money on. That will help you determine your monthly expenses.

The most important budget secret: Keep It Simple!

You can read all sorts of books on budgeting. You can take courses. But the one element to remember, above all else, is keep it simple. Don't try to design the world's most complicated Personal Budget Spreadsheet. Try to design something simple.

If you get paid each week, have a sheet of paper for each week. At the top put the amount of your paycheck, then list everything you will spend money on this week. That's a budget! And that's simple!

Once you know what you spend money on, you can take steps to reduce your expenses. You could try cutting your food bill, taking the bus instead of driving, making your own coffee instead of going to the coffee shop, or switching to basic cable. If you can save some cash each month, you can use that cash to repay your debts.

If you have the cash, the Do It Yourself approach is your best bankruptcy alternative.

If your budget shows that you can't afford to do it yourself, you need to look at other bankruptcy alternatives, such as debt consolidation, credit counseling, Chapter 13 Wage Earner Plan, consumer proposal or if all else fails, personal bankruptcy. is a free resource
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