How to get out of debt, step 10:
Set your Get Out Of Debt budget enforcement policy.
Previous: 9. Plan how to cut expense and save money.
10. Set your Get Out Of Debt budget enforcement policy.
Ingredients: your understanding of how you got into debt in the first place, your family's agreement.
The best plan in the world is worthless if it cannot be implemented. Often, people fall into debt because they simply are not careful about how they spend their money. How many times have we bought something that we really couldn't afford because we like the color? I don't know of anybody who hasn't. What we need to do now, in order to make it work, is to set rules that will make living within the budget easier.
The first thing to do is to look at those little pieces of plastic in our wallets. Credit cards are amazingly convenient, and are the true culprits in so many cases of debt. It's just too easy! We need to know how to close a credit card account. It is a given that if we have multiple accounts, as mentioned earlier, we make fiscal responsibility that much harder. Many of us carry around lots of different credit cards. Each one has a credit limit. If we only had one card, we would not be able to exceed that limit. The more cards we have, the more debt we can get into. Therefore, it's a good idea to limit ourselves to only one or two essential credit cards, and close the rest. In a future step we will deal with how to choose which credit card accounts to close.
The second thing to look at is our use of these credit cards in general. If we force ourselves to use only cash, we are limited to what is in our wallets. It becomes impossible to increase debt. A bank account that will not let you accrue a negative balance will do the same thing. It is good policy to limit all tier 2 spending to cash or checks. Try not to use credit cards for this at all. You will probably discover that you are spending even less than you planned to, and not suffering at all. If you can extend this to tier 1 spending, even better. The less you use the credit cards, the quicker you will be able to get out of debt. In enforcement policy, knowledge is also power.
If you haven't done this until now, start keeping track of each and every expense. It's most easily done in computer expense tracking utility programs, but you may want to take a small note pad along with you to write down expenses as they happen. I keep receipts from everything, and then use those receipts to enter the data into my program. Plan to have a weekly budget review, so that you aren't leaving anything to chance. You will see if you spend too much, so you can adjust that in the coming week. If everybody knows that the accounting is precise, it will make it that much easier for them to stay within budget.
Once you have set the rules, make sure everybody agrees to them. One person should be the leader of the plan who will keep tabs on expenses and run the weekly meetings.
Next: 11. Give to charity.