Originally Posted by crisT

hello everyone I am new to this site. First I would like to introduce myself, my name is cristy and I am 22 years old. I have a question. I just recently graduated from college and I have a Huge amount of debt. not just student loans I know thos e aren't really looked down upon, but i have credit card debt also, and quite a bit of. you see during school i was only working on the weekends and using my cc for almost every purchase, i would make my minimum payments but I did the math and noticed that i am barely even paying off the interest.!!! Does anyone have any advice on how to get out of this situation with the least amount of pain as possible?

Originally Posted by crisT

I have to say I have never really made a budget before. any tips on making one that is realistic? should I doit by the week or by the month?

Originally Posted by Joe

There are form books that you can find in stationery stores or in the stationery departments of department stores that have budget forms in them that you can basically just fill out. The most common brand I am familiar with is Dome.



http://www.domeproducts.com/catalog/...roducts_id=110



I believe each form is done by the month, and then broken down by the week.



You should also go to the public library and check out some books on personal finance and budgeting. They might have some forms that you could xerox and use.



Most of your bills, I assume, come once a month, so I think a monthly budget would be a good way to start, and then you can break that down into weekly amounts if you need to.



You should probably start just by writing down all your income, expenditures, savings, etc., for a few months just to get a clear picture of what you are doing financially before you try to use the budget restrictively to control your spending.



One of the reasons to do a budget first is to avoid the "robbing Peter to pay Paul" syndrome. People think they are "saving" or "paying down a debt" when what they are really doing is fooling themselves by digging a second hole while filling in the first.



One of the reasons for this is the difference between "cash/actual" and "accrued" accounting. Under "cash" accounting, you make note of an expense when you pay for the item (or are billed for it). And this is the way most people do their accounting. But the problem is that this method does not work very well for major expenses that are infrequent but forseeable.





To deal with these expenses, it is better to use the accrual method of accounting, and to have what I will call a "reserve account" into which accrued expenses are paid. Thus, you would have a "mixed" accounting system, where most expenses are accounted for on a cash basis but a few expenses are accounted for on an accrued basis.



Let me give you an example that will make these concepts clearer. Suppose your parents gave you a brand new $20,000 car on your 22nd birthday. And suppose you use this car to drive around, go to work, etc. Suppose you knew that at the end of 10 years the car would cease functioning, and you would need to buy a new car, but that new car would cost $20,000 (and be just as good as the one your parents gave you on your 22nd birthday).



Now, how would you account for this car situation, budget-wise?



You could stick with the cash method, and say the car (operating and repair expenses aside) cost you nothing each year for ten years until--BAM!!--you were hit with a $20,000 bill for a new car. Yikes! Or, rather, you could say that you were using the car for ten years and thus "using it up" over ten years. One way to account for this (called straight-line depreciation) is to say that you were really "using up" one-tenth of the car's value each year over the ten year period, i.e., $2,000 per year or $166.67 per month. So, you would mark in $166.67 each month as the accrued expense (depreciation) on your car, and put at least this amount into a "reserve account" that would allow you to replace your car.



Many people just ignore these kinds of expenses when drawing up a budget, and thus fool themselves into living beyond their income, and find themselves back in debt again to finance these new expenditures when they come due.



The most important thing about a budget is that it present an accurate/true/correct picture of your income and expenditures and that it not involve any sort of self-deception or inaccuracy, regardless of fault.



Any bills that you would get less frequently than on a monthly basis need to be entered as "accrued" expenses on a monthly basis. For example, my auto insurance is billed twice a year. One-sixth of each bill should be entered as an accrued expense each month, and this amount deposited into a reserve account monthly. I have a AAA membership that comes due once yearly. This should be divided into twelvths and entered as an accrued expense each month, etc.



It is important to have an adequate "reserve account" to deal with such on-going and foreseeable expenses just to make sure you are living within your means and paying for what you are really consuming. This is just designed to make sure you are "staying even" as opposed to (unconsciously) falling behind. Only after this is accomplished can you really start to "get ahead" by saving and investing and/or paying down debt.