As a bankruptcy attorney, the first thing I do when I meet with clients for the first time, is to go over a budget estimate I asked them to fill out in advance. Many people have no idea what their gross or net income is per month, let alone how much they are spending on things like food, clothing or gasoline. Most people know what their rent or mortgage payment is, or their monthly car payment, but may not know what interest rate they are paying or how much is still due on a loan. By the time someone comes to see me, there is no doubt there is more going out than coming in each month, and something has to change.
On the Dempsey, Dempsey & Moellring website there is a budget sheet you can print off to work on. If your wages vary from week to week, or month to month, then the best thing to do is look at the past six months of your pay stubs, and average the GROSS (before taxes) amount. You may be under or over-withholding on state and federal taxes. The average withholdings are 21% of gross. You also need to figure out how much is being taken out of your paycheck for health or life insurance, as well as things like union dues, uniforms or 401K plans. The resulting balance is your NET income.
If your utilities such as electric and gas vary widely from season to season, see if you can get on an equalizer or budget plan so that you know your monthly amount is the same. This goes a long way to even out the bumps in the road. Expenses such as phone, internet or cable can often be reduced with shopping around for cheaper plans, or eliminating extra services. For a good idea what the average person, couple or family with one or two children spend on things like food, clothing, personal care products and miscellaneous items (cigarettes, pet food, haircuts, etc.) one should look at the current IRS National Standards for Allowable Living Expenses. It may surprise you what these figures show. Most of my clients guesstimate these expenses well under what they really are spending.
If you have monthly payments on credit cards, pay day loans or other financed purchases like furniture or electronics, you may need to stop “robbing Peter to pay Paul.” I advise people who come to see me to STOP USING CREDIT CARDS. If you do not have enough money each month for gas, groceries or prescriptions, putting those purchases on credit cards is just digging you a deeper hole. Make sure no creditor has the ability to automatically debit your bank account. You may have to make some hard choices, like surrendering an expensive truck or motorcycle you simply cannot afford.
If after looking at your budget, there is debt you simply cannot pay and keep your basic living expenses covered, then that is when you should see a bankruptcy attorney for further advice. Call us for your free consultation.
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