Top To-Do’s to Keep Your Budget in Hand
Sometimes it can be pretty overwhelming trying to figure out how to get your finances in hand. One bit of advice says one thing, and another bit of advice says something else. But where do you start? Although the order of priorities might be different, here are some absolute must-do’s if you and your family just cannot make ends meet every month, and credit debt and unpaid bills are threatening your financial stability.
The number one rule, plain and simple, is stop spending. Just stop. We’ve been taught for so long to spend our money that often we’re not even aware of the money flowing through our fingers until the bill hits. How many times has your credit card statement taken you by surprise? Here are some good ways to become more conscious of where that hole in your wallet is, and good ways to plug it up.
Get rid of all plastic and swipeables. Do you think you cannot survive without a credit or debit card in your pocket? Put one credit card into your glove compartment for emergencies, and lock it up. Don’t carry it with you into stores, or for shopping. You’ll soon become acutely aware of when and where the urge to spend comes over you. Start avoiding those places to help you get a handle on your spending habit.
Next, move to a cash-only system. This will make you very aware of when you want to spend, and how much you spend. It will be a real eye-opener when you see how quickly cash can pass from your hands into someone else’s wallet. And watching that cash pass into someone else’s pocket can be a real incentive to stop spending.
Next, put limits on even necessity spending. Do you really think you must spend $500 each week on groceries? Open your fridge, and see how many of those groceries either got tossed out, or have not been used. Some estimates are that as much as 40% of what we buy eventually gets tossed. So place limits on what you’ll spend on anything. The best way to do that, of course, is to make a budget-and that’s the golden rule of money management.
Make a budget. Keep it simple. All you need to do is write down what your expenses are, and track them. Some experts recommend you put your spending into two groups, discretionary spending and fixed costs. Discretionary means spending that you could eliminate altogether such as renting DVDs or going out to dinner. Fixed costs are the ones you have to pay such as utilities and rent.
Most costs aren’t really fixed-at least in the sense of how much it has to cost you. For example, if the rent is just too high, you may have to move to another neighborhood or smaller home. And there are plenty of ways to save on electricity and water costs that can produce really dramatic savings.
As you make more manageable money choices, take the amount you’ve dropped from your costs, and begin paying off your debts, generally the highest-interest debt first. Before you know it, you’ll have your budget in hand.
Spend Less, Save More: Your Own Debt Loss Program
Think of it as a kind of debt loss program. When you handle your debt, you’ll find a huge weight falls away from you. Some experts actually think there’s a correlation between the growing debt of Canadians and our growing waist lines. Whether that’s true or not you can debate over a donut, but there can be little doubt that debt reduction is one loss most of us can probably use at least a little of.
Tally up your debt weight. Until you know how much you’re carrying, it’s pretty much impossible to know how much you have to lose. Don’t cheat-add up every penny you owe.
Have a partner on board. It’s a lot easier to tighten your belt when someone else is tightening right along with you. Whether it’s a life partner, spouse, friend, or your mom, having someone you’re accountable to, or someone who’s just cheering you on can only help, right?
Don’t hide anything from yourself or the people helping you out. It just won’t do any good to pretend your debt load is smaller than it really is. Is it six credit cards, three personal lines of credit, and two in-store accounts (not to mention your sister and best friend)? Get it all out there.
Plan a debt loss strategy. Whether you pay one debt off at a time, based on a high-interest first approach, or several debts a bit at a time, the key is to have a plan, and stick to it. Having regular money meetings with your partner in debt loss can help you to stick to the plan and meet your debt reduction goal.
Always save something. If you feel like your entire pay cheque is going to pay down debt (and it might be) start setting aside at least a small amount every cheque that goes to savings. Always save something, no matter how small or trivial it might seem.
Live by a budget. Set out the things that you have to pay each month, like your mortgage, car payments, and utility bills. Then pay them, every month, without exception. Never skip a payment. Pay less, if you must, and then contact the company and talk to them about it. Often, they’ll understand and even waive the interest charge or late fee.
Stop using your credit cards, lines of credit, or other false income-extenders. One of the problems with credit is that it makes you think you have more money than you do. And, as valuable as credit can be, until you understand how much you really make-without the help of plastic-it’s probably good to stay away from it.
Try these guidelines to your debt loss and see how much better you feel with debt weight off your shoulders.
Climbing Back from Bankruptcy
So, you did it. You declared yourself bankrupt. You may well have mixed feelings about the whole affair. You may feel relieved that you don’t have to worry about answering the phone any more. But you may also feel pretty low about throwing in the towel on your monetary situation, and losing some things back to creditors that may have held value for you.
Right now, rebuilding may be the furthest thing from your mind. But, even though bankruptcy might not be anyone’s first choice of things to happen to them, it offers a second chance for you to begin again-making better choices and smarter use of your dollars.
Start again without credit cards. For many people, it’s mishandling credit that got them into trouble in the first place. So, be slow to return to plastic. Instead, buy with cash until you have a good feel for how much money you really have every month, and just how much you can buy with that amount of income. Basically, learn to live within your means.
Consider making a budget. When you can see it right in front of you in black-and-white where your money has to go each month, to the groceries, gas for the car, or other bills, it’s a lot harder to blow the wad. Budgets are great reality checks on unconscious spending binges.
Watch what you buy, and when you buy it. Without credit, you might not be able to act on your urges the way you used to, but eventually you’ll likely have credit back in your life. Now might be the time to observe when temptation hits you, and what you can do to resist those terrific buys that got you into trouble last time round. Do you go mad not being able to buy something if you spend a few hours in the mall? Maybe you’d be better off choosing the ballpark on Saturday afternoon. Learn to change the habits that lead to uncontrolled spending.
Make a pact. Agree with someone-your spouse or partner or best friend-that each of you has veto power over the other’s purchases. So if you do spin momentarily out of control, that person can send you straight back to the store with your buying spree. Or take it back for you, if necessary.
Are you a sneak-it-in buyer? Buying purchases and then hiding them until they can be safely slipped into the household? That habit can be quickly nipped in the bud by tracking your spending with the whole family each week. If you’re keeping a budget, and only using cash, it’s much harder to hide that DVD habit you’ve got going.
Recovering from a bankruptcy is hard work, but not impossible. With a few budget guidelines, you can come back to a bright-and solvent-financial future.
Addicted to Debt
Are you addicted to debt? Can you just not say “no” to spending, and snap up every new bauble that attracts your eye? If you feel like your spending is spinning out of control, you may need some heavy-duty withdrawal tactics to get your life back on the straight and narrow.
Eliminate credit and debit cards
Using plastic for purchases can give the illusion that you have more money than you really do. After all, plastic never wears out. Carrying real green makes the end of the money train a very real experience. When it’s gone, your spending is done. So, get rid of all your plastic, and start using cash to pay for all your purchases and bills.
Admit your debt load
One of the ways we fool ourselves into believing that our financial situation “isn’t all that bad” is by straight denial. We just don’t check-until the debt collector’s knocking at the door-and even then. So, pull out every bill you have stuffed away and ignored. Include your mortgage or rent, in-store credit lines, bank lines of credit, regular monthly bills like the utilities-you name it. Add those debts up to see just how much money you owe. Oh-and don’t forget mom and dad, friends, or other relations you owe money to.
Consider consolidating your debt
One of the biggest problems with debts is that there can be so many of them. That makes them hard to track, and can leave you overwhelmed. Which one do you pay? And that can lead to just giving up on paying anything. Consolidating your debts-even if the monthly payment seems big when you do-can help you get your debts under control. Knowing the amount you have to pay out each month to service that debt may also help you curb your spending urges, too.
Consider your assets
It may seem foolish to think about mortgaging an asset to pay off debts, but sometimes this is a good way to get back on track. Even if it costs you a bit more, in the long run, using assets to pay off debt can be a good choice. And, it’s an especially good choice if you’re up against the wall on your credit cards, have stopped paying your bills, or are thinking about bankruptcy.
Consider a vehicle title loan
If you have bad credit, own your vehicle, and it’s less than eight years old, you may be eligible for a car title loan. It’s an easy application you make online, and can be approved in less than 24 hours. You could qualify for as much as 40% of the wholesale value of your vehicle. And that cash can go a long way to bailing you out of financial trouble. Apply today, and your loan could be direct deposited into your account by tomorrow. You can withdraw that cash and pay off a lot of debts by tomorrow night. And get your life back on the straight and narrow.
The Big Ticket Surprise
When your eight-year old complained of a toothache, did you ever think it would turn into an $800 dental bill? Or that an investigation of a crack in your wall would turn out to hold mould, and expensive experts would have to be brought in to clean it up? Unexpected surprises can hit any of us, any time, but when your credit history is weak, or non-existent, it can really be bad news. Where can you turn for an emergency bail out, especially if your credit cards are maxed out, and you just don’t have good enough credit to increase your limit, or open a line of credit?
Consider your assets
You may have more value around your home than you think. Your vehicle-car, truck, SUV, whatever you drive-may be enough to qualify you for a car title loan. A car title loan is especially formulated for people just like you, who have poor credit histories, no credit history, bad credit, maxed out credit cards, or even bankruptcies in their past. It works because you use your car as collateral against the value of the loan. You still get to drive your car, of course, and there’s even another bonus. Because a car title loan is just that-a loan-it goes towards re-building your credit history-and so can help you get back on track to a better credit score.
Car title loan details
A car title loan is easy, fast, and private. You can make the application yourself, online, from the comfort of your favorite living room chair. If you own your car and it’s less than eight years old, you can be almost sure you’ll get approved. People just like you do, about 99% of the time. So, by tomorrow, with your car title loan approved, you could have as much as 40% of the wholesale value of your vehicle in your pocket.
How to apply
The application is straightforward, and almost always gets approved in just 24 hours or less. Your loan can even be direct deposited into your account for your convenience. And repayment is in easy monthly installments made to fit your budget. And, you’ll still be driving your car. And improving your credit rating. And paying that dental bill, or getting your house fumigated, or whatever other unhappy little emergency has taken you by surprise.
Car title loans. A surprising asset you may not have thought about before.
An Even Budget from a Variable Income
If you are one of the many people these days with a variable income, either because you are on periodic shutdowns, temporary layoffs, or cutbacks in working hours, the irregular pay cheque can really throw you for a loop. Taking irregular income and evening it out takes resolve, but it can be done. Here are some tips to help you get through the lean months, not overspend when you are flush, and get cash set aside for when you really need it.
First, go back through three to six months’ worth of your finances. Figure out what bills you owe, and when. For example, do your utility bills only come every second month? If they come due during one of those layoffs, that can make for a rough month-and possibly an unpaid bill-if you haven’t set aside money for them. You want to use the past several months’ financial history to tell you how much you need every month to make ends meet, and avoid unexpected surprises like the electric bill.
Next, open a savings account, if you don’t already have one. In those higher earnings months, set aside the extra money earned to bail yourself out during layoffs, or shorter working hours-whenever your pay cheque might be short. It’s always tempting to treat yourself to something special when you have a few extra bucks in your pocket. But you’ll feel a whole lot better if you don’t, and then, when the bills come home, you have money in your pocket to pay for them.
Here’s the hardest part. Set money aside from your higher paycheques until you have one month’s worth of bills and living expenses in your savings account. This may not happen overnight. It can take six months or even longer, to get this kind of cash together. But, if you can set aside a month’s worth of expenses into your savings account, then you can start living from the savings, and not pay cheque to pay cheque.
Since you know your monthly costs, you transfer only that amount into your chequing account. In the months where you make higher pay, that extra money stays in your savings account. In the lower pay months, you use those savings to ensure your bills are paid on time, and in full.
Setting up this kind of system takes time, and discipline. But it’s worth the rewards of not having to fear a layoff, shorter hours, or forced vacations.
Indebted Canadians…There is Help
More than 116, 300 Canadians filed for bankruptcy in 2009, a 28% increase from 2008. Economists expect that number to hover as long as personal debt loads and unemployment rates remain high. Credit bureaus say the spikes are coming from Canadian’s debt to income ratios as many Canadians sought loan extensions during the historically low interest rates the banks have been offering over the past year.
Several Canadian financial institutions are offering programs to help guide people through the tough times when it comes to debt overload. They say that consumers should monitor their credit profiles to avoid becoming financially overextended and that there are steps that Canadians can take before resorting to bankruptcy.
To keep financial matters in check, it is advised that consumers should keep their housing costs around 28% of their income and overall debt payments around 35%. If consumers are utilizing 30% of their credit limit, it may be a warning sign. If consumers are using 50% of their limit, that is a red flag.
Filing for personal bankruptcy may provide financial relief to consumes who have taken on too much debt, but a bankruptcy will remain on your credit file for many years and can severely impair your ability to borrow in the future. Canadian financial institutions have seen over 30,000 people come to seek financial and debt-paying advice through their programs. Many people are not even aware that most banks offer such programs.
It’s hopeful that Canadians will see better times in the next year as consumer confidence has risen since November. Financial planners recommend consumers have a six-month supply of money saved for emergencies. Only a few years ago these same planners were recommending three-months worth of emergency funds were saved. Savvy planners are able to prepare for unforeseen life events. An insurance policy for $50 a month can easily save you $100,000 in unforeseen medical emergency debt.
If you find yourself on the brink of bankruptcy, reconsider filing. Instead you may want to try altering your budget, using your savings to pay down loans, calling creditors to rework payments, selling a few assets to put towards your debt or consolidating debt to make the monthly payments easier. If you already have bad credit and do not feel traditional banks are an option for consolidating your debt, there are many private financial institutions that specialize in bad credit loans that may be able to help with debt consolidate to help you get your bad credit under control.
Budgets to Change Your Life
First things first. Give yourself a budget-attitude shake. A budget is neither a starvation diet nor a binge approach to money management. It’s a month-by-month strategic plan to care for yourself, your family, and your future. Once you get good at it, your budget can become longer term-some people actually have 5-, 10-, 15-year plans, and more-and peace of mind about their future. You can too.
What a budget can do
- A budget can be a real wake-up call about your finances.
- A budget can tell you what you can really afford, based on how much money you actually make-without lines of credit, plastic, in-store accounts, or other “false” income extenders.
- A budget can help you prepare for unexpected surprises-a furnace breakdown in February, or dental emergency in July.
- Eventually, a budget can even help you plan big purchases-a home, vacation, children’s education, and your retirement.
What a budget cannot do
- A budget cannot change how much money you really make.
And if you’ve never actually compared what you make to what you spend, the reality may be harsh. That 20×30 back deck you were planning to build this spring? It might be more realistic as an 8×12-get the drift?
How to begin
Start with pen and paper. No fancy accounting books or computer programs needed.
Next step
Make two columns. Call one “Fixed costs”, the other, “Variable costs”. Variable costs are ones you can change (as in, spend less)-groceries, liquor, and entertainment. Fixed costs you usually have no control over-like rent and car payments. (Even those costs might be adjustable-don’t dismiss moving for cheaper rent or selling a vehicle.) Don’t count fixed costs if they aren’t. Seriously, how many phones do you need? Basic cable is much cheaper than premium, and beer is not a mandatory food group.
Under one of the two columns, write everything you spend money on each month-groceries, gas, car payments, credit cards, mortgage/rent, phones, television/cable. Add it up. Stay calm. Now write down your income sources, and tally them. Subtract Fixed/Variable costs from your income. Seeing red?
Sharpen your pencil
This is budgeting-choosing how you’ll spend your money. The quickest way to save big bucks is with entertainment, liquor, and groceries. Control those costs by deciding how much you can actually afford. Put those new amounts into your column. Re-tally. Seeing more black?
Tips to control spending
Sometimes you’re so cash strapped, you have to eliminate things-find freebies instead-the library, instead of the movies, the park instead of the mall.
Always buy with cash
From now on, always buy with cash. Melt your credit and debit cards, and close all lines of credit. When you get paid, go to the bank and withdraw the money allotted to variables for that week, and put it into labeled envelopes. When you take out cash to buy those things, put the receipts into the envelope. This way you see where your money goes, and can make a really conscious choice next month about whether you want to spend your hard-earned paycheque that way.
Surprise cash pockets
Don’t squander surprise cash pockets. Every June, after Tax Freedom Day, your paycheque actually jumps a bit-ever notice? From now on, that extra jump is going to be put towards debts, not frittered away. Your income tax return-usually blow it? No more. Pay down debts, highest interest first.
Re-budget and fine tune
It takes time to get budgeting right. But a budget can help you feel like you’re finally in the driver’s seat of your life.
Retiring in the Red
If you’re of the younger generation but are still around the age where the thought of starting to save those retirement funds are stashed away in the back of your mind, you may be surprised to know many retirees are retiring in the red. Years spent enjoying well-earned lavish vacations, purchasing expensive items (bags and shoes, ladies – cars and watches, men), drinking fine wines and indulging in restaurants are eating away at potential retirement money.
Living outside ones means seems common practice for many people. With so much rotating credit available, many of us simply are not saving for the golden years. The recent recession had people reciting ‘Freedom 85′, which unfortunately, probably has a ring of truth to it. While many of us know retirement is inevitable, falling somewhere between death and taxes, the mental concept to just work longer seems to be common one. With people living longer and generally being healthier, it can make sense to consider this an option.
However, we have to admit how unpredictable life can be. An unforeseen health issue or accident can instantly eliminate any of those longer working intentions. Suddenly even Freedom 85 is unobtainable. An unexpected health issue forces many people into early retirement. Even if you’re lucky enough to have a generous pension, the payout will be reduced because of early retirement, which will most likely end up being less than your previously earned salary.
According to Statistics Canada, more and more Canadians continue to grow their debt loads. The Bank of Canada says the average person has accumulated $36,000 in bills. They blame this on credit card addicted young people, but older Canadians are still piling up debt as well. The Credit Counselling Society noted 14% of their clients are over 56, saying this category of clients has almost doubled in the past ten years. If you’re about to start saving for retirement, here are a few tips:
The first thing you need to do is reduce risk. Real estate and stocks don’t necessarily provide the benefits they once did due to surging markets. People need to realize conditions change and markets around the world have been falling. Scaling back is also a key to retirement success. If you’re not the type to live outside your means, then living on 50% to 70% of your pre-retirement income won’t be a problem.
There are things you can do now to help yourself later. If you own debt and traditional banks are no longer an option, consider applying for a secured private loan. This may help put your finances in order so saving for retirement won’t be such a red-hot issue.
One Credit Payment per Month (Impossible? Read on)
Was this another one of those months where you just couldn’t keep track of what you owed, or who you owed it to, or how much you had to pay somebody? Are you tired of those bad credit calls from loudmouths demanding your hard-earned pay cheque? Maybe it’s time to consider consolidating your credit card debts.
What is debt consolidation?
Debt consolidation is a good idea for pretty much everyone. It means a couple of things. First, you try to eliminate as many credit cards as possible, and put all your debt into one pot. Sort of like when you empty out the garage and put all your stuff into one big pile. It can be a bit scary, at first, because now your debt is all out in the open, and you can see just how high that pile has become. But, let’s do it.
So, how much do you owe?
Say you carry three cards-a gas card, a general credit card, and a specialty card, for your favorite big box store. All these credit cards are near their max, and you don’t make payments each month. It’s tough because they all come due at different times, in different amounts, and it seems that they absolutely never come at the same time you get paid, and might have some money in your pocket. But not paying those debts gives you bad credit-in fact, just keeping those credit cards near their max can lower your credit score.
How can you fix credit card debt?
Take out a car title loan. Sound like more debt? Nope. You’re going to use that car title loan to get rid of those credit cards, improve your bad credit debt, and get your payments in line with your pay cheque so that you make one payment you can easily keep track of, at the same time, in the same amount, every month. Sound easy? It is.
How to get a car title loan
If you own your car (or other vehicle) and it is less than eight years old, you may qualify for up to 40% of the wholesale value of that vehicle. You apply online, fast, easy, and private. About 99% of people qualify, so odds are, you will too. And you’ll know about your car title loan in 24 hours or maybe less-it’s that fast. And they can even direct deposit it to your bank account, if you want.
When you get that car title loan, pay off those credit cards, and start making one payment that’s easy to track and easy to remember, at the same time, every month. You’ll be on the fast track to credit repair, and feel a whole lot better about your life and your future.