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.
Where has all the money gone?
Ever wonder where all the money goes? We get paid and it seems within days, we have empty pockets. So, where does all the money go? Well, that’s a question that only you can answer. It will require creating a list of all incoming and outgoing monies and doing a bit of detailed balancing. Don’t forget to include the people who owe you money.
Many countries have this same issue to deal with. The EU has been making headlines lately for this very reason. It seems one of the wealthiest countries in the world has more money problems than any other. Dubai has recently come under massive public humiliation after spending years boasting such luxuries as man-made palm shaped islands (that are rumoured to be sinking) as well as the world’s tallest skyscraper (that recently had faulty elevator malfunction). Countries a little closer to home also have the same problem.
The United States spends an unprecedented amount of money trying to fix the nation’s economy. Ironically the cash required to accomplish this needs to be raised. If you’ve ever heard ‘it takes money to make money’, this is a prime example. The United States, a.k.a. Uncle Sam, raises its money by selling Treasury securities of varying maturity. This, of course, is the most simplified (of the simplified) version of where the money to run the nation comes from.
The United States recently did their own detailed balancing of sorts to find out where they money has gone and the results are a little surprising. These are the top five culprits accompanied by a few honourable mentions.
To the surprise of many, the largest holder of the United States’ debt is the US themselves. The Federal Reserve and the US Intragovernmental Holdings account for an amazing $4.8 trillion in US Treasury debt. Around ten years ago, this debt was only $2.5 trillion.
The second largest debt holders are Mutual Funds. This group of investments manages about $769 billion of the US Treasury securities. The third largest is China owing a phenomenal $739 billion as of January 2009. This does not include Hong Kong’s additional $71 billion debt. Japan comes in fourth as a major US trade partner owing $634 billion. Fifth place is held by state and local governments who have more than half a trillion dollars invested in American debt.
A few honourable mentions go to Pension Funds, both private and local government pension funds combined are worth a $456 billion debt. Investors, oil exporters, Caribbean bank centres, depository institutions, insurance companies and a combination of several additional countries make up the additional debt.
Even though logic tells us our personal debt will never reach such heights, it’s still important to keep track of our spending and our lending. If you find yourself wondering where all the money has gone, consider debt consolidation by inquiring about a private secured loan. It may help to ease your debt and manage your money more effectively.
What’s Your Credit Type?
Really, there are only two types of credit: good, and bad. Which type describes you and your financial situation? If your credit is out of control, there are ways to recover and move yourself from a bad credit risk to someone any banker will be glad to see.
How do you know if you are a bad credit risk?
If you can’t say, within a very few dollars, how much you owe and to whom, chances are that you are a bad credit risk. If you can’t count your credit cards on way less than the fingers of one hand (and thumb, ring finger and pinky don’t count) you may be a bad credit risk.
How to improve your credit score
Managing credit isn’t all that tough, but it’s something a lot of us let spin right out of sight. But a few simple steps can help you stop that tailspin and level out your credit again.
First, when your bills arrive, don’t stuff them under the couch. Have a drawer or a basket within easy reach of the door where you can put them as soon as they come. Use that drawer only for your bills. Promise yourself that every month, you’ll open that drawer, pull those babies out, and pay them on time.
Then, make paying bills a feel-good time. Tell yourself that this is the responsible thing to do, that it shows creditors they can trust you to repay what you owe, that you’re good for it. Have one place where you sit down with your bills to pay them. Make yourself a coffee and settle in. Write down on every bill what you paid and when you paid it. Subtract that amount from your debt. Keep track of that debt and watch it drop every month. Store your paid bills separately, in envelopes, and mark the new amount you owe on the outside so you can see how much you’ve paid down. You’ll be amazed at how good you’ll feel and how well you’ll sleep (and how nice it is when creditors stop calling you).
Keep your credit cards at home so you can’t make impulse buys. When you feel the need to buy something, picture those bills in that drawer. Do you really want to add a new bill to the picture? Think how good it would feel to have an empty drawer.
Consider fast-tracking your debt
That means using credit wisely to help pay off what you owe. One way you can do that is through a car title loan. If you own your car, and it’s less than eight years old, you can apply for a loan using your car as collateral. Sometimes you can get as much as 40% of the wholesale value of your car. It may sound crazy to use a debt to get rid of a debt, but sometimes you need that jumpstart to get you moving on paying debt down. Also, a car title loan enables you to pay off multiple bills and turn many monthly payments into one easier to make payment. A car title loan is easier to get, too, and has the advantage that it’s a loan-and that makes you look good to other lenders in the future.
So, which credit type are you going to choose to be? It’s all up to you.
Credit Repair for Tough Economic Times
Has the economic downturn of the last year or so flushed your own credit down the toilet? Think you’ll never recover from your bad credit? Think again.
Bad credit isn’t the best experience of a lifetime, but it can be fixed. And even in these economically challenging times, you may have more assets to work with than you think.
Know where you stand
First, always get a current credit report. Be sure that your credit rating is accurate. Errors are not uncommon. If there has been a mistake on your credit report, get it fixed. Next, consolidate your loans, if you can, so you make one payment each month. And put those credit cards on ice-literally, if you have to! Then, put yourself on a budget. The whole family can help figure out where you can cut costs, and save some cash. Finally, only use cash to pay for everything you buy, and track your spending. Now you will know where you stand, and how much money you have available to you, each month for life and debts.
A surprising source of credit
Here is something you might not have realized that can help ease your way out of debt and to better credit-your own vehicle.
That’s right. Your vehicle may offer you some help in repairing and rebuilding your credit. If you own your vehicle, and it is less than 8 years old, car title lenders may have help for your bad credit problem.
How car title loans work
Car title loans work in different ways. One, you may be able to re-finance your car to get extra cash to help pay down those pesky bills. That helps you eliminate debt, and it helps you rebuild your credit with one stroke. It may also make the pain of bill repayment and credit repair a bit easier to bear.
Other ways car title lenders work is by helping you to repair your vehicle. If you haven’t been able to work, or you can only work in areas where there is public transit, car title lenders may be the answer to your ride problem. Car title lenders can help you to use the value in your car to repair your vehicle-and get you back on the road to better credit, and a better life.
Bad credit can sometimes seem overwhelming. But there are more ways to credit repair than you might have thought of before, and car title loans may be a good choice for you. Assets such as your vehicle can help you to pay down debt, repair bad credit, and re-start your own engine.
Loans to Improve Your Credit Rating in 2010
If you’re like thousands of others, last year was a bit of a financial disaster. Paying bills late, not making credit card payments on time, phone calls coming in reminding you to pay an account were common occurrences for so many people in 2009. As a result of these, credit ratings can take a beating.
You may be asking, just how important is a credit rating anyway? A credit rating is a legal track record of your financial responsibility. This record is housed at Equifax and TransUnion Canada and your record indicates if you are worthy of receiving credit. Landlords, utility companies and other businesses who ‘lend’ you something want to know just how responsible you are.
When you have poor credit it’s generally much more difficult to obtain a mortgage, a car, loans and even a cell phone. Poor credit can seriously hamper your ability to rent an apartment, appliances or furniture. Even those places that advertise ‘no money down and no payments til next year’ will not consider poor credit because when they say ‘OAC’, that means ‘on approved credit.’
It’s a new year and why not take the opportunity to do something to improve your credit rating? Take out a loan to help toward existing debts, making home improvements or to take a mini-vacation. It may sound crazy, but by getting a loan and making payments on time will help to re-establish your credit rating, and this is a good thing.
Many people may consider a loan to lower their credit card balances. Perhaps the thought of another monthly payment may sound overwhelming, but lowering those credit card balances also works in your favor to improve your credit rating. Many people may not realize this, but a credit card balance that exceeds 75% of the credit limit is frowned upon and is reflected negatively at Equifax and TransUnion Canada. If you have a card that’s maxed or coming close to being maxed, then lowering that balance is really important.
Getting a loan to improve your credit rating only makes sense. No matter what your credit rating is, there are options.
Financial New Year’s Resolutions: Make 2010 the Start of your Journey to being Debt-Free
Making New Year resolutions is an age-old tradition of making a commitment that’s focused at reforming or changing something negative into something positive. Many people want to make the resolution to solve their debt problems but don’t know how to follow through with results.
If you’re like many people 2009 ended with financial stress and the start of the New Year isn’t looking very bright. The holidays for many mean maxed out credit cards and payday loans leaving very little hope to stay above water let alone get ahead. Getting behind with debt payments causes stress and if you’re three months behind then categorically, those debts are considered delinquent. You’re not alone. Equifax Canada reported that as of May 31, 2009 over half a million Canadians were more than ninety days past due on their credit payments.
Trying to consolidate debt can be like hitting brick walls because bad credit impacts your ability to get a loan from many financial institutions. But, there are alternatives to traditional or payday loans available, even to those with bad credit. One such alternative is a car title loan. These are loans which are based solely on the value of your vehicle, and because these loans are secured, the borrower’s credit rating is virtually irrelevant.
Imagine starting the New Year by paying down debt you thought you’d never be able to make a dent into. Reducing the balance of your credit cards is essential in helping to build up your credit rating. Carrying a balance over 75% of your credit limit puts you into the credit rating “dog house.” Not only is it not favourable, but what if you had a financial emergency? Having room on a credit card is crucial should there be an emergency and you need cash instantly.
That “room to breathe” is also important for the sake of your emotional and physical health. Stress has been known to have a significant impact on an individual’s health, and the constant burden of financial stress is not only one of the leading causes for ill-health, but in relationship troubles. Paying down that credit card debt will provide relief and give you peace of mind.
Paying down credit card debt can seem like a never ending cycle. By obtaining a car title loan, you can put an “end” date on your debt. While it may take longer than 1 year to pay all of your debt, you can make 2010 the year you began your journey to being debt-free.