March 18, 2018
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Budgeting Steps and Tips

Some basic tips to begin budgeting are: Get a small notebook and keep track of every expense you have in one month, as small as a can of soda. After each, enter the results. After the month is over, put your purchases in categories such as groceries, entertainment, utilities, etc. List all of your credit cards and loans. Don’t forget to include your quarterly, yearly and seasonal expenses. If quarterly, just divide by four and include it in your monthly expense sheet. If yearly or seasonal, divide by 12. Narrow the expenses down to two categories: Fixed and variable. Fixed are those expenses that do not change and require a set payment each month. Variable expenses are things like groceries or clothes, which can change on a monthly basis. Don’t forget those credit card payments. Now, add up all of the expenses in both categories. Subtract your fixed expenses from your monthly net income. Once you have followed these tips, you have the framework to help you build a budget that suits your needs. You can decide what changes need to be made. Are there expenses that should be cut? Should you increase your income? Now that you have a picture of where you are now, you have to decide where you want to be going forward.

Part of establishing a budget for “where you want to be” should include savings. A good budget should include an emergency fund. Think of all of the unexpected expenses that come up that the emergency fund can help with: our car breaking down, the air conditioner breaking, an unexpected medical bill, the water heater breaking, getting laid off, etc.

The following tips will help you get out of debt:

The first step is to make a chart of your existing debt. Determine how much is available for debt repayment and where you can cut expenses. Pay the minimum payment on all credit cards. Pay all of the extra money to the card that is charging the highest rate of interest. Try to keep the payment level each month as the balances go down. When one card gets paid off, put that money towards the card that now has the highest interest rate. If you have the credit available, transfer the balances to the cards that have lower annual percentage rates. If you receive an offer in the mail for a card with a lower rate, apply for that card and transfer the balance from the highest APR card. Make sure you consider any fees. Do not transfer to rates that are temporary, unless the permanent rate is reasonable or you are willing to watch carefully and transfer again. Call the creditors who are charging high rates and tell them that you have offers with lower rates. Ask them to lower your rate. Check your credit report to make sure closed accounts are reported correctly. You should end up with one major credit card with a balance that you can pay off each month. If you find your debt going up you may want to use a debit card instead. If this doesn’t work for you, you may need credit counseling where all of your unsecured debt is consolidated into one monthly payment. In most cases, the creditors will waive or reduce their interest rates.

Did You Know?
There is a record of your bounced checks. Roughly 80% of American banks subscribe to a national check-reporting network called Chexsystem. Chexsystem works like a credit report, but records only your overdrafts and bad checks, as far back as five years. Banks use Chexsystem to determine whether a consumer is a risk. Too many overdrafts may cause your account to be closed “with cause”, and other banks may refuse to open a new checking account for you based upon this information.



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