budgeting

Get You Budget Right by Managing Your Personal Finances

March 2, 2014 by illinois

If you wish to stay afloat in your personal finances, it is important to maintain a proper household budget. Without maintaining a proper household budget it will become very difficult to efficiently manage where your money is spent. In order to make sure you stay away from a misguided budget, you might want to follow a few general guidelines in order to get your budget right.

In Home Expenses

Housing expenses are the biggest and most costly part of any budget. Thing that you should make sure to include while writing out this budget are your:

Rent/Mortgage
Home Insurance
Taxes
Home Modifications
Utilities, such as, electricity/gas/water/trash/sewer/phone/cable and internet

Of course, the rent/mortgage is the biggest part of this budget and should account for about 25% of your budget. All in all, with everything listed included your budget expense here should be about 30-35% of your monthly income.

Everyday Expenses

Living expenses is a very broad category to try to narrow down into a list. Many people will find themselves overspending in this general budget because there are so many different things to consider. In order to get your budget right, these expenses should only account for 20% of your monthly income. Things to include in this category are:

Groceries
Eating Out
Entertainment
Healthcare
Clothing and other Personal Items
Gifts
Monthly Subscriptions
Cable/Internet

Budgeting your Transportation Expenses

Transportation is a necessity in order to run errands, get to work and travel. It is possible for this section of the budget to become very expensive, especially if you are making payments for your vehicle. While planning for your transportation budget, it is important you try to stay at or below 20% of your monthly income, in order to get your budget right you should account for your:

Loan Payments
Expenses on Gas
Vehicle Insurance
Maintenance and Repairs
Costs for Parking
Toll Roads

If you do not own your vehicle but are using a means of public transportation, you might wish to substitute the loan payments and gas expenses for the fares it costs to use whatever form of transportation you are using, whether it is bus, taxi or subway fares. If you are planning on buying another car in the future, get your budget right in the future by adding your savings as part of this category.

Debt

In order to get your budget right you will wish to make a means of saving some extra money each and every month. This is often a difficult task to accomplish, especially if you are dealing with debt. Once you have focused on and figured out the rest of your budgeting expenses, it is important to turn some of your focus onto your savings account. If you have debt, it is important to focus on paying that off before focusing too much on your savings account. Make sure to try to keep your debt repayments at a minimum of 15% of your overall budget.

Savings

Many people think that having a savings account is unimportant, especially while they are busy paying off other debts, this could not be more wrong. Including a savings system into your budget is very important, especially in dealing with unforeseen emergencies, as well as your investment savings. If you have other forms of investments other than your 401k plan, you should put that in your budget here. Make sure to only use about 10% of your savings plan in this category.

Free of Charge

If you have managed to stay out of debt and are simply looking at getting your budget right. You might want to consider using the 15% of your debt repayment budget and putting it into your savings budget, this would put you at saving 25% of your monthly income. Many people might consider 25% of your monthly income as savings might be too high. But if you think about it, it’s really not that high. Although it is promised, there is no guarantee of receiving your social security benefits after retiring and with the inflation rates the cost of living will only rise throughout the years. If you think about your savings, when you reach retirement, wouldn’t you rather have more than enough money, or not quite enough?

Breaking Down the Budget

Let me break it down for you so it is easier to get your budget right.

35% of your monthly income should go to housing costs
20% is for your everyday expenses
20% is for costs of transportation
15% is for Debt repayment
10% for savings

When deciding on how to get your budget right this categories should be your main point of focus. It is important to balance your ratio in each category, if you have debt and wish to pay it off more quickly, then you might want to consider taking a percentage out of one category and using it in your debt repayment category and so forth.
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How Proper Financial Management Skills Can Get You Out Of Debt

April 25, 2013 by illinois

What people fail to realize is that debt relief is not enough to get you out of debt. You need to understand that any program will have to be partnered with proper financial management skills. Knowing and implementing these skills will also help you develop the habits that will keep you from growing your debt and stay out of any debt situation in the first place.

Probably your best bet to learn these financial management skills is to go through credit counseling. This type of debt relief program includes debt education that hopes to help individuals learn how they can avoid the mistakes that they made in the past. These are the mistakes that led them to the debt situation that they are current in. The best credit counseling agency will teach their clients the following:

First is how to make a budget. If you think about it, financial management is all about staying on top of your finances. You can do this by creating a budget. It will show your income and a detailed plan of where every money will go to. By plotting your expenses on this plan, you will be able to make sure that your limited resources will go to your priority expenses and not on impulsive buying.

It is important for you to define what should be included in your priority list. We sometimes get into a lot of trouble because we always make excuses regarding unnecessary purchases. We make a lot of flawed reasoning so we can justify spending for our wants. You need to discipline yourself so you will only prioritize your needs from now on.

You want to do this so that you can free up more of your income for your debt payments. Or if not, you can use it to build up your reserve fund – which is another skill that you have to develop.

Saving is not just your security net. It also keeps you from incurring more debt. When there is an emergency, you do not have to use your credit card or resort to borrowing from someone else just so you have the money to tide you over a crisis. You can simply pull out from the amount that you had been saving up for these types of situations.

Another habit that you have to develop is making smarter spending choices. As mentioned, what keeps us in debt are the excuses that we make to justify unnecessary purchases. Think twice before every purchase and make it a habit to stick to your budget. If there is a single doubt in your mind that a purchase is really necessary, put off buying it. While you wait, you can save up for it instead of going out of your current budget just so you can afford that particular expense. Try not to put yourself in a huge credit card debt mess if you do not have to.

All of these proper financial management skills that you will learn from credit counseling will help you grow your disposable funds so you can get out of debt faster. The best part is, you get to learn the right habits that will keep you debt free for a long time. It will lead to a whole lot of new habits actually. Just remember that debt really requires you to make certain sacrifices. You have to be ready to take them because the rewards of being debt free is so much greater than what you will have to give up.

Prioritizing Debts and Bills When You Have Limited Resources

April 19, 2013 by illinois

What do you do when you have limited income and a mountain of bills and debts to pay off? That is a very stressful situation to be in. How do you choose which payments will be sent off or ignored?

When Americans started to lose their jobs, a lot of them were placed in this predicament. It is not an easy decision to make because both your bills and debts are important expenses that you have to spend for.

But if it comes down to choosing, of course you need to prioritize your bills. However, it has to be scrutinized to make sure that the bills you are paying for are down to the bare necessities. For instance, your living expenses will include your food, groceries, utilities and gas. If you are renting, you should also prioritize this. The idea is to pay for the bills that consists of things and services and you need to live comfortably.

Your debts will be second to this but you have to rank them according to priority as well. Secured debts are important because defaulting on payments could endanger your collateral. Unsecured loans will be on the lowest part of your list – even if some of them have a high interest. If you can keep up with the minimum payments, you should try to reach that amount at the very least.

Ultimately, you know that if your income is no longer enough to support your current bills and your debts, something has got to change. You need to rethink your lifestyle and lower it down to a level that your income can afford to support. If that means living in a smaller home or selling your luxury car to get a second hand one, that is what you should do.

As you lower your bill payments, you should also do something about your debts. There are debt relief options that can lower your balance significantly if you follow the rules correctly. Or you can consolidate your debts to make payments more manageable and to possibly have a reduction on your interest rate.

Debt management is a legitimate way of dealing with debt problems – especially for consumers who are in need of lower monthly payments. With the help of a debt counselor, they will create a debt management plan that will guide you through the tough sacrifices that you have to make as you pay off your debts. This plan will be based on the amount that you can afford to contribute on a monthly basis – regardless if it is smaller than your current. They will stretch your balance over a longer period and present this to the creditor for approval. The negotiation will concentrate around the lower monthly payment and a possible lowering of your interest rate.

Sometimes, all the decrease and budgeting and the debt relief program may still not be enough. If so, then you should probably increase your income. There are various work from home careers that you can explore. You can even look at your hobbies to see if you can earn from them. As you increase your income, you can loosen the restriction on your budget and make bigger debt payments. Any of these options, alone or combined, can help you ensure that every payable will be well funded.