According to a Gallup Poll (November 2013), only 34 percent of Americans prepare a monthly budget. This entails a detailed, written budget done monthly; here is where you start.
Tip 1 – Make a Budget
There’s no way to improve your financial situation unless you know what needs improving.
A budget consists of fixed and variable expenses. Variable expenses include necessities such as food, where the amount varies, and it also includes things like eating out, clothes, and things you spend on every month.
Why make a budget? The main purpose for a budget is control. A budget is a snapshot of your lifestyle. If you’re serious about improving your financial situation, then making a budget is essential.
Tip 2 – Fine Tuning Your Budget
This is the part many people hate. You’ll have to see where the leaks are in your budget and fix them. Check out Mint.com to help understand how you are allocating your funds, and where you can be saving.
Are you spending too much on eating out? How about entertainment? Can you trim back on these expenses? This means changing habits, lifestyle changes, but if you want to improve your finances, then this is a necessary step to do so.
Tip 3 – Analyze Your Debt
Here’s a quote from Mark Cuban, owner of the Dallas Mavericks: “freedom from debt is worth more than any amount you can earn.”
Do you buy this statement? Think about it. When you’re in financial straits, doesn’t this not only consume your finances but also your life? It’s a weight you carry around day and night. So, Mark may be on to something…he certainly seems to be walking the talk himself.
Tip 4 – A Plan to Payoff Debt
When we talk about paying off debt we’re categorizing debt such as credit cards and personal loans. This debt is manageable, carries higher interest rates, and is the easiest to attack.
It’s pretty simple. Lets say you have $200.00 allocated monthly for four credit cards. You are paring $50.00 to each, but the minimum payment is only $25.00. Take the credit card with the highest interest rate first, pay $125.00 to it and $25.00 to the others. Once the first credit card is paid, follow the same procedure with the next highest rate card.
Sticking to the plan is key to its success and bankruptcy credit repair is where you can satart. This plan works because you see results, and this motivates you to stick with it.
Tip 5 – Consolidate Debt
If you are fortunate to have equity in your home or a strong credit standing, then consolidating debt may be the perfect solution.
Taking the equity from your home and consolidating all those little credit card debts was a popular strategy when home prices were high. The problem was, people fell back into the credit card trap. As time passed, the temptation of buying on credit crept back and the credit card debt mounted. The difference now was they also had a home equity loan to deal with – it went from bad to worse.
Consolidation loans are a great option, if used properly. You can get rid of high interest debt, you can lower your monthly payments, and you can use the extra money to accelerate paying off other debts.
Tip 6 – Debt Settlement
If you have more debt than income, you have what is called negative cash flow.
The shoebox method works for a while, but it eventually fails. The shoebox method is one where all the bills go into a shoebox, a bill is randomly pulled from the box, paid, and then onto the next. When the money for bills runs out, the poor bills left in the shoebox have to wait until next month.
Debt settlement is a negotiation process between you and your creditors. If your creditors agree, you can eliminate some of the principal owed and reduce your monthly payments.
You can do the negotiation process yourself, but mot people find it less stressful using a professional debt settlement service.
Not one size fits all. Everyone’s financial situation is different and the method(s) you use will be different too.
You need to control debt – don’t let debt control you.