5 Steps to Financial Management
Convince Yourself
Alright, you know the extent of your debts. You know what led you to your financial issues. You're feeling how excessive debt is impacting your life. Now it's time to take action. These five steps will help you get on the road
Step 1: Start a household budget to guide your spending. The budget should detail your monthly income and your monthly expenses.
Start out by making a list of all current income sources. This would include everything from dividends, alimony, rental income, interest, etc. Then make a list of the opposite, expenses. This includes mortgage or rent payments, monthly utilities, monthly food cost, auto loan payments, credit card payments; anything that is a routine monthly expenditure. Track all expenses over the course of each week. Then compile the list of weekly expenses into a monthly list. Track this over the course of at least three months. By then you should have a complete view of reoccurring monthly expenses and an amount to plan for.
If after tracking your income and expenses you find that your expenses are more than your income, then you have two options. Either find more income, or decrease expenses. Sometimes not all expenses are needed, so cut the discretionary expenses first. Essentially, your income should exceed your expenses by a good amount to plan for many things: vacations, retirement, rainy days, etc.
Step 2: Compile all debt payments together: credit cards, auto loans, mortgages, etc. Prioritize all of your debt payments. Of course you must make all your minimum payments, however, the idea is to pay more towards the higher interest debts. Be sure to make at least the minimum payments due on lower interest debts.
Step 3: Contact your credit card companies and attempt to negotiate a lower interest rate. Be completely honest about your financial challenges. Remind the credit company that you'd like to still remain a loyal customer, but that you are simply needing a bit of help. Most times the creditor will make small adjustments to avoid the risk of a default on payments, or a transfer of credit debt from one card to another.
Step 4: Save money on a daily basis. Simply keep in mind that you have to save a set dollar amount each day. You could even make a money jar to deposit your daily savings in. At the end of each week, make a trip to your local banking institution. Possibilities for saving are boundless; instead of stopping at the local Starbucks every morning, brew a pot of coffee at home. Start clipping coupons from the local paper for food items. Start purchasing house brand items at the grocery store instead of brand name items. Change your cell phone provider to a more reasonably priced provider. There is always a better deal for auto insurance; find one.
Step 5: Do not hesitate to contact a credit counselor if you believe you have serious difficulties. There are professionals who are available for financial guidance such as non-profit credit counseling agencies. These professionals can offer no obligation credit counseling evaluations of your financial status. Before you attempt to do this however, make sure that you complete a background check on the counseling agency by using the Better Business Bureau's web based tool.
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