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, 2009 |
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Living a Better Life Getting Back on Track – Budgeting for Those in Crisis We
often hear from families that are in financial crisis and this column was
written especially for them. (And anyone else who is struggling to get back on
track!) Some have signed up with a credit-counseling agency and a few
have already filed bankruptcy. However, even with
additional
assistance many still can’t seem to catch up and although their exact
circumstances may be different, the general feelings are very much the same.
Frustration, despair, and fear.
Fear
of possibly never being able to get back on track and live a better life. More...
However bad things may seem, I still believe everyone can get back on track. It may take several years of perseverance, dedication, humility, and hard work, but it can happen. Just as it is with many other difficulties we are presented with in life, there is no quick fix. We have to stick with with it and persevere.
If you're trying to find a way to get back on track financially, here are 7 major points that I first introduced in 2003 that I feel you should consider: 1. Take Responsibility for Where You are, Right Now · Whatever circumstances may have thrown you off-track, if your feet had been on really solid ground things would likely have turned out better. (For example: depending on your age at the start of your financial difficulties, if you were able to have had a nice savings built up by that time... you might have been able to handle whatever came your way.) · I know that this step is not easy, and it may even take you a long time to come to this point, but however long it takes, you just need to get there. · Accept it. Then move on with your life to make it better! 2. Do Whatever it Takes to Keep Your Head Above Water--as Long as it's Legal! · If you need extra money to pay your “already cut back as far as they can go” bills, then find a way to make more money, legally, and immediately. This is not the time to be looking for the ideal part-time job, just get one. · If you have already filed bankruptcy, or are already signed up for a repayment plan, it is even more critical that you stay afloat. · Read my column titled “15 Ways to Create More Cash.” Maybe it will give you some new ideas for generating cash or at least confirm what you already know you need to do. 3. Make a Plan and Get Out of Debt · Make a list of all your debts, including minimum monthly payments, interest rates, and current balances. · If you have more than one or two debts you’ve got several choices when deciding which one to pay off first. After listing your debts and the monthly amount due on each one, choose one of the following to pay off faster (with any extra money you can afford to send): o The bill with the smallest balance. (This is usually my recommendation as it yields more surplus money quickly, which can then be put towards the remaining debts--or the one with the next smallest balance.) o The bill with the largest minimum payment. (Similar results as above.) o The oldest bill. (This can be necessary if a debt has gone into collections, or is past due--medical bills are also a good example, even though they may have 0% interest. They will send bills to collections if gone unpaid too long.) o The bill that’s the most behind. (If you have several bills that are overdue, you’ll have to prioritize them according to your particular situation. You may have to juggle the debts each month until you get completely caught up, rotating the payments so that none of them get too far behind. Speak to each creditor personally and see what can be worked out, some may be more willing to work with you than others as I wrote about in my first ebook “Dealing with Debt,” which we provide as a free gift for all of our subscribers.) o The bill with the highest interest rate. (Or the highest fees you’re incurring because you’re behind.) o The bill (company) that you need to use again soon and won’t be able to unless it’s paid - for example, your basic necessities... housing, food, utilities and medical care. · Stick to your debt repayment plan as best you can, no matter how long it takes to get things right. Remember… o Perseverance o Dedication o Humility o Hard Work o NO FEAR!!! 4. Keep Track of Your Monthly Expenses · Before you can create a household budget, you’ve got to know what your monthly and annual expenses are. · Write your expenses down for 30 days if you’re not sure where your money is going. Take a look at your expenses over the last year to get an idea of annual expenses, such as taxes, insurance and subscription services. · Total each expense on our Basic Budgeting Worksheet. 5. Create a BUDGET for All Future Expenses · Whatever budgeting method you choose to use, even if it’s just a plain sheet of paper each month, make a plan for all of your annual expenses on a month-to-month basis. In other words, if you have an insurance bill due in December for $600.00, ideally you’ll set aside $50.00 each month throughout the year. Treat it just as though you’re making monthly payments to the insurance company. If you’re afraid you’ll spend the money you’re setting aside, put it in an interest bearing savings account. · If your monthly budget totals a sum greater than your monthly income, you basically have two choices. Well, three. o Cut your expenses further. o Increase your income. o Put your head in the sand and ride the storm out, there just might be something left when it’s over. (If you choose this option, please select one the other two as soon as you can handle it. You’ll be so glad you did!) 6. Keep Your budget in Proportion to Your Income · Here’s an example of what your monthly budget expenses (percentages of net income) could be. If you have one category that’s higher or lower than what’s listed here, then you simply adjust the remaining categories accordingly. No one's budget will have these exact percentages; they are a guideline intended to be adjusted on the needs of each individual household.
· Do everything you can do to make your finances better, and don’t be afraid to ask for help when you need it. If you need assistance setting up a successful household budget we are here to help! Check out our next 5-week Better Budgeting Class session, we always have room for a few more students. · Set aside a time each each week, to work on your bills (calling creditors, adjusting your budget, mailing payments, etc.). Then put the bills away, get your work done and get back to taking care of yourself and your family. And, try to have some fun; frugally of course! :o)
Enjoy your life, your family and your friends...
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Copyright © 2003, 2007, 2009 by Michelle Jones, founder and editor of BetterBudgeting.com Want more money-saving tips? Get a FREE subscription to our monthly Ezine!
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