Tag Archives for " Reading "

Budgeting for Dummies – Learn These Essential Steps to Help You Manage Your Finances

“This article will discuss essential steps and tips on how you can manage your finances better. Budgeting for dummies you say? Read on and find out!”

 

budgeting for dummies

Learn and Be an Expert in Managing Your Finance

Learning how to budget is essential to becoming financially healthy. Many people are intimidated by budgeting simply because they have never learned how to budget. Budgeting is simple. It’s a process where you write down what you make each month, what you spend each month and what’s leftover (or overspent) each month.

The whole goal of a budget is to tell your money where to go each month. If you haven’t been budgeting or just simply don’t know how to budget yet, you finances are likely getting out of hand. There is hope in learning how to budget your money. Let’s dig in to the five steps of learning how to budget:

  1. How to Budget, Step 1 – Track Your Income
  2. How to Budget, Step 2 – Track Your Expenses
  3. How to Budget, Step 3 – Estimate How Much You Will Spend in the Next Month in Each Budget Category
  4. How to Budget, Step 4 – Give Your New Budget a Try For a Month
  5. How to Budget, Step 5 – Keep Working at it and You’ll See a Difference

How to Budget, Step 1 – Track Your Income

Yes, you will need to track everything. Do you know how much you make each month? No is not an acceptable answer. Get out those pay stubs, log into your company’s online pay stub system or just look at your bank statement. Note: If you’re income is irregular, you should do additional research on how to budget with an irregular income. There are some great articles out there. For those of you who get regular paychecks, make sure to get your numbers and do the basic calculations on what your income is each month. Once you have your income number totaled, write it down at the top of a blank sheet of paper.

How to Budget, Step 2 – Track Your Expenses

This is the hardest part of budgeting. Learning how to budget won’t do you any good if you’re not tracking your expenses. It’s important to track everything you spend each month because then you can make educated guesses on how much you think you’ll spend each month. The goal of making a budget is to to learn how to estimate your expenses and allocate a specific amount of money each month to certain categories.

A typical budget is broken down by categories of expenses. Some common categories of expenses are:

  • Mortgage and Rent
  • Bills & Utilities
  • Loans and Payments
  • Shopping (clothing, gifts, toys)
  • Giving (church donations, non-profits)
  • Cable TV
  • Cell Phone
  • Internet
  • Gasoline
  • Insurance

To successfully learn how to budget, you’ll need to get a feel for how to categorize your expenses. Mint.combudgeting for dummies does a great job of breaking your expenses into categories, In fact, Mint.combudgeting for dummies has a budgeting tool set which can greatly speed up the process of learning how to budget and get your first budget going. I would highly recommend getting started budgeting with Mint.combudgeting for dummies.

If you decide not to use an electronic system to learn how to budget, an old fashion paper and pencil will definitely do the trick. Write down your budget categories, which are categorized expense types, down below your income on your piece of paper. There could be anywhere from 10 to 50 budget categories. Try to lump them into around 15 or 20 categories as this will make it simpler in figuring out how to budget.

How to Budget, Step 3 – Estimate How Much You Will Spend in the Next Month in Each Budget Category

Once you have your categories decided upon. Try to estimate how much you will spend during the next month in each category. If you haven’t been tracking your expenses up until this point, you’ll likely be WAY off, but that’s okay. If you have been tracking, you may still want to estimate higher than you initially think for each category. When I was first learning how to budget, I tried cutting down many of my category allocations because I thought, “Oh, I don’t need to spend all that”, but I was wrong. Just allocate a number that you regularly spend. Don’t try to short change yourself and make it hard on you to hit the numbers. Budgeting should be a real number, not a fake one that’s too low to realistically hit.

How to Budget, Step 4 – Give Your New Budget a Try For a Month

During and after the first month of learning how to budget, you will likely get frustrated. You likely won’t stay below your estimates. We usually spend way more than we think we do. We just never have tracked how much all that eating out costs us each month. So, if you’re shocked on how much you spend in some categories after learning how to budget, don’t worry. It will take a few months to get this stuff right. For the next couple of months, try tweaking your budget in the direction of over or underspending and see how that goes.

How to Budget, Step 5 – Keep Working at it and You’ll See a Difference

Budgeting is hard at first when you’re first getting started, but after you learn how to budget effectively, it can start getting fun. The results of telling your money where to go each month and being in control of your spending can be huge. I learned how to budget only a couple of years ago and have since gotten out of debt, built an emergency fund of 6 month of living expenses and have saved a significant amount of money that I plan to use either toward a home purchase or toward an investment portfolio over the next few years. I’m definitely glad I took the time to learn how to budget and hope you will too….More at Budgeting for DummiesHow To Make A Budget- A Budgeting for Dummies Article Solution

More Reading on Budgeting for Dummies:

Fast Instructions on How You Can Build Credit Fast

“Big question is on how you can build credit fast. A number of factors go into evaluating your credit worthiness. Many of these factors are affected by your length of credit history, or how long you have had credit. The more responsible you are with your credit, and the longer your history of responsible borrowing behavior, the better your credit will be. Below are instructions on how you can build credit fast”

Fix Your Credit Fast

Establishing a good credit score has never been as vital as it is in today’s society. Your credit rating will follow you around wherever you go. When you want to buy a home, your credit rating will determine how much interest you pay a month. It will determine how much you can borrow. Employer’s also review your credit score when you apply for a job. For young people, it is important to get on the right road in the beginning.

How to Build Your Credit Fast How To Have a Good Credit Rating Fast Instructions:
1. Check your credit rating for free with one of the free credit report websites. There are three main credit bureaus, Equifax, Trans Union and Experian. You can read my article on how to get your credit history report for free in the resources section. Use FreeCreditReport.com or AnnualCreditReport.com, make sure to delete your account before the trial period is over so you don’t get charged.
2. Second option on how you can build credit fast is to put money into a checking account. People want to see bank account to know that you have some security in your life. Two accounts are a good idea, one checking and one savings. Pick your bank as to which ones have the most ATMs in your area for convenience. Interest earned in the accounts is trivial so it doesn’t really matter.
3. Understand what goes into your credit score. Research how the score is made up and pay attention. Two basic things to remember are that you need to pay your bills on time and don’t overuse your credit. It is better to not use credit than to pile up your bills and pay them off. Establishing good credit is not just about swiping your credit card and then paying it off.
4. Another thing to remember on how you can build credit fast is don’t max out your credit cards. This will not help establish a good credit score. Never charge more than a third of what your credit limit is.
5. Mix up the ways you borrow money. Get a loan for a used car, get a card for the market you go to. Also write checks to pay off your bills. Maybe have one credit card that you put your gas money on and then pay it off on time every month.
6. All in all, try to stay out of debt. If you are in debt, this essentially hurts your credit score. There are many resources for getting out of debt. Pay off your biggest interest rates first….. More at  Build Credit Fast – How to Build Credit Fast
You can also watch this video to know more on how you can build your credit fast:

More Reading on How You Can Build Credit Fast:

23 Powerful Tips and Tools to Eliminate and Get Out of Debt Fast

“Here is one of the most frequently asked questions in all of personal finance: ‘How do I get out of debt fast?’.. Continue reading and find out how”

get out of debt fast

Repair Credit Fast

At one level, eliminating debt is simply about following a few steps:

1. Stop going into more debt
2. Spend less than you make
3. Pay off debt with the difference
If you follow these steps, eventually you’ll be debt free. The problem is that following these steps isn’t always so easy. And to make matters worse, there is a lot of “help” out there that can make matters worse. From debt consolidation companies to books like Kevin Trudeau’s “Debt Cures” that I wouldn’t recommend to my worst enemy, there are a lot of promises being made that getting out of debt is easy. It’s not.

In fact, tackling your debt may be one of the hardest things you’ll ever do. You have to control your emotions, which can play a big part in how we make financial decisions. You have to educate yourself about everything from home loans to credit cards to credit scores. And you have to discipline yourself in the way you manage and spend money. The fact is that controlling your spending and paying off your debt is not an easy thing to do. But the good news is that you can do it. If you want to be debt-free bad enough, you can make it happen.

And to help you reach your goal of being debt-free, I’ve assembled a list of 23 tips and tools. If you know of others, please leave a comment at the bottom of this post.

Get to Know Your Debt
The first step in tackling any problem is to fully understand it. When it comes to debt, you should know everything about the terms and conditions of the money you owe. Here are some tips and tools to help you understand your debt.

1. Put Your Debt On Paper: The very first step is make a list of the debts you have. The list should include the following information: The name, address and phone number of the creditor; the outstanding balance; the interest rate; the minimum payment; and any other information you feel is important. Even in the age of computers, I like to write out my debt on paper, at least at first.

2. Take Advantage of Personal Finance Software: By now many people already have and use personal finance software like Quicken or YNAB (You Need a Budget). If so, you can use the tools within the software to record all of the debt you owe and to develop a plan to pay off that debt.

3. Use Free Online Tools: There are many budget tools available online for free. These tools can track your debt and are easy to use. And it’s hard to beat free!

4. Use Free Excel Templates: Microsoft offers free Excel templates that can help you track your debt and a budget. Actually, Microsoft offers free templates for just about everything, including resumes. You can check out the free budget templates here.

5. Involve Others: It’s important that your spouse or significant other is involved in the process. If you don’t see eye-to-eye on finances, it can make getting out of debt even more difficult than it already is. It’s not uncommon for one spouse to take the lead in handling finances, and that’s fine. But you both should be on board, particularly as you develop a plan to tackle the debt.

Create a Plan to Pay Off Your Debt:
Having written down all your debts, it’s now time to determine how you will go about paying off these bills. A solid plan should not be complicated. It’s simply your approach to tackling your debt. There is no one single approach; you need to do what works best for you and your family. There are, however, some important considerations and tools that can help you develop an effective debt repayment plan:

6. Debt Repayment Calculator: As a starting point, it’s helpful (and sometimes painful) to see how long it will take you to pay off your debt if you make just the minimum payments. And there is a free debt repayment calculator that is very easy to use. While the plan will involve making extra payments, the starting point is to understand what you are up against making just the minimum payments on your debt, and this calculator will help you do just that.

7. Prepare a Budget: For many, the word “budget” is the dreaded “B” word. But the fact is that you need a budget to control your spending and better manage your money. Remember that it’s the money you don’t spend each month that will go toward paying down your debt.

8. Be Aggressive About Paying Off Debt: Dave Ramsey talks about tackling debt with “gazelle” intensity. It’s about being aggressive in paying off your debt. As you work through your budget, recognize that every dollar counts, and that the more you throw at your debt, the less interest you’ll pay and the faster you’ll get out of debt.

9. Be Realistic About Paying Off Debt: While we all want to get out of debt fast, we do have to be careful not to get too aggressive. Paying off debt is a lot like going on a diet. You can commit to never eating foods that are bad for you, but is that realistic? The thought of never eating ice cream is just too much to bear. The same is true with debt. Yes, sacrifices will have to be made to meet your financial goals, but you need balance in life, including your financial life.

10. Order Your Debt: With your budget in place and an understanding of how much extra money you can put towards debt, it’s now time to map out a specific plan. The question is this–which debt will you put your extra money toward first? The first thing is not to get too hung up on this question. Depending on your situation, one approach may be better than another, but if you consistently pay down your debt without incurring more debt, you’ll make great progress regardless of which debt you pay first. That said, here are the top three approaches to deciding how to tackle your debt:

  •  Highest Interest Rate First: With this approach, you put all the extra cash you have on the debt that has the highest interest rate. This approach will result in the lowest interest charges and the fastest debt repayment possible.
  • Smallest Balance First: This is the Dave Ramsey approach. He suggests targeting the debt with the smallest balance first. While that debt may not have the highest interest rate, the theory is to get one debt paid off as fast as possible. The rationale is twofold. First, paying off a debt gives you a feeling of accomplishment, which may be just the motivation you need to keep on track. Second, by paying of a debt completely, you free up the cash that was needed to make monthly payments to that bill. While you are likely to put that cash to the next debt, in an emergency, you could use it for other purposes. In other words, by paying the smallest debt first, you free up cashflow.
  • Non-Revolving Debt First: While many talk about the two approaches above, few look at the type of debt when deciding which one to pay first. Recall that revolving debt, like credit cards, allows you to borrow again after you’ve paid down the debt. Non-revolving debt, like a car or school loan, does not permit you to borrow again as you pay down the debt. With a car loan, once the debt is paid, the loan is gone. With a credit card, once the debt is paid, the card is still there to use again if you so chose. For this reason, I’ll often focus on non-revolving debt first. Why? Because I can’t go out and charge up the debt again once it’s paid. This is purely a pyschological issue, but an important one, particularly if you fear you may lack some discipline once some of your debt is paid off.

11. Don’t Forget Your Emergency Fund: An emergency fund is a really important part of a debt elimination program. While you may be tempted to put 100% of your extra cash toward debt, keeping at least some of it aside for emergencies will help break the reliance many have on credit. When the car needs new tires, it’s better to turn to the emergency fund than it is the Visa credit card. I’ll also add that while you can use a high yield savings account for your emergency fund, a short term, high yield CD may be the better bet. Whle most CDs do charge a penalty if funds are withdrawn before the end of the term, that penalty can help keep you from accessing the funds for anything other than a true emergency. In addition, there are short-term CDs available with 3 or even 1-month terms.

Another way to get out of debt fast is to improve your credit score. When many people think of credit reports and credit scores, they see them as important if you want to apply for a loan. And of course they are important when you apply for a loan. But your credit report and score are also absolutely critical to getting rid of debt. With a good credit score, you qualify for lower interest rates that can help bring down your total interest charges. With bad credit, you’re stuck paying double digit rates. So let’s look at some tips and tools that can help you:

12. Understand the Importance of Your Credit Score: As noted above, your credit score is an important tool in getting out of debt as quickly as possible. To underscore this, check out these stats from myfico.com for individuals with a FICO score of 660 (fair credit) versus 760 (excellent credit):

  •  Mortgage: The average interest on a home loan today is about 4.766% for excellent credit, but 5.379% for fair credit.
  •  Car Loan: With a credit score of 760, you can expect a car loan interest rate of about 6.3%. With a score of 660, the rate increases to about 9.8%.
  • Home Equity: Excellent credit can expect a rate of around 8% or lower, while fair credit borrowers will pay as much as 11% or higher.

In short, your credit score matters.

13. Get your Free Credit Report: The starting point is to get your free credit report and check it for errors.

14. Get your Free Credit Score: Next you should get your free FICO score. You can’t get this from annualcreditreport.com, but there are several sources that offer your real FICO score in exchange for signing up for a free trial of a credit watch program. You can always cancel before the end of the free trial if you don’t want to keep the service.

15. Pay Your Bills on Time: There are a number of factors that go into a credit score, but one of the most important is paying your bills on time. Do whatever is necessary not to forget a payment, and make sure you make the payment far enough in advance of the due date so that there is no chance it will be late.

16. Don’t Close Accounts: As a general rule, don’t close credit card and other revolving accounts. One of the factors in determining credit score is the amount of debt you have in comparison to the amount of available credit. The greater the available credit, the better. You can always cut up some of your cards if you don’t want to risk using them, but don’t cancel them. Here are some other tips to improving your credit score.

Get the Lowest Interest Rates Possible on Your Debt:
While you are working to improve your credit, it’s important to be on the lookout for ways to reduce the interest rate on your debt. Whether the debt is a home loan, car loan, credit card or some other debt, getting the lowest possible interest rate will help speed up the time it takes to eliminate your debt. Here are some tips and tools to help you lower your rates:

17. Refinance Your Mortgage: The general rule is that you should refinance if you can lower your interest rate by 1%. While that’s a good starting point, it is important to also consider how long you plan to stay in the home and whether you need to convert from an adjustable rate mortgage to a safer fixed rate loan. Interest rates are still at historic lows, and it is easy to compare mortgage rates online.

18. Negotiate Lower Interest on Home Equity Lines of Credit: If you have a home equity line of credit, compare your interest rate with current market rates. If you think you can do better, step one is to call the mortgage company and request a lower rate. We did this successfully with our home equity line of credit. While there are no guarantees, it can’t hurt to try.

19. Lower the Interest on Credit Cards: Because interest rates on credit cards have risen so much in the last year, getting a lower rate on credit card debt can save a lot on interest payments. If you have a good credit score, you can qualify for a low interest credit cardwith rates in the 8% to 12% range. You can also take advantage of zero percent balance transfer offers.

20. Be Careful with Debt Consolidation: While it is important to take advantage of the lowest interest rates possible, the one area where you want to be really careful is with debt consolidation companies. While they may promise you low rates and a single payment, the number of consumer complaints about such companies is exploding. As an alternative, you can consolidate debts on your own through sites like Prosper that offer reasonable rates.

Spend Less and Make More:
As I said at the start of this article, one important aspect of getting out of debt is spending less and making more. While these topics are the subject of entire books, here are a few resources to get you started:

21. Painless Money Saving Tips: There are countless ways to save money without sacrificing your standard of living. From canceling cable to greening your home, you’ll find plenty of ideas on how to knock hundreds of dollars (or more) off your monthly budget.

22. A Must-Read Book: If I had to pick one personal finance book to read, it would be Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence . This book puts money in perspective and was for me a real source of motivation to get out of debt.

23. Earn Extra Income: Any extra income goes a long way to getting out of debt. I’ve learned this firsthand from the money I’ve made blogging, all of which either goes to charity or paying off debt. If an extra few hundred dollars a month can help you get of debt faster.

 

 

… More at  Get Out of Debt Fast – 23 Powerful Tips and Tools to Eliminate Debt

More Reading on Get Out of Debt Fast:

1 6 7 8