Budgeting involves careful planning and taking a good look at your finances on a weekly and monthly basis. To find out where money is going, it pays to make a list of your expenses and compare with your household income. This is a good way to learn more about your financial behavior and see whether there is a need for improvement. To this, you may want to list all sources of income such as wages, salaries, bonuses, rental income, sick pay benefits, child support and alimony, employee achievement awards, inheritances and gifts, etc. The next step is to compile a list of your monthly expenses, including child support, mortgage balances, loans, credit cards, rent, and utilities such as gas, electricity, phone, internet, and water. Now is the time to compare and see whether you live within your means. If your expenses exceed your income, then you may want to think of ways to cut down on some expenses or find additional sources of income. There are different ways to cut down on major and everyday expenses, one being to try and repay your outstanding balances faster. If you have excessive or multiple debts, visit your credit union or bank to ask for different refinancing options. High-interest credit cards add more debt, especially if you only pay the minimum. In this case, it pays to shop around for balance transfer credit cards with zero or low interest. If you have student loans, you may want to look into different consolidation options to make payments more affordable.
Why Budget and Plan
This is a good way to avoid financial trouble, poor credit score, foreclosure, repossessions, and bankruptcy. A history of repossessions, maxed out cards, and other negative events makes you a high-risk borrower for traditional credit issuers meaning that they are likely to turn you down. Customers with poor credit have access to a limited pool of financial and credit solutions which makes borrowing more expensive. They often resort to payday lenders and subprime credit issuers that charge high fees and interest. Payday lenders, in particular, charge extremely high interest over a short period of two weeks to 1 – 2 months. This can be a solution to your financial worries only in case of emergency and if you need a small amount. Medical and hospital bills and unpaid utilities and outstanding balances can be considered emergencies. Proper planning and budgeting also means having an emergency fund, however, to cover unexpected expenses. It is a good idea to visit your local bank and open a savings account for a rainy day.