Recovering from a personal setback will likely find yourself having to reconsider financial priorities in targeting where to focus effort and resources. Not all household debts will equally impact your family. First payment priorities should be all bills associated with your essential needs, including utilities, food, mortgage or rent, and insurance. While you can most likely find ways to save on all of these bills, by cutting back and negotiating lower rates, paying them is extremely important.
Also, having appropriate health insurance coverage is essential because a medical emergency could put a huge dent in your finances. Check out government offered health coverage or HMO companies that offer lower but practical medical coverages.
Here are some examples on how you can prioritize your financial obligations:
> First priority debts – would include your rent or mortgage, tax liabilities, insurance premiums, auto loans, and utilities.
> Second priority debts – may include other secured loans through financial institutions, such as a car loan.
> Third priority are lenders – this includes retailers, hospitals, doctors, credit card issuers and other unsecured creditors.
Remember, each person will have his or her own unique list of priorities. Realize that just because a category of debt is listed as a third priority, does not mean it isn’t important. It simply means you need to contact and make payments to the higher priority creditors first. For help determining your financial priorities.
Set your priorities – create your financial priorities worksheet, evaluate if these are “needs or wants”, then rank your payment priorities.
Priority – make a list of all your debts; rank and figure out when, and how will pay your debts.
On your spreadsheet, create the following tabs, and make notes on how will you resolve or attain your goals:
Paying off unsecured debt
Paying all secured debt on time
Saving for a down payment on a home
Buying a car
Taking a vacation-Having money for entertainment
Starting/maintaining a savings account
Setting SMART financial goals
Before you think about setting goals, review the five parts of SMART goals.
S A smart goal is specific. It pinpoints something you want to change to achieve.
M A smart goal is measurable. You can measure or count a SMART goal.
A A smart goal is achievable. Setting goals too high can lead to frustration.
R A smart goal is rewarding. Reaching the goal should be a reward for your hard work.
T A smart goal is trackable. Set milestones and schedules for your goals.
After you decide what your priorities are, review your budget and determine which bills you are unable to fully pay. Then, contact your creditors to discuss your situation. Explain that you want to pay your bills but due to your setback, are unable to. In some situations, you may be able to get a new payment plan.
As we approach the second quarter of the year, let’s try to shy away from the mistakes done and start a clean slate by focusing on what can be done now to improve the financial situation. For most us, a better quality of life translates to more money. Here are few tried and tested tips to share with you:
Create a Budget
Budget can become overwhelming, but if you make a monthly budget and stick to it, you can identify areas where you overspend and save big by controlling spending or simply by using money wisely. Write down monthly income (after taxes) and itemize monthly bills and other expenses. Don’t forget about the “little” things like daily coffee or fast food lunch – they add up.
“Spring Clean” Your Finances
You can dedicate an hour over the weekend to review all your current bills, or, you can thoroughly review bills as you receive them, keeping an eye out for hidden fees and services you don’t need or want. If you find questionable charges, investigate them.
Maximize the Value of Coupons
Learn about the potential savings associated with extreme couponing. Pick up a Sunday paper, browse through all the ads to find coupons on items you regularly buy. But don’t stop there. Keep an eye out for store sales on items you buy the most, and incorporate your coupons to increase the savings.
Reduce Entertainment Expenses
Entertainment is a necessary expense. However, it’s also necessary to avoid overspending in this area, especially because it’s easy to get carried away. Check one of the many daily deal websites and see if you can find discounts on places that you visit or would like to. You can often save 50 percent on dining and local activities simply by planning ahead and printing a voucher.
Commit to Fresh Foods
Buying processed foods is more convenient, but buying fresh will save you money and improve your health. You may need to spend more time in the kitchen, but if you make meals in bulk and freeze for later use, you can enjoy the health benefits and savings of eating fresh without “slaving over the stove” everyday. Visit your local farmers markets and make it a point to visit them weekly. You’ll find the highest quality of fruits and veggies at low prices.
Once you’ve identified and implemented ways to save daily, direct those savings towards paying off debt so you can reduce interest charges and improve your credit. And if you haven’t yet started saving for retirement, now is the time.
When it comes to your finances, a few dollars a day can make all the difference in reducing debt, saving for the future, and improving your overall quality of life. Everyone has the power to change, and saving 50 cents at the grocery store could be your first step to a life of financial freedom.
Budgeting is simply the act of working out how much money you’ve got coming in (EARNINGS) and then as accurately as possible figuring out how much you have to pay out (EXPENSES) on fixed costs such as rent, bills and so on to then come up with how much you’ve got left to spend on everything else (DISPOSABLE FUNDS/INCOME).
In simple math terms basic budgeting looks like this:
INCOME + FIXED COSTS = DISPOSABLE INCOME
Budgets can be calculated over a variety of time periods, such as a month, term or even a whole year. Most students have very fixed incomes made up from their Maintenance Loan or Grant, plus whatever they may get in the way of parental support or from a part-time job, so calculating income is usually pretty easy.
The trick comes when trying to figure out your expenses, breaking it down into the fixed costs that are known (for example rent is a ‘known fixed cost’), those fixed costs that are estimated (such as utility bills which can be guessed at based on how much was paid in the previous year) and then essential costs but based on educated guesswork. How much you are going to spend on food per month would be an example of an essential cost.
It’s also important to be strict with yourself about what are and what are not ‘essential’ costs. Whatever is left over after covering your essential costs what you are going to have left to pay for everything else.
Everyone is different, the important thing is to take full stock of your personal income and expenditure – being as honest as possible – and seeing if it leaves you with any money left over. If it does then it’s a case of making that remaining disposable income last (i.e. not overspending). However if after drawing up your budget you have more money going out than you have coming in then you only have two responsible alternatives: You can –
- Increase your income.
- Reduce your expenditure.
It can be difficult to track the small daily expenses (such as cups of coffee, sandwiches, car parking and so on) so here are a couple of tips to help.
1) Pay cash: Debit cards are very easy to use for even small purchases nowadays and you can spend money on them without ever really noticing the total impact on your bank balance. So take out a fixed lump sum of cash each week and commit to only using that cash for your ‘impulse’ spends on a day to day basis. You’ll realize how quickly you’re burning through your disposable income!
2) Cut back: Why pay for coffee when you’ve got a thermos flask or for sandwiches from a shop when you can take in a packed lunch? The simplest way to manage impulse spending is to stop it altogether or reduce it to an absolute minimum. Changing habits can be challenging but the savings can be rewarding.
I was thinking it would be a great time to take a look at comparing the amount you owe as well as how to create a healthy debt repayment arrangement. Obviously, this only works if you commit to spending less than what you earn. If you’re spending more than what you earn, this will cause pile up of debt – which eventually lead to a more serious financial problem.
To get you started, you need to write few items. Doing some tasks by hand adds personal touch and commitment and importance in what you want to do. You will also need to have all the latest statements of what you owe, from bills, credit card, and consumer loans. Analyze the interest rate on each.
You must make a chart with four columns consisting of each debt, amount you still owe, monthly payment, and the current interest rate on each debt. Make sure to get all the information from all the statements. The goal here is to have all your info in one spreadsheet.
Once you have the list and check which of the debts to be prioritized. Go through that list and number the debts based on their interest rate. Give the highest interest a big number 1 off to the left, the next highest a big 2, and so on. Don’t worry about which debt has the biggest balance – that doesn’t actually matter when figuring out which debt is the most important one to pay off.
Once you’re done with the order of debts in place, go to the debt marked with numbers. If it’s a credit card debt, call the credit card company and ask for a rate reduction, or transfer the balance to another card for a lower rate. You can also pay it off with a home equity line of credit or with a personal loan from your credit union. Consolidate your loans at a very low rate. The key is to lower that interest rate. Go through every one of your debts from highest to lowest interest rate and do your best to get each rate nice and low. Obviously, there are some rates you’re likely to be unable to easily change, like your mortgage rate, but see what you can do about most of the rest of them.
Over time, you should be eating away quickly at that top debt, and you’ll be able to eliminate it. Cross it off the list, then start hammering away at the new top dog on your list.
Whenever a debt adjusts in interest rate, cross it off the list, then add it back in just like a new debt where it belongs based on the new interest rate.
After you do this a few times, it’s useful to rewrite the list so that everything remains clear on it, but it’s fun to hold onto the old one (with some crossed-out debts) to remember where you came from.
If you are tired of lengthy family budgeting and want a quick fix in saving some funds, start on your basic needs – grocery. Your food budget is probably the highest budget-eater. On average, consumers spend more than 13 percent of their income on food. Fortunately, food bill is one of the most easily manipulated, and saving money is virtually effortless.
First, everyone’s heard that you should not shop when you’re hungry is a good idea. And you know the reason too well, right?
Here are some practical shopping ideas to keep in mind:
> Always shop with a list. On average, impulse buying accounts for 20 to 50 percent of a total grocery bill. Instead of wandering aimlessly through the aisles, bring a shopping list and a pen with you.
> Grocery stores are for groceries. Books, batteries, light bulbs and pet supplies can all be found at the grocery store. Before you purchase everything you need from one store, make sure you aren’t paying too much.
> Shop alone. Marketers spend a lot of money convincing kids to buy their cereal for a reason. By reducing your distractions, you can make thoughtful purchase decisions.
> Carefully consider the cost of convenience. As a general rule, the more convenient the item, the more it will cost. Ask yourself if it is really worth paying more for shredded cheese when shredding it yourself would take mere minutes and save you some cash.
> Shop only once per week. Try to adjust your schedule and your purchases so that you are going to the grocery store once a week. This will help reduce impulse shopping and should be a big cost saver. If you must go more than once per week, stick to your list.
> Plan your route. To find the most natural and least expensive ingredients, such as dairy, bread, vegetables, and fruit, try skipping the center of the store and make a loop of the outermost aisles.
> Consider generics. Look for generic brands of items where it really doesn’t make a difference. For example, most dry goods have the same ingredients, regardless of the brand. The difference in price, however, can be as much as a 50 percent discount.
> Use coupons wisely. Only use coupons for items you are planning to buy anyway. Also, make sure you compare the price of a product with the discount on the coupon to the regular price of the brand you normally buy.
Finally, don’t assume that all supermarkets have the same prices. Make a list of the ten or so products you buy the most and do some comparison shopping. Often you will find a huge difference between chains, and if you can save just 5 percent it will add up to hundreds of dollars in the long run.