Tips And Guide For Debt And Loan Management

If you are looking for business loans, you should be sure that you are able to gather all significant advantages, all for yourself. Many business loans provider give benefits like no application fees and any hidden charges. They should also guarantee a free credit pull with one-two days of approval period.
It would be better if the fund can be taken in a week or so.
Even if you have a quick cash on your hand you should be aware that it is just another debt that you should repay. Just use it wisely.

Most people who go deeply into debt have no idea how much they spend on groceries, entertainment, clothes, or restaurants every month. As we said in an earlier posts in this site, not knowing the state of your finances (except for the fact that you are in debt) is like driving with a bag over your head. A budget allows you take the bag off and get a good look at where you are going financially. If you don’t like what you see, make some changes.
Maybe budget is the wrong word to use. A plan is more of what we are talking about here. You need to come up with a plan that lets you see what comes in, what goes out, and what you want to go out.
For example, maybe on September 1, after reading this chapter, you decide that you would like to spend $200 a month on entertainment (it is your budget after all).
The first part of the plan would be to find out what you normally spend on entertainment. So for the whole month of September, you would spend money as you usually would, keeping close track of your entertainment expenses.
At the end of the month, you would add up those expenses and see what you spent. If the total were $300, that would be valuable information to have, would it not? You could then decide that you want to spend $300 a month the next month and cut back somewhere else, or you might decide to watch your entertainment spending more closely. Maybe you had no idea that you were spending $300 a month on entertainment. Either way, the budget, the plan, is working for you, not against you. It takes the blindfold off, see? (We will explain how to make this plan in a tad more detail.)
So the first of many benefits of budgeting is that you know what is going on. Planning (we will use the terms planning and budgeting interchangeably) is a tool that shows you how your funds are allocated, what your priorities are, and how far along you are toward reaching your goals.
Creating a budget has several other benefits:
You are in control. A budget enables you to take charge of your finances. It helps you get a grip on your spending so that you can make sure your money is used properly. It will help you have enough for essentials, and actually allow you to create enough extra left over for “nonessentials.” With a budget, you decide what is going to happen to your hard-earned money and when. You can control your money, instead of having your money control you. Now that would probably be a welcome change.
You are more organized. A basic budget divides funds into categories of expenditures and savings. Beyond that, however, budgets can record all your monetary transactions. They can also provide the foundation for a simple filing system to organize bills, receipts, and financial statements.
You are more communicative. If you are married, have a family, or share money with anyone, having a budget that you create together can resolve personal differences about money handling. Your budget is a communication tool to discuss priorities for where your money can best be spent. You don’t lose opportunities. Knowing the exact state of your personal monetary affairs and being in control allows you to take advantage of opportunities that you might otherwise miss. Have you ever wondered if you could afford something? With a budget, you will never have to wonder again. You will know. You will be more efficient. A budget means that all of your finances are automatically organized for creditor communications, for tax time, and for any query that may come up about how and when you spent money. Being armed with such information saves time digging through old records.
Most importantly, you will have extra money. Hidden fees and lost interest paid to creditors can be eliminated. Unnecessary expenditures, once identified, can be expunged. Savings, no matter how small, can be accumulated and made to work for you. A budget will almost certainly produce extra money for you to do with as you wish.
Even if you don’t use the budget you draw up, just the homework involved in creating it can be instructive because you may find that you are spending more than you want to on various items. There are three steps to creating a budget. The first step is to keep track of where your money goes in a normal month before you create your budget. After reviewing where your money is spent, the second step is to decide where you would rather see it applied. The last step is to create a budget and track your spending.

Getting out of debt requires that you know how much you spend every month and where you spend it. Vicky was shocked when she began to keep track of her spending habits. She had no idea how much she was spending on lunches at work and on music. She didn’t know where her money went every month until she kept track. Do you? If you don’t, do you see how knowing this could be immensely helpful? That is the purpose of keeping a good record.
Spend a month writing down, every day, exactly what you do with your money. How much do you spend on food, cabs, gas, and magazines? Create categories, carry a little notebook with the categories listed, and keep a daily log of every expenditure. If you are not keen on the notebook method, many personal finance computer programs enable you to do the same thing. Either way, every day, you need to record every expenditure for at least one month. Yes, this process sounds like a pain in the rear, but what you discover will be worth the effort, and it’s not as hard as it sounds.
List every little thing, to the penny: lunch, movies, books, dry cleaning, haircuts—everything. On days that you write large checks (your car payment, for example) enter those in one of your categories too. Having 20 to 30 categories is not uncommon. Every time you spend money, record it in a category or add a category.
This is not as much work as it sounds. You only need to create this list once, in the beginning. It will be the basis for any budget you create later on. Your categories, the more specific the better, should include:

• Rent
• Utilities
• Groceries
• Insurance
• Clothes
• Fast food
• Restaurants
• Entertainment (be specific)
• Transportation
• Medical
• Child care
• School expenses
• Health

At the end of the month, tally the results. Make sure that you also include all canceled checks and itemized credit-card statements so that all of your expenditures are accounted for. The picture should be illuminating. Maybe you never knew that you spent $30 a month on late video charges. Maybe those computer games added up. Whatever the case, this record will help you see where the problem lies.

Once you see where things are, you can decide where you want them to be, put yourself back in control of your finances, and begin to make more intelligent decisions. You can decide that less needs to be spent on vitamins, for example, or that more should be spent on clothes for the kids. Instead of blindly spending whatever cash you have in your pocket on whatever need you may have on any given day, you start your month by planning ahead.
Madeline decided that she could easily spend a lot less on fast food every month. Next
to the $300 she had in that category’s recorded total, she added a category called
“budgeted” and listed $150. On the first day of the next month, she went to the market and loaded up on her favorite items and made sure to keep some with her each day as the month progressed. That first month, she spent less than the $150 projected, and for the first time in a long time, she ended the month without a money crisis.
This type of plan is flexible, can be changed, and does not control you; you control it. The whole idea of the record and plan is to enlighten you and enable you to make intelligent decisions. A budget is simply your plan for how you can best utilize your money. It’s restrictive only to the extent that you want it to be.

After you monitor your spending, the process of putting together a budget is quite easy. The simplest budget of all would consist of just adding one more column to the record you made and listing how much you plan to spend on each item the next month. You would then need to continue to track your expenses to see whether they meet your goals. Voilà! You created the dreaded budget. However, because a budget is a planning tool, it is wiser to create a more elaborate one. For example, you may have had no health-related expenses the month that you tracked your spending habits. That does not mean, however, that you do not want to budget some money every month for that purpose. What you should do, then, is to create a budget that covers everything that you plan to put money toward in any given month.
Although adding more detail into your budget plan will be time-consuming initially, doing so will give you more information and make your plan more useful in the long term. It will also enable you to put aside money every month for specific reasons and make paying bills quicker and easier because there will be no fights over priorities; you prioritize your discretionary spending up front. Your budget will be broken down into three sections: income, fixed spending, and discretionary spending.

Whether you use a computer program to help you with your budget or do it by hand in a notebook, the first category will be your income. Before you can decide how best to spend your money, you must know exactly how much comes in every month.
Income will include your net paycheck, money from freelancing, tips, alimony, child support, trust funds, interest, dividends—everything. All revenue streams must be included. If your income varies every month, then the best thing to do is to use an average month calculated from income generated over the past year. Let’s say that last year you took home about $30,000. Some months you made $2,000, and some months you made was $3,000. Average it out. $30,000 over a year is an average of $2,500 a month.

Fixed expenses are expenses that stay the same every month, month after month. You have no discretion when it comes to fixed expenses. This part of your budget will include Mortgage or rent payments: Yes, your rent or mortgage may go up or down, but budgets change as your life changes. Whatever your housing costs currently are, put them here.

• Utility bills: These bills include gas, electric, phone, heating, water, garbage, cable TV.
• Car payments.
• Taxes: If you make ongoing payments to the IRS for past taxes, or if you are self employed, you need to budget some money every month for this expense.
• Loan repayment: Student loans or other personal loans are included in this category.
• Child support or alimony payments.
• Insurance premiums.
• Any other fixed expense or regular monthly payment.

Your budget will make a difference in the area of discretionary expenses. What are your priorities? Upon reviewing your record, you will probably decide that you need to spend more in some areas and less in others. That’s the whole idea. By reallocating these expenses, you will be able to re-focus your finances. You can decide to spend less on food and more on saving or whatever works for you. This is not how most people view a budget. Instead of something that is always telling you “no,” we see a budget as something that says “yes” to your most important values. This kind of budget tells you to spend more, not less, on those things most important to you. If spending money on your children is important, then you can create a budget that reflects that desire.
This part of the budget will include

• Food: Include all food and household goods spending at grocery stores, bulk-food stores, farmer’s markets, and so on.

• Eating out: Dinners, work lunches, breakfast meetings, and so on.

• Home-related expenses: Furniture, electronics, home improvements, the gardener or handyman expenses, and maintenance belong in this category.

• Clothes.

• Entertainment: These expenses would include concerts, clubs, movies, video rentals, and so on.

• Work: Any work-related expenses not covered in the clothing or food categories would go here.

• Accounting and legal: Even if you don’t have ongoing expenses here, you might want to budget for that yearly trip to the CPA at tax time.

• Automobile: Gas and upkeep.

• Health and medical: Here you account for health items such as vitamins and your gym bill, as well as any potential expenses not covered by your insurance, things like prescription drugs or chiropractic treatments.

• Travel: toll road expenses, airline travel, and so on.

• Taxes: Ideally, you will have enough money taken out of your taxes by your employer that you won’t owe any at the end of the year. But if you normally owe taxes, account for it here. If you are self-employed, you probably don’t need to be reminded to budget for taxes.

• Books and magazines: We can’t forget to buy books!

• Vacation: If you spend $500 every summer taking the kids camping, you save a little for it every month.

• Children: monthly child care expenses, baby-sitting, piano lessons, school expenses, and everything else.

• Saving: You said you were going to start saving, right?

• Debt repayment: As you will see it is very important to budget some money, whatever you can comfortably live with, toward repaying your debts.

• Fun: If this isn’t in your budget, what’s the point?

• Miscellaneous.

Although the goal here is to have your spending stay within the limits you’ve set, a concurrent goal should be to discover if some of your figures are unrealistic. If so, adjust them. There is no point in making a budget that you can’t live with. You will probably have to change it two or three times before you come up with a useful, workable budget.
Optimally, your goal should be to reduce your spending to about 90 percent of your income. Why? That way, you will be saving 10 percent of your income and hopefully earmarking it toward investments (discussed in the last section of this book) and your other longterm financial objectives. If you reduce your spending and invest the savings, not only will you get out of debt, but you also can get rich.

Let’s look at Chris and Amy’s budget. Their problem was that, although both made a good living, they were running in the red every month and borrowing from their credit cards to make up the difference. Chris brought home $1,500 a month, and Amy took home $2,200 a month. They have two kids.
They bought a computer program to help them create a budget. Every day for a month, they each dutifully kept track of their normal spending habits, and every night for a month, they spent about 10 minutes entering it into their computer. They agreed up front not to fight over how the other one was spending money. At the end of the month, they had made $3,700 but had spent $4,000. Let’s look at how they solved the problem.
Their fixed expenses included a mortgage payment of $1,100. Car payments were $600 a month, and utilities were $200 a month. Their fixed expenses totaled $1,900 per month.
Their discretionary spending broke down this way:

• Food: Chris and Amy spent an average of $800 a month at the market, although their record disclosed that they spent quite a bit at the convenient and expensive small market down the street. By shopping at a less expensive grocery store and making a run for bulk items once a month, they figured they could save about $100.

• Eating out: The family ate out or ordered in three times a week. They decided to cut back to once a week (if that), intending to save another $200 a month.

• Entertainment: Chris and Amy had a standing Saturday night date for movies and dinner. Between this and the baby sitter, they spent $60 a week. They decided to cut out the dinner portion of their date sometimes and stay home once a month, saving another $100.

• Children: Both kids participated in activities such as music lessons, kung fu, and soccer at a cost of $200 a month. Each child had to cut out one activity. This saved another $100.

• Saving: They had no savings when they started but decided to allot $100 a month to start with.

• Debt repayment: They also began to pay $100 extra toward paying down their credit cards.

Once they saw where their money was going, Chris and Amy were able to cut $500 out of their budget and put their money where they thought it would be better served without radically changing their lifestyle. They wanted to avoid borrowing from their credit cards, begin to pay them off, and start to save some money. These things were more important than another date or the convenience of shopping down the street. A budget does nothing more than assist you in prioritizing your finances.
Mary had a different problem. A stay-at-home mom, Mary found it difficult to get through to the end of the month because her husband was paid only once a month on the first. By the 25th, she was always out of money and had no credit cardsto borrow from.
Mary decided to be fairly strict with herself and her family after reviewing her record. Now, on payday, she writes all the checks for fixed expenses and utilities, and then subtracts from her balance the amounts for automatic withdrawals, such as the mortgage payment and student loans. She transfers money into the savings account for long-term savings and for unscheduled expenses like car repairs and emergency funds. Then she takes the remaining amount and divides it by four to use as a weekly allowance for groceries, gas, and incidentals. She withdraws that amount in cash from the bank on Monday and pays only cash for purchases. At the beginning of the next week, she takes her allowance again. Mary’s method of budgeting demonstrates that a budget can be a flexible and creative as you want it to be.

As we said, you can create a budget by hand or with the help of a computer. If you have a computer, you can take advantage of some of the great budget programs that are available.
Both Quicken and Microsoft Money (to name just two programs) make it easy to draw up a budget and monitor compliance. Quicken, for example, comes with a set of categories that handle most of the basics. You can edit the list to create categories that make better sense for your particular household. If you’re away from home, you can even track expenses at the Quicken Web site and then download the transactions to your computer later. Also with Quicken (we use this program as an example because it is the market leader), you can produce monthly spending reports in categories you select.
The drawback to electronic budgeting is that entering and categorizing all of your income and outflow can be quite a tedious chore. You can reduce the tedium to some degree by judicious selection of categories. If you are only worried about tracking your spending for recreation and leisure, then you could create categories that cover those types of expenses and let everything else accumulate under “miscellaneous revenue” or “miscellaneous expense.”
The problem with that approach is that you forego the opportunity to spot problems in other spending areas that you may not even be aware of. A better solution is to track expenses using electronic banking. That way, you can download your payments and deposits directly from the bank, rather than having to enter them by hand.