DA, Debtors, Addicted
The Federal Trade Commission (FTC) says, "If you or someone you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation [debt negotiation], or bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future." The purpose of this article is to deal with a realistic budget and offer ideas for curbing your expenses and spending. However, I would encourage you to also look at the other options suggested by FTC. The National Association of Certified Counselors and its Institute of Financial Counseling also endorse these same suggestions. A Solid Spending Plan Any hope of curbing your spending must begin with a realistic budget or spending plan. If you don't know where you are going or where you have been, how can you possibly continue any journey? Therefore mapping out how your money is spent and will b spent is a key ingredient. Begin by going to your last 12 months of check registers and categorizing all entries. Insure you have ALL your expenditures. If you always carry spare money in your wallet or purse, you need to record every dollar spent for a few weeks. I have yet to see someone do this exercise without a significant impact on his or her spending plan. This may be the most important step to getting to the facts. All non-cash purchases should be easier to track through checkbook registers or credit/debit receipts but be sure to use proper annotation. Just writing "miscellaneous" or "versa teller $20" does little to gain facts. List your fixed expenses: Rent/mortgage, Utilities, Child care, Transportation, Insurance, Loan repayments, Allowances, Alimony or other legal issues, Savings, Other. List your variable expenses: Food, Entertainment, Grooming, Babysitting, etc. Estimate your periodic expenses? List last years car repair, trips, medical, taxes, maintenance, gifts, etc. Now determine if this estimate is what you can expect in the future. Divide each item by 12 to have a monthly figure. Once you are certain you have all annotations including non recurring expenses, start to adjust how much you will spend in each area to fit your particular needs. If you do not have enough to cover it all, you must either reduce expenses or find ways to increase income... it is that simple. The tough part is doing it. Cutting Costs Here are a number of ideas to curb your spending. 1. There are so many resources on the Internet and in magazines for cost cutting tips, that it is impossible not to find an untold number that fit your needs. On the Internet, use your favorite search engine and enter words such as "frugal", "frugality", "saving money" or similar key words. You will be amazed at the resources available. There are always different ways to do the exact same thing and save money at the exact same time. You simply have to locate and implement them. 2. Call each of your creditors and ask for a reduction in interest rate. Do not tell them your life history, but do offer a concise statement as to why it would be in their best interest to do so. 3. Regardless of what type of debt (mortgage, car, credit card, etc.) view your monthly statement and look specifically at how much of your payment is going to interest and how much to principle. This is a real eye opening experiences and motivates the individual to get that debt under control. 4. Make it a habit to throw away credit offers before even opening the envelope. Take existing credit cards and hide them or better yet, destroy them. 5. Determine what are the "needs" in your life and separate these needs from "wants". Suspend ALL "wants" until debt is at least under control. 6. Get assistance from such groups as Debtors Anonymous. If there is a gambling or drinking problem, seek help from support groups.