Manage Your DebtFamily PlanningProper credit management will save you money. Keep your house in order by monitoring your spending and borrowing.
Be realistic. If you spend $400 a month for food now, you are not going to be able to cut it to $100 next month.
- Do things gradually. Cut your expenses in any given area by 10% or so at a time. See if you can live with it. Then cut a little more.
- Make allowances for inflation. The cost of goods and services goes up a little bit each year. Historically, the amount is between 3 and 5 percent.
- Expect the unexpected.
Live your life by the 10% Rule: If you learn to save 10% of your gross income, you will be well on your way to reaching your financial goals.
Considerations When You Have Too Much Debt
If you’ve got debt problems, the cash flow you just completed probably didn’t make you very happy. Take a good hard look at your cash flow. What is the rock bottom amount you can survive on?
Consider the following:
- Think about interest rates. How much are you paying on your credit cards?
- Could you go six months without buying any clothes? This is fairly easy for adults to do, but hard if you have growing children. If you do need clothes, could you buy them used, at garage sales or thrift shops?
- Could you go six months without eating out?
- Rent a DVD instead of going out.
- Look in your local paper... there are lots of things you can do for free.
- How much money do you spend on convenience foods and impulse items at the grocery store? Would you be able to eliminate most of these?
- Could you survive without a vacation this year?
- Could you drive your car an extra year?
- Could you give up cable TV?
- How much money could you save on phone bills if you strictly limited long-distance calls?
- Could you stop using credit cards except for real emergencies?
- How many things do you pay for that you could really do yourself, or talk a friend into helping you with?
- Is the amount you spend on gifts really necessary? What about giving your time instead?
- Could you go an extra two weeks before you get a haircut?
- What about getting your shoes resoled rather than buying new ones?
- How about sending your children to community college for two years, and then switching them into four-year schools?
- Could you live someplace cheaper?
- Would your landlord be willing to trade some work around the complex for a reduction in rent?
- Would you be willing to rent out a room in your house? Or trade living space for babysitting?
- Watch your thermostat! Get an automatic timer so that you don’t waste resources when you’re out.
Now construct a future cash flow, or spending plan, that will get you out of the hole you’ve dug yourself into. Think bare bones. What is the absolute minimum it would take to feed and house you and your family? You may be surprised at how little it is. Remember: We’re not asking you to live like this forever. Wouldn’t a year or two of sacrifice be worth it to get that debt cleared away?
Future Cash Flow: A Bare Bones Spending Plan
| Monthly Cash Flow |
|
Savings/Investing
|
|
| Federal & State Taxes |
|
| Mortgage or rent |
|
| Home repair/maintenance |
|
| Property taxes |
|
| Life/disability insurance |
|
| Home/renter’s insurance |
|
| Auto insurance |
|
| Credit card/loan payment |
|
| Utilities & telephone |
|
| Food (include eating out) |
|
| Clothing |
|
| Grooming |
|
| Gasoline |
|
| Auto repair/maintenance |
|
| Other transportation |
|
| Medical care |
|
Education
|
|
| Child Care |
|
| Alimony/child support |
|
| Entertainment |
|
| Vacations |
|
| Gifts/charitable contributions. |
|
| Laundry/dry cleaning |
|
| Others: |
|
| |
|
| |
|
| Total Expenses |
|
| Income |
|
| Cash Balance (b) – (a) |
|
Lastly, look ahead to the future. What’s a good compromise between where you are now and bare bones? Add back the luxuries that are important to you. Include an amount for savings.
| Monthly Cash Flow |
|
Savings/Investing
|
|
Federal & State Taxes
|
|
Mortgage or rent
|
|
Home repair/maintenance
|
|
Property taxes
|
|
Life/disability insurance
|
|
Home/renter’s insurance
|
|
Auto insurance
|
|
Credit card/loan payment
|
|
Utilities & telephone
|
|
Food (include eating out)
|
|
Clothing
|
|
Grooming
|
|
Gasoline
|
|
Auto repair/maintenance
|
|
Other transportation
|
|
Medical care
|
|
Education
|
|
Child Care
|
|
Alimony/child support
|
|
Entertainment
|
|
Vacations
|
|
Gifts/charitable contributions.
|
|
Laundry/dry cleaning
|
|
Others:
|
|
|
|
|
|
Total Expenses
|
|
Income
|
|
Cash Balance (b) – (a)
|
|
It takes a lot of time to put a spending plan together. But if you do it well and thoroughly, you’ll have something to aim for. It may not work out exactly as you’ve planned. But a spending plan will give you a way to measure your progress. And that’s all you may need.
Article Content by Truebridge, Inc. All rights reserved. Copyright 2001-2010 |
