Week 3 of Budget 101

Part 3: Save on the Big Things

After spending the last week sorting out your budget and then recording all your purchases, you hopefully now have a fairly clear idea of where your money is going.  Over the next 6 weeks be sure to keep those worksheets handy–you will need to adjust your amounts as we work to lower expenses in the various categories.  Be sure to also continue recording all your purchases in the expense tracking worksheet too!
(NOTE: If you are new to “Through The Eyes Of I” or missed out last week, you might want to start at Week 1 of Budget 101 before starting this week’s assignment!)

This week we are going to tackle lowering the BIG 3:  Housing, Transportation, & Insurance.  I will readily admit that this is not my area of expertise.  Not even close. From this point forward it should be known that you are taking financial advice from a girl who thinks a cute pair of designer shoes or a great book is a perfectly reasonable investment, not just an impulse buy.

In other words, some of this stuff is a little over my head.

Since this kind of stuff overwhelms me, I’m guessing that it probably overwhelms many of you too. So let’s figure it out together and be better for it.  Luckily for us, the internet is a vast pool of knowledge.  This week, we’re going swimming.

I think the most important thing to keep in mind when it comes to your finances and the money you’re spending is this premise: Everything is negotiable.  

The great thing about NOT being socialists is that we live in a country where companies have to compete for OUR business. This is something they don’t really want you to figure out.  Most companies would rather have you believe that they are doing you a favor by financing your home or car, or providing insurance, because if you believe that, you’ll pay whatever they tell you to.  The truth is that they NEED your business, and that if they are not willing to negotiate, there is probably someone else out there who will.

Knowledge is power; use it to your advantage!

When it comes to saving money on your housing costs there are a lot of factors that will come in to play, far too many to get into specifics here.  Do you rent or own?  Do you owe more on your house than it’s worth?  Are you looking to buy?  Are you in an apartment? Is your lease coming due soon?  Your individual circumstances will determine your course of action, or even whether there is a course of action possible.

As far as transportation costs go, unless your vehicle is constantly in need of repair or way more expensive than you can afford, it is almost always more cost effective to stick with the car you have than get a different vehicle. Thus, your current car payment is probably not going to change much.  That said, if you need a new car, it is almost always better to buy used than to lease or buy something brand new. Your auto insurance, on the other hand, can definitely be negotiated!

Likewise, health, life, & home insurance prices can also be negotiated and shopping around pays.  When my Husband and I needed health insurance last year, we took a lot of time to price things out.  When we took into consideration how little we actually go to the doctor, we discovered that it made a lot more sense financially to buy only catastrophic coverage with a high deductable, then to pay a huge premium each month for medical coverage we weren’t using.  As with most things, it is very important to do the math!

How to negotiate when chartering a gulet

Here is your assignment:

1. Research options for lowering your mortgage payment or rent

Once you’ve done your homework, decide if making some changes or re-negotiating your rent or mortgage would be the right solution for your family.  I found some awesome, super informative, and, most importantly, short articles to start with:

How to Lower Your Mortgage Payment Without Refinancing (homeowners)

How to Negotiate Low Mortgage Interest Rates [Video] (homeowners)

I Owe More Than My House Is Worth (homeowners underwater)

How to get the best mortgage rate (looking to buy a home)

How to negotiate lower rent (renters)

Tips for Reducing your Insurance Premium

2. Research options for lowering your insurance rates

If you haven’t shopped around for auto, homeowners, health, or life insurance lately (or ever) then you need to.  Do some due diligence to find out what options are available, then make some phone calls (or send some emails) and get new quotes.  You might be surprised at how much money you can save.

 Here are some great articles I recently wrote to get you going:

What Every Mom Needs to Know About Insurance

9 Smart Ways to Save on Car Insurance

12 Smart Ways to Save on Home Insurance

It’s only two tasks, but this should be plenty to keep you busy this week!  If it seems daunting, just remember that every dollar saved on your mortgage, rent, vehicle, or insurance is a dollar that can be spent on shoes.
Stay tuned for another riveting installment next Sunday and don’t forget to let me know how you’re doing! What big things do you want to save money on?  Do you think it will be possible?  What is something you know you can’t save on?
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Week 2 of Budget 101

PART TWO: MAKE A BUDGET

It’s been a week.  How’s that no-spending thing going? Well, here’s the good news:  You can start spending money again.  Of course the bad news is that after today’s assignment, you might not want to. Hopefully last week’s exercise started you thinking about the reasons WHY you’re spending and also got you to start making a serious distinction between the things you WANT and the things you NEED.

(NOTE: If you are new to “Through The Eyes Of I” or missed out last week, you might want to start at Budget 101 Part 1: STOP SPENDING before starting this week’s assignment!)

Before we go any further, I want to make a quick but important distinction that just because something is a “WANT” instead of a “NEED” doesn’t make it wrong or bad. It’s okay to want a pretty comfortable house with all the amenities, vacations or cute shoes. What’s not okay is to want all those things at the expense of your financial well-being,  your marriage, relationships, your children or anything else that we know is more important than stuff. It’s okay to WANT, but not to GET if you are not at a stable financial stance to do so. ***Don’t go on vacation, then come back and not pay your electric and gas bills. Don’t go out shopping with your friends and then go and tell your family you’re struggling*** If you are not struggling with your spending or find that you have plenty of money leftover for your savings, life & retirement accounts at the end of the month, have no trouble paying all your bills on time, know exactly where all your money is going, have great credit and don’t stress out over unforeseen expenses, then you probably don’t need to be reading this series.  In fact, you probably could write it better than me because you are obviously doing something right. I have multiple bills including a retirement and savings account, life, funeral and health insurances that I pay towards monthly, and I don’t have school or credit debt so I say I am pretty financially stable BUT…… most of us, including I struggle with money or budgeting, at least in some area. Believe me when I tell you there is plenty of room for improvement. This week’s assignment is going to require a little more effort.   The hard truth is that no one can fix your budget for you.  There are no magic solutions or ten-minute fixes that will have permanent results.  Improving your financial outlook will require change, and change is HARD.  Do it anyway.

As I tell my stepson, never neglect to do something just because it is hard, because it is the things you work hardest for that will reward you the most. Don’t let fear stop you either. It can be very scary to open up the Pandora’s box otherwise known as your finances, especially if you’ve been turning a blind eye.  In some ways, ignorance is bliss.  But if you’re still reading up to this point, you probably know, deep down, that this is something you need to do.  Take a deep breath, muster up your courage, and just do it.  You’ll be better for it. And now that the pep talk is over, it is time to get down to business:

HERE IS THIS WEEK’S ASSIGNMENT:

                      CLICK TO DOWNLOAD MY PERSONAL BUDGET WORKSHEET

1. Assess your income and fixed expenses

Print out the nifty budget worksheet above, then grab your bank statements, your bills, your check register, & any other financial information you can think of.  A calculator might come in handy too.  Then grab a glass of wine, sit down (with your spouse if your married), and start crunching the numbers.  Use worksheet number one to list all your sources of income, as well as all those key fixed payments you MUST make each month

Use worksheet #2 to add up all the subtotals of your fixed expense categories, then subtract that total from your income.  The remaining number is what you really have to work on creating a budget for.
In the coming weeks, we will work on finding ways to lower both your fixed AND variable expenses, but we need a place to start from, and this is it.

2.  Create a budget for your variable expenses

Use a pencil to fill in each category with what you are currently paying each month, then add up your subtotals and see how it compares to the number you are shooting for.  Then go back and lower different categories as necessary.  Obviously some things, like your water and electric, won’t be adjustable, but other things can probably be cut significantly.   Include SOMETHING in your savings budget, even if it is just a small amount.  If you have credit card payments, include those in your household expenses as well.

3. Take some time to self-reflect

This step may be the hardest, but it is also the most important.  Complete worksheet #4 and make some concrete decisions and goals based on what you’ve discovered through this budgeting exercise.

Maybe you’ve realized it is time to cut up your credit cards, or, at the very least, put them on ice. (Fill a bowl with water, put your credit cards in, and freeze.  If nothing else, it will slow you down!)  Maybe you’re ready to start packing a lunch instead of going out or to give up cable.  What you spend your money on is a very personal decision that only you can determine for yourself (or with your spouse.)

4. Track your spending

The last page of the PDF packet is an expense tracker.  Print out as many as you need, and use it to keep track of everything you spend.  At the end of each day, and then again at the end of each week, go over your expenses to make sure you are staying on track.  The more frequently you “check in,” the less likely you will be to let your spending get out of control.  Little things add up quickly!

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Whew, what a week!  I know this probably seems like a lot, but please don’t give up on me!  I promise it will be worth it in the end, and your bank account will thank you.  Stay tuned for another riveting installment next Sunday and remember, I want to hear from you!  How did your first week of the challenge go?  What did you learn about yourself or your budget?
Keep in mind, once again, that I am not a financial expert.  You are welcome to use these worksheets to help you–they are what make sense to me–but there are lots of other budgeting books, worksheets, & software available that might work for you better

Beginners Budget 101

 

My goal for this series is to guide you through a series of assignments intended to put you on sounder financial footing.  Basically it is eight weeks to a better budget. It is my personal guide, a beginners budget 101.

Each week we will tackle one specific area for us to work on, and then complete assignments related to that segment of our financial life. Keep in mind, just as anything you need to do in life, following this series will take some effort & commitment on your part. There are many ways to budget your financial life, and this is the blood, sweat, & tears edition. Okay, well maybe no blood 🙂

Every Sunday will mark a new week towards a better budget. Come join me and save! Click on Budget 101 in the menu scale, and use the drop down to view the series by week.

Disclaimers: 

  • I am not a financial expert or certified financial planner.  I have degrees in business administration, criminal and business law, have studied accounting, and am a certified tax preparer.  I have no credentials whatsoever beyond my own experience to qualify me for teaching anyone about saving money.  There are plenty of money experts out there who could probably explain this stuff far better than me, and some I will even refer you to.  My only goal here is to try to break down the scary world of budgets and saving into manageable bites.  Yes, this is the baby steps guide to saving. This is my personal guide, and its work for me.

Credit Does Matter

Credit Does Matter                                                                                             Samantha Jonas-Rongo

Majority of people are becoming increasingly dependent on using credit to make purchases and decisions. These days, good credit is used for more than just getting a credit card or a loan……Samantha Jonas-Rongo

If you think bad credit isn’t a big deal — think again. The truth is, credit issues can have a crippling effect on all facets of your financial life. So, before you shrug off a low score, think again and work towards building a higher one.

The “American Dream” isn’t cheap. Having a family, purchasing a new car, building or buying a house all cost lots of money. Chances are, you won’t be able to pay cash, (in full), for some of the bigger things your family wants and needs. That is why credit is so essential to not only your current living, but building a better, efficient future that Is reachable due to your past and present spending responsibility and behavior.

Have you ever wondered why you were turned down for an apartment or car loan? Or why you did not receive a job offer you applied for, even though you thought you had nailed the interview? Perhaps it was due to your credit record.

Your credit score, also known as a FICO score, can range from 300 – 850, 850 being the best possible score, (your Vantage score can go up to 990 at max). Your credit score is monitored and reported by three main credit bureaus known as Equifax, Trans Union and Experian. Your credit history begins the first time you apply for credit. The action initiates a credit inquiry to the credit bureaus and also establishes a profile in the system. Credit scores are determined using five types of information about you:

  • PAYMENT HISTORY = 35%

Lenders need to know how reliable you have been in the past, and your payment history illustrates just that. This section covers:

  1. Your payment consistency
  2. Collections and charge-offs
  3. Bankruptcies, tax liens, etc.
  • OPEN ACCOUNTS AND BALANCES = 30%

Contrary to popular belief, debt can be a good thing when utilized correctly in proportion to your overall credit limits. This section covers:

  1. Your total number of active loans (e.g., mortgage, student debt, etc.)
  2. Your credit card debt and credit utilization. The healthiest credit scores are born from using 30 percent or less of your monthly credit allowance. For example, if you have a $10,000 monthly credit limit, you should never use more than $3,000 during that month.
  • LENGTH OF TIME ANY ACCOUNT(S) HAVE BEEN OPEN = 15%

In addition to reviewing your track record, lenders want to be sure you actually have one. A credit history of seven years or more is ideal when establishing clean credit, so make sure to keep your oldest accounts active.

  • TYPES OF CREDIT USED = 10%

Smart planning is key in every financial realm, and spreading out your spending is a great way to illustrate this concept. Lenders want to see your experience with numerous credit types. If you only have installment loans, consider opening a bank credit – (Not a bank debit card that’s affiliated with your bank account), or another line of credit. Broadening your horizons will demonstrate your flexibility and success with multiple credit forms.

  • CREDIT INQUIRIES (DENIED OR APPROVED) – NEW CREDIT = 10%

Every new account will likely depress your scores. Of course, you can’t increase (or even have) a credit score without having a track record to begin with. Just know that, with every new account, your credit score will probably get worse before the longer term scoring benefits are realized. Creditors fear those who appear to depend too much upon acquiring new credit accounts.

To maintain a good credit score, it is important to avoid all of the following actions:

  • Making late payments (even one month)
  • Utilizing more than 30% of the total credit limit on any credit card(s)
  • Closing credit cards you have not used for some time
  • Frequently opening new credit card accounts
  • Routinely transferring payments between credit cards to obtain rate advantage

Delinquencies on your credit report will have an impact on your credit score and so does the length of time which has passed since your last major delinquency. A bankruptcy may stay on your credit report for up to 10 years, but additional credit may be acquired once a two-year timeframe has passed.

Some of the basic things that we would like to purchase can be placed at a halt or become more expensive and difficult to buy due to your financial responsibility. However, having good credit and containing it can make these purchases more convenient and obtainable.

  1. MORTGAGE:

    Having good credit is important when it comes to where you live. Mortgage lenders want to know that you won’t default on your mortgage. If you don’t have good credit, the lender will consider it risky to give you a mortgage loan. Unless you have a lot of money saved and are planning on purchasing a house or thinking of buying a foreclosed abandoned one at a cheap cost of $15,000 and spending at least another $50,000 to renovate it, you will need to pull out loans and mortgages to do so. This could result in a higher cost of borrowing or worse, a denial of the loan. Your credit is used for rental decisions, too. Landlords consider your lease as a loan.  You’re being loaned a place to live and the landlord wants to know you’ll pay back this loan. If you don’t have good credit, you can get denied for an apartment especially if you have any evictions or late utility payments on record. More than often, good landlords want good tenants so they will check your credit report.

  2. VEHICLE FINANCING:

    Unless you have all the cash to purchase a new car, you’ll have to get a loan. I’m not speaking in regards of a used car that you purchase from someone else, but a used and new car from any lot or dealership. The cars that come with warranties and are fully approved and checked for safe performance, mobility and consistency unlike those that can be bought from an individual. Your credit not only affects whether or not you qualify for a loan, but also the amount and interest rate of the loan. A lot of people believe you will pay double or more than what the car is worth, but the amount you pay depends on the interest rate which is reflected from your personal report. Generally, loan applicants with good credit qualify for larger loan amounts with lower interest rates. Regardless if a loan is from the dealership, credit union or your own bank, your credit score will be scanned and your finances and cost will be reflected.

  3. ENTREPRENEURSHIP:

    business-startMany people have dreams of starting their own business. Business startups require a sizable amount of cash that you might not have available. In that case, you’ll need to obtain a small business loan or a personal loan to get started.  Among other things, you need to have good credit to qualify for the business loan. It is near impossible to  qualify for a business loan if your credit is poor, especially if you have evictions on record as well. Unfortunately, with a low credit score, your chances of getting any type of loan are slim to none. You might qualify if you have a co-signer with great credit and plenty of collateral, but expect a higher interest rate than someone with an excellent credit history. Your availability to have a co-signer with great credit may be a difficult task as well because that individual may not be able to trust you and your financial stability and responsibility.

  4. EMPLOYMENT:
    Open sollicitatieMany employers conduct credit checks as a part of the hiring process. If you haven’t demonstrated financial responsibility, a prospective employer might be hesitant to hire you. Why does your credit rating count? Employers in the financial sector often use it as a part of the pre-employment screening process to check out an individual’s character, decision-making skills and of course as a way to measure whether or not they can handle money. It can also be used to make sure new employees aren’t distracted, or stressed out, by financial issues.  Its simply standard operating procedure for many companies to do a credit check, along with checking out your work and education references, or even doing a drug test or checking to see if you have a criminal history. When you sign on the dotted line, you may not realize you’re authorizing a credit check, unless you read the fine print. According to federal law, individuals in the pre-employment process must give their prospective employer permission for not only a background check, but a credit check as well. So it pays to read exactly what it is you’re signing.
  5. UTILITY SERVICES:
    It might be somewhat shocking to learn that your credit is needed to establish utility service. Your electric company contends that you’re borrowing one month of electric service. So, before turning on your electricity, the company will check to see if you have good credit. This applies to most utility services including cable, telephone, water, and even cell phone. You may still qualify for a contract or services, but you may need to put down a security deposit when others with great credit do not.
  6. HOME/AUTO INSURANCE PREMIUMS:
    Insurance companies are in the business of risk management. the lower your credit score, they higher you are as a risk and the higher car insurance rate you will likely payInsuring your life’s most precious possessions is another segment of life that is controlled by your credit score. Insurance companies check your credit and price for risk when determining annual premiums. Insurance companies want to make sure they get paid for their services of insuring your assets. Not only that, but insurance companies see a correlation between low credit scores and insurance fraud when putting in a claim. Some auto insurance providers run credit checks and charge higher premiums to those with low credit scores. The thought behind this is that people with good credit are usually more responsible drivers and those with higher credit scores are more likely to make on-time payments. You can maintain low and affordable premiums by improving your credit score.
  7. RELATIONSHIPS:                                                                                                      Love me, love my debt? NotWhen you enter into a committed partnership with a significant other, in which you share everything, that does not exclude your credit histories. Granted, even a spouse is not legally responsible for debt you incurred prior to the marriage. However, any major purchases you want to make together, as a couple, will be negatively impacted if you have bad credit. This not only makes it difficult to buy a house or a car together, for example, but it puts an unwelcome strain on the relationship in general.

Believe it or not, but your credit habits can affect your children’s lives as well. If bad credit prevents you from buying a house or buying an automobile, this affects where and how you raise your children, and whether you’re able to have reliable transportation for your family. Also, if you have a low credit score, you might not be able to co-sign for your child(ren) to get a student or auto loan, or help your child financially in other aspects of his or her life. If you pass away with debt, your debt will rollover as your child’s responsibility and if you have life insurance, the debt will be deducted from the payment as so before being issued to your dependents.

Yes that is correct, landlords, insurance companies, and employers etc.; not just banks and car dealerships, check credit records. Your credit report allows these companies to look into your personal spending habits, your payment history, whether you have been sued, evicted and whether you have declared bankruptcy. Not only do they check, they also report. Having a good credit history is an important part of maintaining a secure, healthy, and financially fit life.

If you have no credit or have experienced some financial setbacks in the past that have negatively affected your credit, lenders won’t be very eager to loan you the money you need, which can keep you from buying that car, paying for school, or investing in a home. Good credit, on the other hand, means you can get the financing you need, and usually at a better rate, which will save you money in the long run.

Even if you never had a credit card you can damage your credit before you apply for one and therefore, you will not be approved and may need to settle for a secure credit card where you need to place a security deposit down. Secured credit cards can help build credit and impact your score, but it will take longer to build and fix your credit. You can monitor your score for free but some free websites such as Credit Karma may only track your actual credit card usage and not reflect your actual score. If you never had a credit card, sites such as Credit Karma may state you do not have enough credit when in actuality, you may have poor credit but not enough credit card usage to higher your real credit score and enough to have been tracked by these sites.

https://i2.wp.com/bemoxie.org/wp-content/uploads/2014/09/credit-score-1050x700.jpg

It takes time to rebuild your credit history and positively impact your score. Don’t get discouraged if your report doesn’t immediately reflect the work you’ve put into rehashing your credit file. Just be patient and continue working to gain more control over your finances.

In addition to keeping an eye on your credit balances and accounts, you may want to consider other methods of getting control of your personal finances, such as reducing household spending or creating a detailed budget.

You can also write a personal statement for your credit report. It won’t impact your score, but it can be read by anyone checking your credit report, from prospective employers to potential lenders.

With a little patience and discipline, you can positively impact your credit score and credit file.

Samantha Jonas-Rongo