1. If you are worried about controlling your credit use consider cutting up your credit cards or putting them in a safe to prevent impulse purchases.

2. Even if you have debt consider putting aside money in savings each month. Savings will help you to avoid using credit again if something unexpected occurs, like your car needing a repair.

3. Examine the factors that caused you to use credit in the first place. Having a better understanding of the past can help you to avoid making the same mistakes in the future.

4. Learn to say no to others. Often we feel obligated to help family and friends, even if we do not have the money to pay our own expenses.

5. Consider if you have any sellable assets that can be used to pay down your debt. While you do not necessarily want to withdraw from your savings or 401(k) to pay bills (since that money is set aside for the future) it could be a good idea to sell an extra car, boat, furniture, or antiques.

6. Exercise and eat right. By staying physically fit you will reduce your medical costs.

7. Avoid making non-essential purchases, such as sofas or televisions, until you have saved the money to buy them.

8. While you do not want to ignore your financial situation avoid getting too stressed and worried. Too much stress can make you physically sick.

9. Opt-out of receiving pre-screened credit offers, to reduce the temptation to open more credit cards. You can opt-out by calling 1-888-5-OPTOUT.

10. Look for sales. Whatever it is, purchasing items on sale will save you money. However, avoid purchasing an item just because it is on sale. Only purchase what you need.


The Naked Truth About Your Money: Straight Talk About You and Your Finances
by Bill Deshurko, Certified Financial Planner (Alpha Books 2007)

Like the title implies, this book provides a straightforward, practical guide to managing your finances. While the book was specifically written for people in their twenties and thirties it actually has information that is helpful for people of all ages. The author discusses a range of financial topics, including budgeting, credit scores, dealing with debt, purchasing a car, purchasing a home, saving, checking account management, retirement planning, insurance, and taxes. The information that is provided is thorough and detailed but also easy to understand. This book is empowering, not frustrating, because the author shows an understanding that people are not perfect, and sometimes managing your money well is hard. He gives numerous examples of advice he has given in the past to clients and friends as well as realistic suggestions (which he humorously calls “unsolicited advice”) to create a solid financial plan. By getting this book you are receiving guidance from a certified financial planner at a fraction of the cost of hiring one!

Whether it is aches and pains or the inability to pay our bills we often ignore signs that things are not right, hoping that everything will get better on its own. Sometimes it works, but often ignoring symptoms of problems only makes the situation worse. For serious problems, both financial and medical, early detection is the key. The longer you wait, the more limited your options are and the harder it becomes to regain control. This is especially true for credit cards and other type of debt because the more you owe, the higher your monthly payments are. Your financial health can improve if you take the time now to see if you are experiencing any symptoms of financial trouble, which include:
  1. Paying only the minimum amount due on your credit cards.
  2. Charging more each month than you make in payments.
  3. Needing to use credit to pay for regular living expenses, like food and gasoline.
  4. Needing to use credit to make credit card or loan payments.
  5. Having a total debt balance that rarely decreases.
  6. Being at or near your credit limit.
  7. Having multiple credit cards or frequently applying for new cards.
  8. Experiencing anxiety whenever you use your credit cards.
  9. Not opening the mail from creditors or answering the phone because you are afraid a creditor is calling.
  10. Making your payments late.
  11. Frequently overdrawing your checking account.
  12. Being turned down for credit.
  13. Not being able to save or contribute to a retirement fund.
  14. Finances affecting your relationship with others.
  15. Hiding how much credit you have from others.

Doing an exam
If you were sick and wanted to know what is wrong you would schedule an exam. Likewise, if you are experiencing financial trouble an examination of your finances can help you see what is wrong. In general, people experience financial difficulties when what is going out each month (expenses) exceed what is coming in (income). To better understand your situation you can create a budget that lists what your income and expenses for each month. For some expenses, like your mortgage or rent, car payment, and insurance, it will be easy to put down what you spend each month. For other expenses, like groceries and gasoline, it may be harder. To get accurate figures you can record what you spend each day on a piece of paper or your computer or save your receipts. You may want to do this for several weeks or months to get a realistic picture of your spending.

Once you have created your budget you can more easily see where you may be able to make adjustments. The chart to the right shows guidelines for how much of your net income should go toward different categories. Every person is different, but you can use it as a starting point for determining what should be changed.

For example, it is recommended that housing, including insurance, maintenance, and taxes, not take up more than 35% of your net income. If your housing costs are high and you are a homeowner consider downsizing or renting out a spare bedroom in your house. If you are a renter and have a spare bedroom ask your landlord if you can get a roommate. If you are in a one bedroom apartment try looking for a cheaper apartment in another area or a larger place with roommates, once your lease expires. Usually the rent for a two bedroom apartment is less than double the rent for a one bedroom apartment.

Try keeping transportation costs under 15% of your net income. If your car payment is high consider trading your car in for a cheaper one. Many dealerships offer used vehicles that are reasonably priced and come with a limited warranty. For car insurance see if you can increase your deductible, which would lower your premiums. If you car is older than ten years consider dropping collision coverage completely (while still maintaining liability coverage). It is costly, and since older cars are usually worth little you will not get much from the insurance company even if you are in an accident.

“Other” expenses should be less than 25% percent of your income. These expenses can include things may be difficult to change, like prescriptions, and things that may be easier to reduce, like dining out, vacations, and other entertainment costs. Consider what expenses you can live without, and try to eliminate them.

By examining your finances and taking positive steps to address your situation you will be well on your way to financial health.

Copyright © 2008 BALANCE
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