April 5, 2013
By Anthony Rivieccio, MBA, PFA
Suffering from a lack of cash? It's likely that you don't follow a budget that reflects your earnings. Smart budgeting prevents eviction, increased credit card debt, and ruined credit scores. It's never too late my friends —get started now with some steps to make your financial life less stressful.
Avoid Immediate Disasters
Don't be afraid to request bill extensions or payment plans. These requests are often granted. If your biggest worry is eviction from your apartment, talk to your landlord, but, also, see if you can get extensions on any other expenses to free up money for keeping your home.
Review Credit Card Payments and Due Dates
If you are only making the minimum payments on your credit card(s), you are flirting with a disastrous credit score. However, avoiding credit card payments will only worsen your debt.
For example, suppose that your minimum payment on a $1,000 balance is $40. You fail to pay $40 on time, so you are charged a $35 late fee. In addition, your interest on future charges is charged at the default rate of 25%. Now your credit card is even more difficult to pay off.
Go over all your bills to see what must be paid first and then set up a payment schedule based on your pay days. You will want to leave yourself some catch-up time if some of your bills are already late. If this is the case, call the bill companies to see how much you can pay now to get back on track toward positive status. Tell them you are catching up and going on a stricter budget. Be honest about what you can afford to pay.
Ignore the 10% Savings Rule
Stashing 10% of your income into your savings account is daunting when you're living paycheck to paycheck. Balance your budget before starting incremental savings.
Review Your Past Month's Spending
Online banking and online budgeting software help you categorize spending so you can make adjustments. For instance, with online banking, with a few mouse clicks you can categorize your money for expenses, such as dining, food and utilities.
Negotiating Credit Card Interest Rates
If you have good credit, call your credit card companies and ask for an interest rate reduction. If you don't ask, you won't know!
Eliminate Unnecessary Expenses
Do you need to cut back on coffees? Or movies? Or do you often have spoiled groceries? All cutbacks should start with items you wouldn't miss, such as switching car insurance companies to get a cheaper rate, or reducing your fresh food purchases if you find food spoiling before you can eat it. Eating out is even more costly, so examine how much and how often your really need to do this.
Journal New Budget for One Month
Once you've gone through the first eight steps, monitor your progress by journaling for one month. You can do this by noting everything you spend in a notebook, budgeting apps on your phone, or with financial software. How you track your money isn't as important as how much you are tracking. Focus on ensuring that every cent is tracked by dividing your expenses into categories, such as rent, food, clothing and utilities.
Adjust Spending as Needed
If, after journaling for one month, you've found your budget isn't where it needs it be, get prepared to make changes. Look at how much you are over budget and decide where you can cut. Don't rule out items that are viewed as basics.
Seek Out New Sources of Income
If your current budget doesn't balance or you're barely scraping by, you may need to look at working overtime, getting a second job, or possibly getting a new, higher-paying job.
When you're short on cash, a strict budget is your best tool for correcting your situation. Employing sound money management can mean the difference between financial disaster and financial stability
Anthony Rivieccio is the founder & The CEO of The Financial Advisors Group, celebrating their 15th year as a fee only financial planning firm specializing in solving one's financial problems. Anthony has been a recognized financial expert since 1986. He has been seen, heard or read by many national and local media outlets including: Klipingers Personal Finance Magazine, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS1010 Radio, The Bronx News newspaper and this publication.
Anthony can be reached at 347.575.5045