One, two, three, four I won’t swipe my cards no more. Five, six, seven, eight I am going to get my money straight. It’s four months into the new year and hopefully you have goals in mind. Did you set New Year’s resolutions so that you can get your finances in order now, so later your long-term goals are not compromised? If not, then maybe it is time to put yourself through a money bootcamp. So, let’s get your finances in shape and build a better financial support system.
Here are some ground rules. First, you need to establish where you are financially. Where does your credit stand , do you even know what your credit score is, are there any errors on any of your 3 credit reports, how much debt do you owe, are all of your accounts in order, and are you in good standing on your reports? If any of your accounts have inaccuracies and you can prove the error to be one, contact the three credit bureaus by disputing the claim(s) on your report. Doing this will delete the error from your report and hopefully increase your score.
- Experian, P.O. Box 4500. Allen, TX 75013 – (888) 397-3742
- Equifax Information Services, LLC. P.O. Box 740256. Atlanta, GA 30348 – (866) 349-5191
- TransUnion, LLC. Consumer Dispute Center. P.O. Box 2000. Chester, PA 19016 – (800) 916-8800
Next, make a list of your monthly bills. Where is all of your money going? When are your bills due and how much do you have to pay each month to be in good standing with bills or accounts? This is where a budget comes into place. If you have never done a budget, no problem. Young Finance 101 is here to help guide you. So what is a budget? A budget is a system set up specifically for your bills and the income that you have coming in every pay period. You will need to look at your pay stub and/or other passive income/streams of income and write down the amount that you bring in. Your passive income or other streams of income could include freelancing gigs, contracted jobs, rental property, etc… Once you figure out how much money you bring in and where all of your money is going look at how much money that you have left after all of your bills are paid. If you have money left, great! That means that you are not in the negative (the red) and there is some available money to put away for savings, pay down debt, or put money away for a larger expense that you might want to purchase one day like a home. Now, if you discover that you are in the negative each month then you are probably living above your means. Hopefully, you are not living off your credit cards because the interest and annual fees will keep you longer in debt.
Unfortunately, you are going to have to forget about taking a vacation somewhere else other than staying home i.e. a stay-cation. Any money that you have extra needs to go towards paying down your debt. If you have student loans, then this should be tackled first. Student loans still have to be paid even if you file for bankruptcy. Only in death can student loans be wiped clean. Here is something else that is very important; because most student loans are federal that means that if you decide not to pay them the IRS can take your tax refund check to pay down the debt you owe for taking out the loans to get your degree. The best solution is to call your loan provider and work out a payment plan that works for both parties. Some of the plans include: pay as you earn and income-based repayment. To find out which plan works for you visit studentaid.ed.gov for more information.
After making your monthly budget are there any ways that you can cut your monthly expenses? Do you have cable? Cutting the cord could save you hundreds a year. Try streaming your shows and movies instead. Are you buying your lunch every day? Try a couple of days a week to pack your lunch and bring it with you. Take it slow at first. It can be overwhelming to break a habit and try something new. It usually takes about 60 days to make something into a habit. Take the money that you would have put towards buying your lunch and pay down your debt. If you think about it, weekly you are probably spending $30 or more just eating out. Also, skip the morning rush to get that cup of coffee. Incorporate the Latte Effect. Make your cup of coffee at home before you leave. This will save you on average $960 a year if you purchase coffee five days a week. There are plenty of coffee makers out there that can be programmed to make your cup of Joe right before you leave. To add to the list of cuts save some money by washing your own hair rather than heading to the salon every week or two. There are so many ways that you can cut cost to get yourself out of debt quicker. Just think about the things that you have in your life that you could probably do without or trim like getting a better cell phone plan or bundling services. The list goes on.
Your budget should also contain a list of expenses such as how much you pay for gas, groceries, personal care, etc. After you collect everything and you seem to still fall short then that means that there needs to be more adjustments and something has to give. If you can’t cut anymore then you might have to consider getting a second job just until you can pay somethings off, catch up, and save money in case of an emergency.
On to automation. Set up your accounts so that they are paid automatically. This way you do not have to worry about making sure that your bills are paid on time each month. There are two ways that you can go about doing this. A lot of companies will allow you to set up automatic payments with them and they will debit your account on the date that your bill is due. If you rather not do this because you might have a lot of accounts and it might take longer to set up you can set up automatic bill payments with your bank. A lot of banks now have a feature that allows them to pay your bills for you. You just have to give them the information for each account and they will pay that company for you on the set date provided.
While we are still on paying your bills automatically we need to talk about paying yourself first. The first thing that you should do when that paycheck is deposited into your bank account is to pay yourself first. Money should automatically transfer into your saving account(s) or an emergency checking account. This is very important because if something happens and you need money it will be there. The same thing goes for your 401K and IRA accounts. Life happens and at times people find themselves without work, or get ill, or even have to take a leave of absence to take care of a family member. Having money set aside will keep you from worrying how you will survive during life’s emergencies.
Look into apps that remind you that a bill is coming up that needs to be paid. A great app is Mint. Mint will monitor your accounts that you set up with them and send you alerts and email reminders days in advance before your bill is due. It even sends you alerts if there was a large amount debited from any of your accounts.
Don’t forget to look into credit monitoring services. Last year Equifax was hacked exposing millions of Americans personal information. Don’t fall victim to another hacking or someone stealing your identity. There are many credit monitoring companies to choose from like freecreditreport.com and Credit Sesame. Not only are these reputable companies, but they also give you guidance on how to pay down your debt and what to tackle first.
You can do this. Step number one is to just get started. For more tips or suggestions please visit our website and leave a comment below letting us know how your budget is going. Remember, class is always in session!