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Debt Management - Budgeting
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Bad Credit Home Loan To Get You Out Of Debt
A "bad credit home loan" can help you climb your way out of debt and get you started back on the road to upstanding, good credit. There are many lenders who are willing to make bad credit home loans to you - a loan based on your equity in your home even if your credit has slipped or isn't as perfect as it could be. By taking out a bad credit home mortgage or home equity loan, you can consolidate a... Read article
Consumer Debt Consolidation
A debt consolidation loan is simply a loan allowing you to combine all of your debts into one single loan with a low interest rate. Despite the type of debt you have, whether secured or unsecured, you can still significantly reduce your required monthly payments by obtaining a debt consolidation loan. The benefits are fairly obvious. Imagine only paying one monthly payment rather than multiple pay... Read debt consolidation article
Debt Management - Budgeting
Introduction
The most fundamental basic of debt (or money) management is to be in control. To know about every penny that comes in and where every penny goes. Ideally, when you open those envelopes that arrive on the door mat every day there should be no surprises.
If you are in debt and/or having financial difficulties, you need to bring yourself around to a situation where your income exceeds your expenditure - you need to establish a budget and stick to it.
Budgeting and sticking to it are two separate things. In this article I am going to cover setting the budget only, sticking to the budget will follow in a subsequent article.
Before carrying on it is worth noting that the principles outlined below are good for not only reducing debt, but also growing personal wealth overall - effectively an investment for the future.
Establishing Costs and Income
The first thing to do is to recognise that all spending is not equal: that some monthly expenditure is more important than others. For example, not paying your council tax for a few months could land you in jail.
The next thing to recognise is that some outgoings are fixed and others are flexible. With this knowledge you can begin to tackle your flexible monthly expenditure intelligently and make progressive steps to reduce outgoings both immediately and over time.
Additionally, you also need to recognise that even fixed expenditure may be reduced with the right approach.
The next thing to do is to list everything you spend money on over the course of the year.
I have put together a budget planning sheet for the purpose of helping you do this. You can download it by clicking on this budget planning sheet link, or going to www.cars-and-money.co.uk/tips and clicking on budget sheet on the right hand menu.
You will see that the sheet is split into specific sections to provide some guidance on how to breakdown the list. The sheet is also split into columns for yearly, monthly and weekly expenditure so that it is easier to group all like expenditure together even if you pay for it in different ways.
The most critical items are towards the top of the list, i.e.: housing costs;
- rates and utilities;
- important household services;
- personal insurances.
With the critical items, the consequences of non payment can either be very high and/or occur very quickly, e.g. loss of house, loss of electric, water or gas supplies, imprisonment etc. It therefore makes sense to attend to these bills first.
The next part of the list is critical in terms of day to day living, but much more discretionary, i.e.:
- motoring expenses;
- food and housekeeping;
- miscellaneous goods and services;
- personal and leisure;
- sundries and emergencies.
This group includes some very fundamental items such as food; however, how food is purchased can have a massive impact on monthly expenses. For example, living on takeaways is obviously much more expensive than shopping carefully in the local price leading supermarket.
While detailing the first section is usually fairly clear cut (just check past bills), this section is fraught with difficulty as most of it can be cash or lumped spending. That is, a figure of £150 charged to a card from the local supermarket says nothing about what was purchased on the final bill - who knows, it might have been £150 of beer and crisps - it can be difficult to recall everything.
If it is just you in the household you have the relatively simple task of being honest with yourself about this sort of expenditure so that you can recognise how much is really being spent on what. If you have a partner, or live in a family group, it can be much tougher. The key word is of course honest. You will have to draw out the truth about what is really being spent and who is doing it. If it is the two of you, you may have to recognise there is a key culprit, or that you are both as bad as each other.
In any event this section is a land of opportunity as far cost reduction is concerned so spend time on it, get out past bank and card statements and go through them line by line. If necessary walk through a typical week, or have everyone involved keep an expenditure diary so that everything is exposed.
The third section in the budget sheet is entitled 'credit card and other debt': in other words unsecured debt. Unsecured this may be, but non payment still has consequences in terms of your credit worthiness and other debt collection measures - including the use of county court judgements and even bailiffs. The only difference between this debt and many of the more critical fixed costs outlined above is the time it takes for the consequences to bite.
If you are having financial difficulties then the figures that should go in this section are minimum payments only. You will need to stop using all cards until the situation is resolved.
The last section on the budget sheet is for income. That is, income after tax - employable cash.
Make sure all income is included. So, if you do have shares that earn dividends, or bank accounts that earn interest, then these figures need to be included as well as any salary income from yourself, your partner or anyone else in the household that may contribute to the monthly bills.
With all costs and income identified, we are now in a position to look at the overall picture and start developing a plan that will ultimately become our budget.
With everything in place, there can only be three scenarios:
1 - Income exceeds outgoings
2 - Outgoings equal income
3 - Outgoings exceed income
If income is greater than outgoings then you can continue comfortably. Cost reduction, budgeting and careful saving will pay dividends in terms of loan reduction, early mortgage repayment, or even building up savings and personal wealth.
If income equals outgoings, then the situation is a borderline one and action to reduce costs will need to be taken. However, it is unlikely that savings cannot be made and there is a strong likelihood you have caught things on time and can turn it around.
If outgoings exceed income, then this exercise has not come a minute too soon and it is now time to grab the bull by the horns and turn the situation around.
Next: Planning The Budget
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Debt Consolidation Loans
If you are troubled by the large number of your debt repayments and are unable to afford them from your own monetary resources.....if your creditors are calling you again and again for their money and sending you legal notices....if you are not able to sleep properly due to stress and anxiety of clearing your debts....a debt consolidation loan can give you the quickest relief from all such troubles.
A debt consolidation loan is the loan for combining all your debts. This means that whatever repayments you are making at different interest rates separately to all your borrowers are merged in one single repayment to a single lender every month and that too at much lower rate of interest. This happens when you repay all your existing debts with the loan amount.
Banks and financial institutions is the first place can get you a debt consolidation loan but what if you are having a bad credit? Or what if you are lacking collateral to offer to the lender? No bank will entertain your request in such situations. But with lot of private players in the loan market the debt consolidation loan can easily be taken for amounts up to £75000 depending upon the presence of collateral and policies of the loan lender. Without the presence of the collateral, the lender will grant you loan but the interest rate may be slightly higher. This loan will be termed as an unsecured debt consolidation loan. People who can apply for a debt consolidation loan includes; homeowners, tenants, retired persons, bad credit holders and other segment of borrowers.
Debt consolidation loan also enhances your credit score and making future borrowings easier for you. You can get updated regarding your credit score by logging on to the websites of credit rating agencies. These agencies are Experian, Equifax and Transunion.
A debt consolidation loan is a debt for paying current debt. You need to be very sure about the amount which you are applying for as you are responsible for paying those amounts. Borrowing larger amounts can lead to non-payments or late payments which instead of getting rid of your debt troubles can create problems for you. Also this can affect your credit score adversely. You can consult your loan officer for better guidance.
All done!!!...Now its time to apply for the loan. Applying for the debt consolidation loan is quite simple. You can search among large number of online loan quotes for a debt consolidation loan and can compare them with the help of free comparison tools available to get a debt consolidation loan deal which can make your life better and debt-free.
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Debt Management - Budgeting
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