The latest economic growth report for the United States was not the positive beacon of light that most of us wanted to hear. Actually, the report indicated a slowdown. This is no surprise to most in the financial industry since the sluggish growth has been right at our front door for some time now. One of the biggest problems faced by the American consumer is how to manage their bills in a responsible and timely manner while avoiding the pitfalls of falling behind on the debt owed to creditors. This can be an extremely treacherous task to accomplish in today’s economy. There are a few contributing factors that most of us deal with on a daily basis which makes it even harder to contend with the debt owed. They are high and ever climbing gas prices, the recent meltdown in the subprime mortgage markets, and more stringent creditor guidelines. Also, mismanagement of funds on the consumers’ behalf, in particular spending beyond your means usually leads to financial turmoil. If you are doing this it is probably with the help of a credit card, which usually indicates a debt issue. If any of the examples listed above apply to you then keep on reading to find help with budgeting your resources.
“I need help but do not know where to start. What can I do?” This is one of the most common questions asked of a financial professional.
First you need to take a good look at your monthly expenses.
Second, divide monthly expenses into two groups-Fixed and Variable costs. Fixed costs are costs that stay the same and never change whereas variable means your costs change or vary. This is known as organizing your expenses.
Now let’s prioritize the debt. If you are a homeowner the mortgage payment should be on top of your list. Depending on the type of mortgage you have this could fall under fixed or variable costs.
Third you should focus on debt that has a variable or changing rate. This is usually associated with credit cards and lines of credit- secured or unsecured. As many consumers have found out this is the area that needs extreme attention to detail. Why? Most debt instruments of this form have daily compounding interest which can lead to greater debt and financial stress.
Lastly, do not forget about retirement. A few ways to accomplish this are to set aside money for the future whether in the form of mutual funds, bonds, stocks or 401(k) plans.
Now add up all outgoing expenses and subtract them from your monthly income to find out your disposable or discretionary income. If the amount you calculate seems to low and you would like less debt and more disposable income go back and review each of your fixed and variable costs. Take a hard long look at where your money goes and cut back where appropriate. One of the best places to cut back or limit spending is with credit cards. Use this debt wisely and only when absolutely necessary. If you calculation shows you are in the red (more money going out then coming in) you may need to speak with a financial professional to help you regain financial control.
Remember, track all expenses and set up reasonable financial benchmarks to avoid becoming another statistic for debt issuers and buyers.
Jason McGraw is a Financial Consultant in the San Francisco area. He is currently a member of the management team at Select Debt Relief. The increasingly large number of bankruptcy filings in recent years has prompted him to lend is expertise in resolving consumer debt. For more financial information please visit www.selectdebtrelief.com