Brian Denysuik will be on CJOB on Saturday March 31, 2012 as a guest of Barbara Bowes on her Bowes Knows Radio show from 9:00 A.M. to 10:00 A.M.
Brian will be talking to Barbara about consumer debt and he will be sharing ideas on developing spending plans, preparing our children for moving out and talking about the credit industry in general.
Don’t forget tune in this Saturday at 9:00 a.m. on CJOB!
Budgeting – Review Your Spending Before You Create Your Budget
If you want to reduce your debt, then you need to have a budget. I know, you have tried this a million times and it is a waste of time. You see, the problem with a budget is that it only works if you know what you are budgeting for. If you sit down and pull numbers out of your head, what you are doing is the equivalent of wishing away your debt. First and foremost, a budget needs to be realistic; which means you will have to do the ground work.
The key to success is in reviewing your spending, before you create your budget. To do this you are going to have to be honest with yourself. The easy part is your recurring payments, such as mortgage, insurance, taxes and credit cards; so start with those. Next you will need to look at your outgoings for less predictable or fluctuating costs. Consider your groceries, clothing, travel expenses, entertainment and any other impulse purchases. Track what you spend on each area for a month to give a realistic view of what you are currently spending.
Now, once you have calculated your outgoings, there is a chance that you will be over budget. Don’t let this dishearten you. You have effectively listed the component parts of an overall formula; you now need to make those components work for you. This is where you budget really begins.
Look at your outgoings; especially those that are not essential or are adjustable, and consider how you can reduce them. Allocate higher amounts from your budget to payments which have high interest rates. If, after you have tweaked the numbers as much as you can, you are still in the red, it is time to speak to your lenders. You may be able to make further monthly reductions by changes to your payment plans.
Whether you are saving for one big purchase or simply as a means of combating debt, you deserve a reward for your efforts. If you have ever played games on social media sites, where you effectively click buttons for six hours, you will appreciate this article. The developers of those games use psychology to keep you hooked. They are based on an effort and reward system, which keeps the player motivated to continue in order to receive their reward.
Saving is just like those games, except for most of us, it is often a long time before we see a reward. So why not have a little fun with your saving, by setting yourself challenges? It is difficult to appreciate the results of your hard work when the goal is in the distant future. By setting incremental goals, with a reward at the end, you will feel that your efforts are worth it and you will also notice an increase in your motivation.
So, let’s say that you set a target of $5,000 dollars and you reach it within your estimated time frame. Now you can reward yourself. Here’s a tip: create two dates; one is your reward date and the other is your ultimate deadline. If you reach your target by the reward date, you can treat yourself to a night out or a similar luxury. Obviously the reward should reflect the target amount, so if you are aiming to save $100 dollars, don’t splash out on a foreign holiday as your reward or anything else that will eat up a large chunk of the money saved.
This simple idea will make saving fun, rewarding and worth the effort. Get as creative with it as you like, as long as the end results are the same.
It may surprise you to find, that in an article about reducing credit card debt, we are not going to tell you to stop using your credit cards. Responsible spending, using credit, will actually help you keep a healthy credit score. This will make all the difference in the future if you need to take out a large loan for a new home or car. However, you do need to keep your credit card debt down, and to do that you have to keep up with your payments.
Whatever you pay, you need to be realistic about it, so create a budget to track your outgoings. Try to avoid paying the minimum on your credit cards at all costs. It may seem like you are chipping away at your debt, but really, all you are doing is paying interest. The next step is to compare the interest rates on all your credit cards. You want to allocate the highest payment to the cards with the highest rates. You may not have it within your budget to pay more than the minimum on all your cards; however, you can pay off the larger ones while maintaining minimum payments on the others.
A low-rate balance transfer is another option for reducing your debt. You can consolidate all your credit card debt into one easy to manage, lower rate payment. Be careful when choosing this option, and make sure to check the rates and how long they last.
We recently asked you, our Manitoba readers, to share your debt resolution for 2012 for a chance to win an Apple iPad. Our iPad winner is Janice Margelino! We were very happy to meet and present the prize to Janice. We were extremely impressed by her dedication to good saving practices and determination to pay off her student loans!
Also, here are the Top 5 Resolutions we would like to share, as chosen by the contest participants. The choices are listed in descending order from lowest to highest votes.
Number 5. Commitment to save – By creating a budget and cutting your costs you will put yourself in the best position to save in 2012. You can use those savings in the future so that you don’t find yourself in debt again.
Number 4. Follow your budget – A budget is absolutely essential, if you really want to reduce your debt. The key to success is to make sure that the budget is realistic and to stick to it. If your budget comes in over your monthly income, it is time to start looking at where you can cut costs.
Number 3. Pay off student loans – Those students loans are not going to go away on their own. Commit to making regular payments on student loans as part of your overall budget. If you are struggling to meet your payments, speak to your lender to discuss your options.
Number 2. Pay down credit card debt – Credit cards are a quick and convenient way to pay for the things you want. However, they are also a sure way to increase your debt and put a huge dent in your monthly budget. Pay off your highest card balances first and work your way down.
NUMBER ONE. Cut frivolous spending – The top choice for debt resolution, and rightly so, is to cut frivolous spending. This does not necessarily mean going without. Look for cheaper alternatives to your favorites treats. For instance, retro clothing is fashionable at the moment, so why not check out your local thrift stores?