Organize to be effective!

Suddenly, the word “finances” has become a regular part of our

speech. We as a society and as individuals are learning the

importance of finance and monetary strategy as it applies to our personal lives.

The role played by money has become more and more important as we

realize that we can no longer afford to let the chips fall where they may.

The organization of our financial resources has become key to successful

money management. Grappling finally with the root causes of our bad credit status, we can see for the first time what has to be done to extricate ourselves from the clutches of the unscrupulous.

The best way to begin organizing your finances is by creating and keeping an effective budget. Two important concepts here – keeping track of your money – the sources of income and timing of income, the targets of spending and its timing and an effective system of controls over spending. A disorganized mess will contribute to your rating as a bad credit risk and will prevent you from a methodical correction of your situation. Not only that but even bad credit loans will not be available to help in the process.

Before you do anything else devise a list of categories of both income and expense.

Give this some thought before accepting a predetermined list from one of the bookkeeping software or services. They’re OK but you need to construct a plan for your spending broken down by your primary segments not someone else’s. You will have a good starting point for each budget category if you start tracking what you currently spend. Look at your checkbook stubs. What? You haven’t balanced your checkbook in a while? Then start there even before you make the budget. In doing so you will gain a better appreciation of just where the money is really going. More importantly, you are beginning to convert your bad credit history to good credit.

It’s human nature. As soon as you track how much you spend you will inevitably recognize what’s been happening and begin an automatic curbing of the outgo.

You need to know everything about the flow of your money and get ready to rethink what you have been considering essential. You have to be the master of all this. You can’t send the partner out on a shopping expedition without a detailed plan and agreed to limits.

Here are some rules of thumb for the wise use of limited resources:

• 35% - Housing - Spend no more than 35% of net income on

housing which includes mortgage or rent, utilities, insurance, RE taxes and home maintenance.

• 20% - Transportation - Spend no more than 20% of net income on transportation. That includes car payments, auto insurance, licenses, maintenance, gasoline (currently a big ouch for all of us) and parking.

• 15% - Debt – You are probably over this one but no more than 15% of net income should go on all consumer debt: student loans, retail installments contracts, credit cards, personal loans and other loans or lease agreements.

• 10% - Savings - Save at least 10% of income throughout your working life.

(this should be an integral part and foundation of your plan)

• 20% - Other - Spend no more than 20% of net income on all other expenses: food, clothing, entertainment, child care, and medical expenses.

To help you get your finances more organized it is important to incorporate some useful tools that will make everything you do concerning your finances easier. These

will help you overcome the normal challenges that face people when they try to keep a budget. Using personal financial management tools, (many are free or shareware), will

make your budgeting a lot easier. You don’t have to have accounting training to use these and you only need a commitment and a personal discipline to get your self back on track.

You know what – after a few weeks of this, you’ll be mighty pleased with yourself and the family as you recognize the benefits of getting your financial affairs in good day to day working order.

Good luck!

Credit Guide