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Budget Planning Can Help Reduce Debt Stress
Debt-Ex Inc. is a Santa Barbara company that has been helping people suffering from financial hardship since January 2008. It offers a free consultation and a complimentary budget analysis, so it can truly understand each client’s unique situation. It then explains all the options available, so the client can make an informed and educated decision.
Debt-Ex has affiliations with other proven professionals, so it can help each client with financial coaching, debt management, debt settlement, bankruptcy and debt consolidation.
About the Economy
» National consumer debt is just more than $2 trillion.
» The nation’s credit card debt is nearly $800 billion.
» The average household has about $16,000 in credit card debt.
» The nation’s unemployment rate is about 10 percent.
» Business and state employees are experiencing layoffs and wage reductions.
» Credit card companies are lowering consumers’ available credit card limits, which has a negative effect on consumers’ credit scores.
» Based on the new lower credit score, credit card companies are raising the consumer’s interest rates.
» Credit card companies can now charge a minimum payment of 4 percent of the current balance.
Debt Stress Health Issues
Debt stress is up 14 percent since 2004, and debt can strain a lot more than just your purse strings. According to a 2008 Associated Press poll of 1,002 people, if you are stressing over high debt, you’re more likely to experience the following medical conditions compared with people who are dealing with manageable debt:
» Three times more likely to have an ulcer or digestive track problems
» Six times more likely to suffer from severe depression
» Twice as likely to have a heart attack
» Seven times as likely to experience a panic attack or suffer from severe anxiety
» Three times as likely to get headaches or migraines
» Twice as likely to suffer from muscle tension, including lower back pain
Advice
Whether you take on the task of eliminating your debt by yourself or if you utilize the advice of a debt counselor, the first step will be creating a budget. Before you can develop a plan to get you where you want to be, you have to know where you are starting. Below are some helpful hints on how to develop an accurate budget.
Determine Your Take-Home Pay
In order to create an accurate budget that you will use, you will need to determine your monthly household income. This should be your net income, not your gross. After all, you only want to work with money that you actually receive from your paycheck.
Write Down All of Your Expenses (not totals; just what they are)
Either use a pen and paper or sit down at your computer and make a list of everything you pay for on a monthly basis. The amounts don’t matter yet; just make the list and be honest. If you “forget” to write anything down, your budget won’t work.
Calculate Totals
After you are confident that you have all your expenses written down, begin filling in the blanks with the actual amounts. One rule: Make sure the amounts are completely accurate. Do not guess at this part. Grab your bills from previous months and write down the real totals.
Review
When your budget has been created and the totals have been filled in, review everything you wrote down. Don’t make any changes; just review. Do you find that you are spending more each month than you’re bringing in? Did you have any “uh-oh” moments where you discovered areas that you could cut back on? If you are having any thoughts when reviewing your budget, then you’re making progress.
Make Realistic Changes
If your expenses outweigh your income, where can you cut back? Are you paying too much for cable? Have you gone to the movies one too many times? Remember to change only what you will change. If your rent is $1,567.45 per month, don’t change it to $1,500. Only change things that you and your family will give up and live without for the time being.
Keep It Handy
The final step in using the budget is to keep it handy at all times. Do not leave your house without at least reviewing it. You’ll find that living within your means and sticking to the budget you created will make you feel fantastic. It is a huge accomplishment, and you should be proud to have succeeded at following it.
We know that your determination in achieving financial strength will keep you motivated to manage a budget that works for you.
— Farrell Odendhal is a senior debt analyst for Debt-Ex Inc..
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