Monday, May 25, 2015

Money Matters - It Sure Does - Part 1

Money matters is my area of expertise. I have a degree in accounting. Let me explain something: accounting and finance are two different areas of money matters. I do not have expertise in finance - that would be my youngest son who has a Master of Finance degree. I HAD to take finance as an undergraduate and as a graduate student, and I did well, but I have no interest in stocks/bonds/IRAs, etc. 

What I love is to help people to succeed financially using a budget. I will admit something that is hard, but true. I was the budget manager in my house, and our family was once deeply in debt. In 1998, we went to a financial planner to get help digging out of the financial hole. He said we would never get out of the hole - it was too deep. Well, I was not going to accept that as anywhere near the truth.

First step, create a budget. 

Comprehensive Budget Worksheet
Second step, figure out a way to bring the debt down. It was actually easier than I thought. I had a budget before seeing the financial planner, but it did not include the debt repayment portion. This was how to get out of debt and stay out. Write down all the places to which debt is owed.

The important thing here is to pay the smallest debt off first by paying minimum payments on all other debts. Since it is the smallest, it will be paid off quickly. When that is paid off, take that payment amount and add it to the next smallest debt. Continue this method until everything is paid off. 

My advice: Cancel all credit cards as they are paid off except the one that means the most. For me, it was a card that earns me money towards purchases from a certain company. I believe in this company, its merchandise, and free merchandise works for me. The card can be used anywhere. 

My advice: Once the debts are paid off, never charge more than can be paid off when the next bill comes. If it is paid off monthly, the interest rate does not matter, because interest will never be paid.

My advice: Do NOT charge meals out - that meal can end up costing two to three times the ticket price when interest is added in.

Look into refinancing debt, too. Mortgage interest rates had dropped, so we refinanced and brought down the monthly payment. After the debts were repaid, we refinanced to a faster repayment plan - we had 23 years left on the loan and changed to a 15-year-mortgage. 

This is where I will end today. For now, gather all the bills and work on creating a new budget using the Comprehensive Budget Worksheet I created. Do not stress - I will walk through the worksheet. Feel free to ask questions in the comment section or contact me privately. Tomorrow, I will write about savings, and then discuss creating the budget itself the day after to allow time for questions.