Breaking budget
Jeff Broddle/The Cadillac (MI) News
5 January 2012
The Christmas decorations all are put away, (or maybe not), and the pile of presents under the tree has long ago disappeared. The credit card bills, however, still linger like the ghost of Christmas past.
You can't dig yourself out of a credit card hole using a snow shovel, but the new year does offer one bonus: an extra day to both take stock of your current financial situation and plan ahead for the future.
Why dig your way out of a financial hole when you can leap out?
Find out how thanks to budget advisor's plan for the New Year.
Look at your credit card bill. On each bill, there's a box that details how long it would take to pay it down entirely by making only the minimum monthly payment.
Some people who are deeply in debt are amazed to discover how long that is.
“People say, 'it could take 15 years.' That is scary to them,” said Andrew Johnson, communications manager in Michigan for non-profit GreenPath Debt Solutions.
Johnson said the average unsecured debt held by those who take on a debt management program is almost $30,000. The average number of credit cards they hold: eight.
On Black Friday, the busy shopping day after Thanksgiving, consumers spent about 9 percent more than they did the same day last year.
On the one hand, it could be a sign that the economy is starting to turn around, Johnson said. On the other hand, it could also mean consumers simply feel more comfortable using their credit cards.
A GreenPath trainer urges using the leap year day of February 29 to make the jump to financial security for 2012.
Megan Bridgett offers a plan for the first 60 days of the year.
Right now, in early January, make a projected budget of your monthly expenses. Break them down into separate categories, such as rent/mortgage, groceries, gasoline, clothing, entertainment, dining out, utilities, household bills, debts, and so on. Then, hold on to every receipt and keep track of every expense you make this month.
Each week, sort your receipts out into each category you've identified. Compare to how much you assumed you would spend in your projected budget.
“People tend to spend 10 to 20 percent over what they anticipated,” Bridgett said.
Looking at the difference between what you guessed you would spend, and what you actually spent, will help in figuring out where to adjust or cut back.
Before the first two weeks of January are done, hold a family meeting while you can still capitalize on the enthusiasm over your resolution to make this year the one for tackling your budget problems. Include everyone. Children can help save the family money by keeping track of their cell phone charges, for example, and making sure they turn the lights out when they leave the room.
During the next two weeks of January, set short-term and long-term goals for yourselves. Three to six months is a reasonable length of time for short-term goals, while long-term goals might have a window of the next few years.
Keep the goals specific, measurable, attainable, realistic and timely. You can remember the requirements for these five goals by the acronym, SMART.
In February as you move forward, begin to make some cutbacks. Think of areas where you think you can trim down. Stay realistic, and don't try to slash everything.
Continue to track your expenses and use a notebook to make comparisons at the end of the month. Put savings into a family bank account and celebrate your success in a small but fun way, such as renting a video and having “movie night.”
On Feb. 29, use the extra day in the leap year to make budget adjustments while keeping an eye on financial landmarks ahead such as vacations, back-to-school shopping, college and so on.
“If you are able to get through the first 60 days of attaining your goals and tracking your progress, you'll find yourself saving, budgeting and tracking your way to financial success throughout the rest of the year,” Bridgett said.