Budgeting Tips
Can an Envelope Budget Help You Get Out of Debt?
money jar
If you’re seeking to get out of debt, an envelope budget is worth consideration. Although it requires willpower and dedication in order to work, it’s a method that can help you start to become more aware of how your money is spent. Also, it’s very simple to implement. How can an envelope or money jar budget plan reduce your debt and do you really have to use envelopes or jars to make this plan work?
The Basics of an Envelope Budget Plan
When you decide to use an envelope budget to help you manage your debt, you must first begin by evaluating the amount of money you earn each month, as well as the specific things that you need to buy. Once you have figured out how you use your income, it’s time to designate one envelope for each spending category. For example, you may need to create envelopes for your mortgage or rent, groceries, healthcare and entertainment. Decide how much of your income will be devoted to each category and stick to it. The final step is to go withdraw the appropriate amount of cash from your bank and deposit the correct amount into each envelope. In this plan you’re going to be living on cash, rather than using debit cards and credit cards. This helps improve your mindset about money as you can see and feel how much money you truly have.
Technology Can Help You Adjust to an Envelope Budget Plan
If you don’t like the idea of carrying around a bunch of envelopes in order to help you achieve freedom from debt, there are several software programs that work on the same principle, but don’t require the use of actual envelopes. Keep in mind though that envelope budgets may take a few months before they start to make a noticeable impact on your finances. If you find that it’s difficult to leave your old habits behind and start sticking to your new envelope budget, you may find that you feel more motivated when using traditional methods instead of software programs. Regardless of how much technology is used, envelope budgeting is an effective way for many people to become more aware of their spending habits and take steps towards handling their debt and saving money
How Are You Going to Recover from Overspending on Christmas?
It’s the first week of January and you’re filled with financial dread. You can’t believe the shape of your finances. Not a good way to start a new year, huh? It might seem daunting to meet new year’s financial resolutions when you have no money in your account. So many people are in the same boat as you. Wait until the credit card statements start flooding in! Some of you spent cash only on Christmas, which is smart, but whether you spent cash or credit cards, if you overspent you’re feeling the cash crunch as you’re struggling to pay January’s bills.
Here are some tips to help you recover NOW and then plan more effectively for the next Christmas:
NOW:
- Eat Frugally. Shop sales, eat up those leftovers, forget restaurants and don’t even think about buying your daily Starbucks or Tim Horton’s until you’re back on track.
- Clip coupons. Become a coupon queen or king. You might be surprised at how fast the savings add up! Why not consider putting everything you save into a jar to pay toward your debt or do it all year long to help you save toward next Christmas?
- Set up a strict budget and follow it to the letter. It’ll help you get back on track fast.
- Prepare for next year carefully.
How will you be better prepared next year? That’s a good New Year’s resolution. Here are some tips:
THEN:
- Set a holiday spending limit and stick to it. Then portion your income so that you put aside a portion of that money between now and the holidays.
- Shop throughout the year instead of all through December. One of the reasons Christmas hits us so hard is that we often pull the money out all at once, leaving a gaping hole in our finances. Yes, there are great sales after Thanksgiving but if you see something perfect for a good price in the summer, for instance, why not buy it and put it away? That’s one fewer gift to scramble for next December. Keep a running list so you know what’s been bought.
- Draw names. Did you overdo it buying for all the siblings, cousins, aunts, uncles, and neighbours? Maybe it’s time to set a limit. Maybe drawing names or giving smaller tokens (such as homemade gifts like tins of baked goods) to some of those people is a better idea.
- Start a Christmas fund. Open a high interest savings account now. Portion a certain amount of your income to go toward it automatically. Don’t make this money easily accessible! You can use this as a Christmas fund alone or double this account as an emergency / savings / Christmas / holiday fund.
- Keep all your holiday spending money separate. Open a separate bank account, use cash, or use a specific prepaid debit card. This can help you stay within your limits and not leave yourself short for January.
Hopefully you had a lovely holiday, despite your financial faux pas. A bit of frugality can help you get out of debt quick and some planning can help you have a smoother season next time.
Doing a jar or envelope budget? It’s a great way to portion your income. Learn more about it: Jar Budget Technique.
What Can You Do To Repair Your Credit And Boost Your Credit Score?
Credit repair is something that can make a big difference for you. There are a lot of things you can do to improve your bad credit report so that you appear to be not only credit-worthy but worthy of a promotion or worthy to a potential soul mate. Yes, even your love life could be impacted by your credit history.
Because credit is such an important factor to people today in terms of their ability to reach their goals, a lot of people now talk about credit history when they are building a relationship. Your poor history could make you less than attractive to a person you are interested in building a future with because it could hamper their goals and plans.
Note: Time doesn’t really heal all credit wounds. Even if you’ve laid low long enough that seven years has passed, you still need a good credit score.
Here are some credit score boosting tips to help:
- A secured / pre-paid credit card. You pay the credit card company a deposit (they usually keep the interest) and you pay fees to use it as a normal credit card. They report to credit bureaus that you pay your bills on time. You can get two or three types of prepaid credit cards in Canada, for instance. Consider Home Trust Secured Visa and Capital One Guaranteed Mastercard, for help. (Note: Debit cards or pre-paid credit cards typically do not report to credit reporting agencies.
- Check your credit history with TransAmerica and Equifax to ensure that there are no errors. You can also work to negotiate with bad debt lenders listed to pay off your debts. Some will agree to update the file once you’ve paid off your outstanding balance.
- A car loan can help. Only do this if you aren’t out of your depth with your finances (i.e: you are solvent) and if you buy a car you can afford. Car financing companies will often approve bad credit car loans but generally with a high interest rate and often a sizeable deposit will be required. If you shop around for a good deal and stick to a payment you can afford, you will probably help your credit. Be sure to deal with a financing company that does take the time to report payments monthly.
- A secured loan. If you have collateral, you can often obtain a loan that you can use to boost your credit score.
Time can heal things and making payments on time will help. Do be careful you don’t sink into an abyss of debt in an effort to make your credit report look better. Consider living on a cash budget such as with the money jar budget and be sure to use credit wisely.