Financial stability is an attainable goal – and we can help
There are many myths circulating about budgeting, let’s clear up a few common misconceptions.
Budgeting = Denying yourself everything
The reality is that budgeting provides balance. As a result, cutting back in areas may be necessary, but not everything needs to be sacrificed. A budget puts you in control of your finances.
Budgeting requires an accounting background.
Not true! Budgeting does require that you have a basic understanding of where your money goes and a determination to match your spending to your priorities. There are several simple ways to take control of your finances, such as using an envelope system.
People end up in financial trouble because they spend too much.
There are several reasons people end up in financial crisis: natural disasters, chronic medical conditions,
uninsured medical expenses, unemployment, divorce and many other life events can severely affect
your bottom line.
Looking for a budget worksheet to get started?
The 4 C’s of Credit
- Capacity indicates how much debt you can realistically repay based on current income and expenses. Elements used to calculate capacity include living expenses, current debts, income sources, income reliability, ongoing responsibilities such as child support or alimony, and proposed payments for new debt
- Character is based on objective measures of past behavior that’s likely to impact your financial actions. These measures include length of residency, length of employment, and the nature of your credit history.
- Credit History is determined by existing credit relationships. Factors may include collection activity, credit card accounts, judgements, bank loans and mortgages.
- Collateral is an item that can be taken and sold by the lender if the borrower fails to pay as agreed. Side note: lenders stake their claim through a lien that gives them legal interest in the item used to back the loan, usually a vehicle or real estate.
Savings Accounts Everyone Should Have
- Emergency Savings:
Saving for emergencies makes it possible to cope when the unthinkable occurs. This type of savings would not be used if a car breaks down or the roof needs repair. Instead, emergency savings are reserved for truly dire occurrences: job loss; serious injury/illness, etc. Your goal should be to save enough to cover 3-8 months of expenses.
- Set-Aside Savings:
The purpose of this savings account is to help you budget for large expenses that are outside the scope of day-to-day spending. This might be taxes, car repairs, appliance replacements, dental work, holiday gifts, vacations, graduation parties, weddings, etc. You should set-aside for predictable and unpredictable expenses.
- Retirement Savings:
Even people who are covered by pension plans or 401(k) plans will probably need or want discretionary retirement savings. This is money you control in addition to your pension or other retirement income.
Need a little help sorting through all the details? Schedule a FREE Financial Physical at 231.798.4321.