by Diane St. James
Most of my 20 years in the work force have been spent in the wonderful world of mortgages. But there was a period of time when my daughter was 3 (and I did not have my second daughter yet), that I worked for a Financial Planning firm about 45 minutes from my home.
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By observing the financial planners in their meetings and through my own education in business and finance, I've come up with a few suggestions for people on how to manage money before, during and after they get a mortgage. I thought BetterBudgeting.com would be the best place to tell about them, so, from time to time, I'll be writing some articles about this closely related topic.
First of all, I highly believe in a budget! Do I follow it all the time? Wait...while I blow the dust off of my "Monthly Household Budget" book. Well, I didn't say I always practice what I preach, but if you can write down a budget and stick with it, that will help.
You'll want to keep track of all your spending for a few months to see just what you spend money on. Keep a little notepad with you if you need to, so you know where it all goes. Little incidentals like that pack of gum, deodorant, and oooh... don't have that new copy of People magazine yet, can be put into a miscellaneous category.
Depending on how many categories you have, by the end of the month, this misc. total may be your biggest! The monthly household budget books that you can find at any store like Kmart, work well, or if you are computer savvy and want to keep it on a spreadsheet type of program, you can do that. Write your expenses in the appropriate column and don't forget to write your income down too.
Once you have a few months of income and expenses written down, take a look at it. Look at it again! Are you spending more than you are making? Join the crowd! How is this possible? Maybe the credit card is being used a little too often, or you are dipping into savings to get the lawn furniture that is on a special pre-season sale. Don't go blaming yourself entirely (although changing it is up to you). We live in a world of instant gratification which is hard to resist.
Look at areas that you can spend less money. Of course things such as rent or mortgage payments, car loans and installment loans that will be there every month, you can't change. Utilities you will have to average. The amount you spend will vary each month unless you are on a budget payment plan like some utility companies offer. You can certainly save on utilities. Have you ever seen that commercial where the Mom follows the kid around the house, turning everything off after the kid had turned everything on and left the room? You can turn things off that you don't use. Are you forgetful? Get a timer! Take showers instead of baths. In fact, take shorter showers... you get the picture.
See how much you spend in credit card payments. How many different ones do you pay on? If it is more than a few here is a suggestion. Don't keep making the minimum payment on several different cards each month. They will each continue to add finance charges, and you are also spending more in postage (unless you pay electronically or via phone).
Also having several open charge cards with balances on them (especially if they are close to the limit), will affect your credit score which is one of the main things reviewed when getting a mortgage.
Look at the credit cards bills you currently have. See which ones have the lowest APR (annual percentage rate) as well as have the highest credit limit. Many offer transfer balance services also at introductory lower rates for up to 6 months. I would recommend consolidating all of your credit card balances into two or three credit accounts. And then don't use these credit cards unless absolutely necessary. If you can, close the accounts. This may bring your credit score up as well and help you resist the temptation to use them.
I myself had some credit issues a few years back and transferred all my department store balances into one Visa and one MasterCard account. Sure the balances on these were now high, but there were only 2 credit card payments due each month. The minimum payment was more, but I could pay more because I wasn't trying to split the money between 10 accounts. Then I tried to add an extra $20/month to my payment and not use these credit cards either. My balance started to come down by more than a couple dollars each month. It can work!
I also saved on postage. Today if you mail payments on 10 separate credit cards each month, that is $3.40 in postage. Sending 2 payments is .68 cents. So you save $2.72 in postage. It may only be $2.72, but it adds up each month. In a year's time it equates to $32.64 in savings.
See what things you may have bought that weren't really needed. Shop smarter. If there is something on sale that you use a lot, stock up while it's on sale. Then you don't have to buy it the next few times you are at the store. Try using coupons when you can, many stores double them. Do you eat out a few times a week or more? Try doing it less. Pack a lunch for work more often, instead of using those vending machines. I think you get the idea. I'm not saying don't enjoy life, just try to keep a rein on where the money goes.
Once you have a budget with the amount you like to stick to spending each month in each category, try to keep within those totals. It doesn't hurt to put a little in savings each month too, if you can, but the first thing to do is pay off any credit card debts that you have.
If you can stick to this plan and follow your budget you will have a better grasp on your finances and feel better about where all your money is going!
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Copyright © 2001 by Diane St. James. All rights reserved.