Ring in the New Year … with a Budget

By Diana Palmieri
 
“Is this woman nuts?” you may be asking. How could she possibly mention the word
budget during the holiday season? I don’t want to talk about a budget. I want to celebrate, enjoy the holidays, and not think about how I am spending money–that is, until January comes around and I’m opening up credit card statements and noticing the checking account is somewhere in the negatives. Please pass the antacid.
 
Before I talk budgets, I am hoping some of you took the initiative and viewed at least one credit report. Now that you have discovered your financial past and present, did you find any discrepancies? If so, the bureaus try to make it easy to rectify depending on what the discrepancy is. All three bureaus, on their Web sites, have complete information on how to dispute something on your report, whether online, by mail, or by phone. It looks to be that online would be the fastest, however. When I disputed my error, I decided to go right to the source and wrote directly to the creditor. I just happened to get lucky and get that resolved rather quickly. I know some errors may not be as cut and dry as mine. Be patient, and follow up. This is important. Web sites for the three credit bureaus are
www.transunion.com,
www.experian.com, and
www.equifax.com .
 
For those of you with a great credit report, congratulations! For those of you who may not have so nice a credit report and are aware that you need to improve, the first thing you need to do is get a budget together. I can tell you from my own experience that living on a budget is the single thing that is going to get you out of a rut. But, you have to be honest with yourself and your family and really stick to it. It does not have to be complicated.
 
Start with a simple spreadsheet with column headings such as “House,” “Cars,” and “Misc.” Under the “House” heading, list your mortgage, taxes, utilities, and home insurance, for example. Under the “Cars” heading, list the payments, insurance, and maintenance. Under the “Misc.” heading, list dry cleaning bills, pocket money, food shopping, credit card payments, and entertainment. You are probably going to be very surprised when you see what flies out on a monthly basis.
 
Then, go through your checkbook
line by line and see where you spend. Highlight where you think the leaks are—the dangerous items, such as the 20 visits to Target in one month where you dropped $50 each time. I know every time I walk into to Target for cat food, I end up walking out with a basket full of stuff and spending $50.
 
Look at your credit card statements (gosh, didn’t I cancel that Netflix membership?). The auto pays on your credit cards can be very dangerous if not monitored. They will keep charging your credit card even if you don’t want it anymore! List all of those auto pays and see what can be cut or reduced or, more importantly, what you don’t use. Yes, it’s time to cut out the gym membership if you have not been there for six months.
 
Now, after you have gone through all of these cuts and reductions, you need to figure out your budget and stick to it. Part of your budget should be a savings account. Start with $10 a month and pay yourself first. Everyone’s situation is different, and you will try and try again until you come up with what works. It’s going to be painful, but the rewards of living within your means will feel much better eventually.
 
Finally, let’s talk about bankruptcy on your report and repairing credit. Some folks dear and close to me filed for bankruptcy about 11 years ago. Devastating as it was, they pulled themselves back up, took responsibility, and rebuilt their credit. They also made some big changes to their budget and revamped how they buy anything. They started rebuilding their credit by using a secured credit card. A secured credit card allows you to give the issuer cash, and you charge up to that amount. It’s a great tool to rebuild credit, but shop around, as some issuers will charge fees to open and to maintain them. So now, the bankruptcy is no longer on their credit report. They worried they would never again own a home or drive a nice car after filing for bankruptcy. Through patience and some reality checks, they made it and are just fine. You will be, too.  

I want to wish all of you a wonderful holiday season, and a Happy and Healthy New Year. Many thanks for visiting Fire Life and reading my column. Here’s to a prosperous 2011!

Diana Palmieri
is dually registered with Vanderbilt Securities LLC and H Beck Inc., which are unaffiliated. Securities offered through Vanderbilt Securities LLC, member SIPC/FINRA/MSRB.
 

 
 

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