Running a family’s finances can be a lot like running a small business. You need to have a clear understanding of your assets (earnings) and liabilities (debts) and how to allocate scarce resources. With this in mind, here are five personal finance tips that could help keep your family’s finances running smoothly.
Keep debt in check
The surest way to get in trouble financially is to lose control of your debts. You can quickly determine how you’re doing debt wise by calculating your debt to ratio. Add up all your net monthly earnings (after all your deductions) and your monthly debts. Then divide the earnings into your debt. Be sure to include all of your fixed debts such as your mortgage or rent, monthly credit card payments, auto loans, insurance, utilities, etc. If your ratio is 40% or less, you’re probably okay. But if it’s 50% or more, you need to take immediate action to reign in your spending until you get your debt to earnings ratio to 40% or less.
A quick way to reduce the interest you’re paying on your credit cards
If you have multiple credit cards, check out the interest rates on each. If you find your paying 18%, 20% or more, consider transferring your balances to a new credit card with a lower interest rate. Most of the credit card networks are now offering 0% interest balance transfer cards. If you can get one of these cards, you could transfer all of your other balances to it and pay no interest for 6 to 18 months – depending on the card you choose. This gives you the opportunity to pay down your balance to get out of debt faster. Be sure to choose a card that goes to a reasonable interest rate once your introductory offer expires. Some of these can go as high as 18%, which would put you right back where you were to begin with.
You can get some great financial apps for use on your tablet computer or smart phone. An app such as Mint (www.mint.com) will help you track expenses, develop a budget, monitor your checking and savings accounts and keep on top of your investments and it’s free. You Need A Budget (YNAB) is popular tool for creating and staying on a budget. If all you want to do is keep your checkbook balanced, there is the program Checkbook. Buddi and AceMoney are two other popular personal finance tools.
Have an emergency fund
If you don’t have an emergency fund, you really need to build one. It should be the equivalent of at least three months’ earnings though six months is even better. We all run into emergencies and it’s just so much better to have money available to weather the storm rather than having to go deep into debt.
Refinance your mortgage
Now would be an excellent time to refinance your mortgage. There are mortgages available at less than 4%. If you have equity in your house and can refinance, you could cash out your equity and put it into savings or use it to pay off your debts. It also makes sense even if you don’t have any equity. This is because you would have a lower monthly payment and could put the difference between it and your old payment into savings or again to pay off your debt. However, do keep in mind that when you refinance a mortgage, you’re starting all over again so that a new 30-year mortgage will take 30 years to pay off.
Consolidate your debts
Having a serious amount of debt can put a real damper on your life. Our debt consolidation providers would work with your creditors to save you money and become become debt free in a reasonable amount of time. Plus, we offer a 100% satisfaction guarantee.
Don’t let debt ruin your life. Call our toll-free number today to learn more about debt consolidation and what we could do to help you