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Chapter 3: Building and Sticking to a Budget
Book I
Taking
Charge
of Your
Finances
Depending on your conclusions, you may need to revise some of the numbers
in your household budget. If you have to increase the amount of an expense,
try to decrease another expense by the same amount. If you have to revise
your budget to reflect a decrease in your household's monthly income, try to
offset the decrease with budget cuts as well.
If your monthly comparison shows that some of your expenses were lower
than what you budgeted, don't revise your budget right away. Wait a month
or two to see if the changes are permanent. If they are, put the extra money
toward your high-interest debts, focusing first on paying off the debt with the
highest rate of interest. Do the same if your income increases permanently.
Your budget is a dynamic document that should change as your finances
change, hopefully for the better. Gradually, if you stick to your budget, you'll
start paying off your debts faster. Eventually, you'll also be able to add some
extras to your budget (maybe some of the things you've had to give up for
now) and start contributing to savings so you'll have a financial safety net.
If you continue to be careful about your spending and minimize your use of
credit, before you know it, your family will be in a position to make its finan-
cial dreams come true.
future IRS tax refund. Some tax preparers,
as well as finance companies, car lenders,
retailers, and check-cashing companies,
make this kind of loan. Usually the loan
will be for no more than $5,000, and it will
last for no more than ten days. In addition
to having to pay a very high rate of interest
on the loan, you must pay the lender an up-
front fee, and you must file your tax return
electronically to the tune of about $40. So
when you consider the loan's interest rate
plus the fees involved, the effective rate of
interest you pay to borrow against your own
money may be in the triple digits. When the
IRS issues your tax refund, it deposits the
money directly into an account set up by
the lender, who takes its money and gives
you the rest.
Car title loan: If you own your car free and
clear, some lenders will make you a loan for
a small fraction of what your car is worth.
Usually the loan will be for no more than
30 days and will have a very high rate of
interest. To get the loan, you must give the
lender the title to your vehicle and a set of
car keys. The major danger with this kind of
loan is that if you miss a loan payment, you
risk losing your car. Depending on the loan
agreement, one missed payment may be all
it takes.
