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Seriously contemplating the purchase of a new auto in this economy can be a bit scary. Knowing exactly how much you can afford is the single most important question. There is a plethora of excellent deals on the market, but does it make sense to take on another payment right now? Make a checklist of the pros and cons before saying yea or nay.

Do you have secure employment? Many who thought they did have found out in the worst way that the company in which they worked for 30 years–and planned to retire from–is suddenly downsizing. Be sure that the money you plan to expend on a monthly car payment will not overtax your bottom line in the event you become unemployed. Budgeting is easier to do when you know exactly how much money you make every month. Always be sure to leave plenty of cushion after your other payments have been deducted. It is not easy to save, but it truly is better to be safe than sorry.

Is your reason for wanting a new or used car strong enough? There are many reasons for needing to trade up–or even down. If your current ride has a number of issues that will cost much more in the long run to keep repairing, then certainly trading up is a very good reason. Conversely, if your vehicle is a high-end model and the payments are too steep along with the insurance payments, selling it outright or trading in for a more affordable model makes sense to reduce debt. If you have no car at all and you desperately need one, saving up for a few months to buy a decent used auto is a good way to purchase one without having an unwieldy payment hanging over your head every month. In addition, if you have recently been in a wreck, search for an auto with approximately the same terms as the previous unless you know without a doubt you can afford more. Buying up just for the pure enjoyment of having a new car does not make the most sense if you barely cover your current expenses.

The rate of interest you get is contingent upon your credit rating and the loaning entity. Currently they run anywhere from 3.99% up to 12.99%. Many banks have up front application fees and require a down payment in order to give you a lower rate. The bureau of motor vehicles in your state may charge a title transfer fee in addition to the excise tax for your license plate, and in some states the amount they charge is relative to the value of the auto you purchase. Insurance premiums are another consideration and cannot be overlooked when figuring your out-of-pocket expenses to purchase a vehicle.

Now may be the best time to purchase if you are in a solid job with extra cash to spend. However, it may be wiser to save up and purchase with cash rather than take on a payment for 36, 48, or 72 months. Signing an auto loan is a serious commitment that requires some serious consideration. Failing to meet your financial obligations can cause grave consequences to your good credit standing. You may decide it is best for you to stay out of debt at this time.

Get Committed to Becoming Debt Free

Personally, I have found that the first step needed to make to become debt free is to be committed to doing it. After all, talking about money management and limiting excess spending is not going to be enough – and it is not going to happen.

Truthfully, you can have one or the other, but not both. Desiring to be debt free is just a dream, unless you are committed to making it happen. Find out now if you are willing to make that commitment, and if so, then take the next steps.

Take a few minutes and imagine what it would be like to be debt free. Imagine having a bank account where you have been able to save money and can buy things now and then – without being in debt! Then, think about what it would mean to not have to live with the pressure of wondering how you are going to meet next month’s bills. What a relief it is to be debt free.

Determine Your Essential Bills

The next step is to take a look at your bills and determine which ones are “must have” and which ones are optional. The optional ones you want to get rid of. This would include things that it is not necessary to have such as newspaper or video subscriptions, premium cable programs, etc.

Your goal here is to strip the excess off of your finances and get down to the bare minimum. Most people have a number of things that they pay for every month that they could do without. This could also include expenses, even small ones that you make on a regular basis. Things like eating lunch out every day, a daily latte, cigarettes, fast food, etc. can certainly add up each week and month.

In addition to this, however, you want to be able to look over your credit card bills and see where money is being wasted. If you have some that are high interest, as is probably the case, or that you are always paying late fees on, determine to either put them on a new balance transfer credit card for credit card consolidation, or pay it off as quickly as possible.

Establish a Budget and Eliminate Non-essentials

Getting your finances in order also means setting up a budget. This is something you will need to do in order to get out of debt. It will enable you to see where your money is going, but only if you stay on top of it and record everything.

Once you find where money is going for non-essential things, simply eliminate them, or, at least reduce them until you are sure your family budget can handle it. Besides telling you where your money is going, your budget also needs to tell you how much money is available for a certain category for that month. This way, you can simply look at it and will be able to tell if you have money available for a particular purchase or not.

Choose Smallest Debt and Pay It Off

In order to free up money the fastest, which will also enable you to put more toward other bills, you should pay off the smallest bill first. This will mean the smallest possible time until you can start putting more money toward your debt elimination.

It also will mean that you have one less bill quicker, and this can be refreshing and even rewarding to you. It will allow you to feel a little debt relief, which will even encourage you to continue working toward that goal.

Becoming debt free also means that you need to use cash on all your purchases and do not accumulate any more credit card debt. Remember, too, that debt simply means you will pay more for any and every purchase you make. It really does not matter if it was on sale when you bought it, because the interest will surely rob you of any sale benefit.

Once you pay that debt off be sure to apply the extra money toward a new debt – one that can be paid off quickly. Also, be sure that you are paying at least the minimum amount on each bill, plus some more each month. Ideally, you want to eliminate debt as fast as possible, and also to work to have to pay the least amount of interest, too.

Find Ways to Increase Income to Reduce Debt Faster

You may even want to take some steps to become debt free even faster. You can do this if you are able to temporarily take on a second job, or find some other way to make money.

Things like having a yard sale could be very beneficial, especially if you have some items around your house that you are not using but still have some value. EBay is another way to make some fast cash, or by putting an ad in the newspaper. Ads can also be placed online at places like Craigslist, or Kijiji.com.

Some other ideas that will let you get some extra cash to quickly reduce your debt include downsizing your house or apartment, getting an older model car (this will also help you save money on car insurance), increasing your deductible on your insurance policies, or renting out a room. Another option would be to start an online business of some kind. Many people are doing this now, some out of necessity because they cannot secure a job anywhere else, and it is working perfectly for them.

Getting out of debt requires some sincere and planned steps. How many of them can you apply today toward a better and debt free future?

Having No Budget in Place to Control Flow of Money

Many people know what a budget is and they may actually understand the need for it, but few people actually have one that is usable. When there is no budget in place, or when it is not followed, more money is often going to places that are totally unexpected – and unseen. Before long, it seems like there never is enough money on hand, and the debts can accumulate rapidly.

Being constantly aware of where the money is going is an essential first step toward gaining control of debt. Hopefully, your debt is not yet out of control. In most cases, using a debt consolidation company is not necessary. You can often do it yourself and save money, but it will be necessary to set up a budget first to gain the control you need to stop the uncontrolled bleeding of your finances.

Failing to Watch the Credit Cards

Here is a second common problem that often leads to debt that gets out of control. If people understand that the first credit card (Diner’s Card) was not used like they are today, but it was merely a way to get a bill so that cash did not have to be carried. The bill was expected to be paid in full as soon as it was received.

This was a good thing at the time, and credit cards really need to be treated like this for the best way to save money and stay out of debt. Failing to look at credit card debt as total debt leads to a misconception about how much you really owe. I ran into this problem and it produced a problem with the amount of income I had (next point). Had I paid each charge in full when I got the bill, it would have been easier to stay out of debt.

Credit card companies get rich (very rich) simply because people cannot control their credit cards (their wants). When they are seen as a way to buy more things than you could otherwise – trouble is not far behind.

Having More Bills than Monthly Income

A budget can allow you to see when a trend is developing. You can see what is happening to your finances quickly – as long as you stay on top of the budget and keep it up to date. Without a budget in place, you may not see that your monthly bills are becoming more than the amount of money you are bringing home until it is too late.

Adjustments to your finances can also be made when needed, as long as there is money available. It will also let you know when other purchases – the extras, can be made – and when they cannot. If you follow the budget, this is how it gives you greater control over your cash flow.

Not Having an Emergency Fund

An emergency fund provides a cushion when things do not go as smoothly as might be hoped. Everyone is aware of what happened about a year ago to the economy in this nation – nearly everything was turned upside down and most people were affected by it in some way or other.

An emergency fund can help you meet such unexpected events, although the extent of damage cannot always be predicted. Many people lost their jobs, and some are still looking for another one. While most crisis periods are usually shorter in duration, an emergency fund would have helped many to be able to temporarily stay out of debt – and possibly keep their homes. The fund can also cover you when there are unexpected events, such as a car accident that requires you to pay your portion of the bill first (the deductible amount).

The amount of money that is recommended for an emergency is about six to nine months worth of your cost of living. If you are self-employed you will want to have twice that amount – especially if you are the sole breadwinner in your family.

If you are without an emergency fund and you suddenly find yourself unemployed, or even unemployable, you can be sure that the bills will quickly stack up – along with the interest and late charges on those bills. This will make it even harder to get caught up, and having the creditors calling daily will not help anything, either.

Not Reviewing Expenditures Regularly

Even if you have a budget, it is a real good idea to review where your money has gone for the past few months. If you are younger, and your life style has frequent changes, you want to look over your expenses about every six months or so, but sooner if you have just set up your budget.

A family’s expenses change over time, and oftentimes, their wants will change, too. This means that money may still be going to things you do not need anymore. Why not take that extra money and use it to reduce a bill instead?

Develop a Plan to Get Out of Debt

If you are in serious debt today and see that you are headed for financial trouble, you can start to make some essential changes. The first step, however, is mental. You need to make some decisions that you will bring your money under control – or it will only happen again – no matter what solution you use. One more important decision that must be made is that you need to resolve to stop buying things you do not need until you are out of debt.

When in financial difficulty and things are looking pretty bleak, you do not want to rush into action of some kind without learning your options. You can get bill consolidation through a debt consolidation loan without the services of debt company. Also, there may be other solutions than having to declare bankruptcy.

As you seek to get out of debt and get into better money management, you will also want to be sure that you make a way to save money regularly. After all, saving money could be the one thing that will keep you out of trouble later, and it will provide you with some money for retirement – without debt.

Get started on getting yourself out of debt by reading our articles for strategies and advice to help you get out of debt!

This means that no matter how well planned your budget was when you first set it up, that there could easily be a need to adjust it considerably to meet your current situation. By doing so, it could mean that you would be able to save money on a larger scale. I discovered that my own budget changes rather frequently as my kids get older.

Here are some areas that you may want to look at in particular.

1. Auto Insurance

Your car insurance can be changed to save money, especially if you have an older car. You can raise the value of your deductible and save the money to put toward your next car. Just be sure to be able to pay for the deductible if there is an accident or your car gets stolen, because you will have to pay the deductible before the insurance company will pay anything. Fortunately for me, my insurance agent regularly reviews my insurance needs.

If you have another car that is insured by a different company, then check to see which one will give you the most savings by switching one of them. Most insurers will give you a discount for having multiple cars with them. Also, see what other discounts may be available and find out if you are receiving them.

If your kid is old enough to drive, like mine, be sure to check your budget before you go out and get insurance for them. It may just mean they might have to wait a little longer – it won’t hurt them – or let them get a job and pay for it.

2. Pay Your Bills on Time

A lot of people throw money down the drain just by being late with their bill payments. My income is sporadic and I often found myself paying a lot of late charges because I did not have money coming in as fast as I wanted it to – or when I needed it to be there.

Budgeting your money more effectively should result in you being able to work faster toward debt elimination and less waste. Most creditors charge late fees, and some credit card companies are even raising the interest rates on their cards for just one late payment. No one needs that. Paying on time will not only help you avoid late fees, but it will also enable you to have a better credit score – which can mean more borrowing power on larger items like a car or house.

3. Eat at Home More and Save Money

A lot of money in most households goes to the fast food companies. Unfortunately, this often leads to thicker midsections for many of us, and this can lead – doctors tell us – to more illness and doctor’s visits. Anytime you have illnesses and doctor’s visits unnecessarily, it is a time when it can quickly blow a budget and put you in debt – even if you have health insurance.

Eating at home can be healthier for you and the family, but there may need to be a short adjustment period. Keep healthier snacks around the house, plan a meal schedule, make enough for two meals each time and freeze the other half. This not only enables you to save money on groceries, but will also help save time on meal preparation later. You can save money also by taking bag lunches to work, or put meals in containers that you just throw in the microwave.

4. Get Healthy

If you are overweight, like many Americans, then you are probably paying too much in more areas than one. By losing the weight (I am working on it myself), you can save money on food expenses, health insurance, doctor’s visits, and end up feeling better about yourself, too. You may even be able to get lower life insurance costs, too, because, statistically, people with better weight control are more likely to live longer.

5. Rent or Borrow Movies

It is tempting to buy movies when they first come out. These will cost you a bundle, however. Remember that there are many movies out there and some of the older ones are very good, too. You can get movies at a much lower cost if you get them from your library (for free), rent them from a local box at the store, or, go online and watch some from Hulu.com, or a similar Web site. If you feel you have to have a new movie, you might split the cost with a friend, and then have a get together and watch it as a group.

6. Plan Your Activities

When you want to go and have some fun, you can stay within a budget if you plan it in advance. It is those sudden unplanned trips that have no budget in mind where you are most likely going to blow more money than you intended.

There are plenty of places where you can go for a low cost and almost free outing if you go online and look for them. This may include parks, local events, do things with friends, beaches, etc. The newspapers will also advertise some events, and you may even be able to find some online in your town. Some groups, such as libraries and parks, often conduct classes and activities for the children – and these are usually free.

By going to free places more often, your children will also begin to understand that it is not necessary to spend a lot of money to have fun. This will also help them to save money when they have a family of their own. It is a good idea to teach them how to budget, too, for their financial well being. It can also lead to them asking for money less often, too.

7. Plan Your Purchases

Everyone has plans to buy larger priced items from time to time. You can save money if you will wait for it to be on sale rather than buying it when it first comes out, or when it appears at a store near you. This will actually enable you to get similar items as your friends – but at a better price.

You can also get some rather amazing discounts from time to time if you are looking for them. Keep an eye on sale papers and on the price of the item you are looking to buy. Then buy it at a great price when it goes on sale. This also works well with coupons and other ways of saving money.

When was the last time you looked over your budget to see if it is helping you save money? Why not take a look at it this week?

All of us know that our society is built on the exchange of cash, and this means it is cash that you will need when you are faced with that emergency. Here are some tips about how you can set up an emergency fund – in a savings account.

Understand Why You Need an Emergency Fund

The first step you want to take is to understand what your needs are for emergency funds. If you are like me, you probably never gave it a lot of thought – who wants to think about things like that? The truth is, though, that by spending a little time thinking about it, it will enable you to understand just how important it really is. So – you don’t want to be in too much of a hurry to pass over this section.

Emergencies can take all kinds of shapes. They can range from very simple ones – to those that are almost beyond the imagination to comprehend – like the one that occurred not long ago in New Orleans. Here are a few possible emergencies that are experienced from time to time around this country – all of which you will need an emergency preparedness savings account for if it happened to you:

• Floods
• Earthquakes
• Tornadoes and hurricanes
• Tidal waves
• Accidents
• Medical emergencies or illness
• House fires
• Unemployment
• Emergency travel

Determine How Much You Will Need

Note that in some of these cases, your home could be destroyed. If that were to happen, you would need to be able to have a place to live for a while. If you have a home business, then your income may be destroyed at the same time. You would need living expenses for several months, plus some way to regain an income – whether it means getting new equipment, or just getting a new job.

Another possibility is a car accident. Remember that you probably have to pay a deductible before your car insurance company will pay anything. This means you would need to pay the deductible for everyone on the policy, plus the deductible on your car, before you get a dime – if your whole family is hurt at the same time.

Also, don’t forget that your insurance company probably works on a reimbursement policy, and this means that you will have to pay out of pocket for some time, and then be reimbursed at some point in the future. You will have to have enough money saved to support yourself during this time. As you can see, a safe amount to have in an emergency savings fund would need to be a couple of thousand dollars for a family, but having at least one thousand dollars would be a good starting place for many people.

As a rule of thumb, it is a good idea to set aside at least three month’s worth of income – but six month’s worth is better. If you are self-employed, then it is recommended that you set aside up to a full-year’s worth of income. Besides just saving money, however, a self-employed person should also have a back-up plan to resort to in an emergency.

Put It into Your Budget

After you decide how much would be a good goal for you and your family, you want to set aside an amount each month – in your budget – to build up to that amount quickly. This is a very important item in the budget and should not be delayed – if possible. The main reason is that the damage that can occur to your financial situation can be very serious – and long lasting.

Probably the easiest way to establish your emergency fund would be to have the money automatically go into a savings account for this purpose. This way, you never have to see the money, and you do not need to make any effort to put it into the account, either. After you have the amount you want, let it continue to build up, but take the extra money every few months and either invest it or put it into a retirement account.

Make a Separate Account

You want the money in your emergency fund to be available – but not too available where it constantly runs the risk of getting spent on trivial things. You should look at it like a life preserver – it’s only there for one purpose – an emergency.

When you decide to create an account for your emergency funds, remember that you need to have access to it quickly – it must be rather liquid. Also keep in mind, though, that if a natural disaster takes out your home – that it might also take out the local bank, too. In some rather recent disasters, some people found this to have happened to them. This makes it essential to try and keep your money in a larger bank, and in one that has branches outside of your local area.

You might start out putting your money into a savings account, and then turn it into a CD when you get over $500, or $1,000, in order to gain a higher interest rate. Saving money in a CD will also help prevent you from drawing into it too often since there would be a penalty for early withdrawal.

As you think about creating your emergency fund savings account, be sure to shop around some for

the best interest rates. Banks post their rates online, so it is easy to see what they are offering. Also, find out if there is a monthly service charge for the account – some will give it for free. Here is a Website where you might want to go to start finding which bank has the best interest rates.

Replenish it when Used

If you should ever have to use money from your emergency savings fund for any reason, be sure to start replacing it as quickly as possible. You never know when you may need it. An emergency fund of any kind is only useful if it is there when you need it, so replace the money quickly.

When to Start an Emergency Fund

You may be one of those people who are in debt and you are wondering what to do first – pay off your debt or start a disaster preparedness emergency fund. If this is you – or even if you had not thought of it yet – let me say that you should start an emergency fund right away. Keep on paying at least your minimum amounts on your bills, but definitely put something into an emergency fund now. Emergencies wait for no one, and it will only take one emergency to destroy you financially – especially if you already have debt.

This was a problem I faced when I saw that my own finances were getting the best of me. I knew it was time to get my financial things together, since things just could not continue the way they were going without great consequences in the near future.

What a Budget Can Do for You

A budget – I already knew – could help me to see where my money was going – and to know where it would go in the near future. Even better than that, though, was that a budget would enable me (and you) not only to be able to set some money aside into savings, but it would also give me better control – the control I needed.

How a Budget Works

Budgeting your money enables you to see at a simple glance – if you keep up with it – just how much money you have available at any time for that budgeted area – food, as an example. It also lets you know how much you need out of your upcoming paychecks for the month where your money has to go out toward bills.

As you learn to look at your budget and not your checkbook, you will quickly understand whether or not there is extra money to buy an extra item with – or if you should not buy it. The accounting lets you know, and it takes the guesswork out of it.

How to Set Up a Budget

A budget is not really hard to set up. What I did was to take my checkbook and wrote down all of my recurring bills – every one of them. Then, I listed all my bills that change from month to month (like the electric bill, heating, etc.) for the past 6 months and put them together so I could average them. I first made sure that I had some winter bills in there and some mid-summer bills to account for the air- conditioning – this would give me the extremes.

Then I looked over my credit card bills and wanted to find out if there were any regular expenses I had missed. It is important that everything is included. Here are some things that you might want to make sure are in there:

• Rent / Mortgage payment
• Food
• Electric
• Gas / Oil
• Water / Sewage
• Trash removal
• Phone – landline
• Phone – cell phones
• Car payment (s)
• Car insurance
• Credit Card payments
• Health Insurance
• Life insurance
• Other insurance
• Clothing
• Car Maintenance
• Gasoline and Oil
• Cable / Satellite TV
• Internet Service
• Education expenses
• Taxes
• General Household
• Medical / Dental Expenses
• Home Business Expenses
• Subscriptions (Newspaper & magazines)
• Memberships
• Home Maintenance
• Entertainment
• Other

After all these things, I also had to try and figure out how much I and other family members were spending in cash each week and month. This can be difficult. In order to be sure, I had to go for a month and get receipts for everything – from everybody.

Once there is a total understanding of where all the money is going, then you also need to know what money is coming in. Besides your regular paycheck, this must include everything like alimony, retirement, gifts, child support, etc.

Then, subtract all of your expenses from your total monthly income, and this will let you see how much money you actually have to work with for extra things. If there is no balance, then you must immediately find places to cut down on your current expenses so that your bills are less than your income – or you are headed for serious trouble. If there is not much left after bills, it is also strongly recommended that you reduce your bills somewhere.

What Your Budget Needs to Include

Now comes the hard part – it has been rather easy up until now. After you subtract all your current monthly expenses, you want to add into your budget amounts for:

• Emergencies
• Deductibles
• Medical and Dental

Each of these things is things that you always want to have cash on hand for – when there is a need. If you have young children, the need will probably be sooner than later.

Besides this, though, you also want to add in a savings plan – both short-range and long-range. Short range refers to those things that you need to save up for – possibly for a few months – like a washing machine and dryer – or for some electronics. Long range refers to those much larger items that you may need to save years for – like college, a special vacation, a motorcycle, a boat, a house, etc. It has been long recommended that you should try and save about 20% of your income.

What a Budget Needs

After you have your budget set up, and you know what money you have for extras, then it comes time to fine tune it. You keep a record of your actual expenses each month, and note how often you regularly go over – or under – your allotted amount. Where there is considerable difference, you want to adjust your budget accordingly. For instance, after you make your budget, suppose the electric company raises its rates by 8%. This means, if your budget is accurate, that you should add 8% to the total amount for electricity – or, cut back on your use of electricity to try and compensate for the raise in costs (trial and error).

It is also a good idea to review your budget after the first month and then again about two months later – to see if some adjustments need to be made. After that, look it over about every six months to determine its adequacy for your needs.

What a Budget Requires

Household budgets look great on paper. It makes you look organized. But unless you actually have the discipline to stick to it, it is just so much ink on paper. It is not the numbers neatly recorded that will make it work – but your determination to limit yourself to those numbers.

Household budgets are merely a tool to help you control your finances and be able to control and save money. You can make a budget on your own or buy some home budget software for the purpose.