Budget Management Counseling

What is a budget? Financial instrument used to plan and monitor the receipt and use of income Lists income and expenses for a particular period of time Primary purpose is to guide the allocation of income so that it will meet expenses and permit other uses, such as savings and investing

Why do budgets fail? Not really wanted Not agreed upon Not realistic Not well designed Not well supported

10 most common budget problems Too little income Too much debt Too much spending Too little discipline Too many goals Too naïve Too little knowledge Too little management Too little communication Too little agreement

Three most basic budget solutions Reduce expenses Restructure debt Increase income

More personal budget solutions Resolve personal problems Reconcile competing goals Improve management

Ways to stick to a budget Get rent out of way Stay away from the ATM Leave money at home Record credit card purchases Save automatically Keep money in large coins or bills Save your change

Ways to stick to a budget Keep checkbook balanced Set goals Consider tradeoffs Take your lunch Pay yourself first Bank your refunds Continue paying a loan Shop second-hand

Ways to stick to a budget Try crash savings – Zero based budgeting Save extra paychecks Break costly habits – consider trade-offs Reducing your spending bin/calcs/SAV13.cgi/uiue bin/calcs/SAV13.cgi/uiue Cost of smoking html

Budget Challenges Cash or ATM withdrawals Variable income Impulse buying Gifts Bookkeeping errors Attitude challenges

Budget Challenges Credit

Limited purpose credit cards National credit cards Bank credit cards Travel & entertainment charge cards Types of credit cards

Things to look for: Annual fee Interest rate Additional perks insurance, discounts, cash back bucks Cash advance Hidden fees transaction fees cash advance fees over credit limit fee late fee

CAUTION! “No payment for 6 months” “Low introductory offer - 4.9%” “No fee” “Balance transfers” Loan sharks

Tips to lower costs Switch to a lower rate card No annual fee Take advantage of your grace period Ask for lower interest rate Pay more than the minimum balance If paying interest, mail check as soon as you receive your statement Use savings to pay credit card bills

Credit Problem Signs Not knowing how much you owe Making minimum payments Making cash advances to pay bills Working 2nd job to keep up with spending Being consistently late with bill payments Being denied credit

To obtain a credit report Must be in writing: full name, address, old address - (2 years) social security number date of birth current employer telephone number $8.00 sign request

Three major credit bureaus Equifax Experian Trans Union

Assignment: Develop a Resource Section of money-saving tips Food Automobiles Insurance Recreation/entertainment Clothing Savings Variable household expenses