Does this Sound like You? There are 100 shopping Days left until Christmas and your Credit Card Balance is Higher now then it was in the beginning of the year. You may have thought of using your home and getting a debt consolidation loan, A Debt Consolidation Loan without a solid Long Term financial plan is a Recipe for Disaster. A One way ticket to Credit Card Purgatory
The Debt Consolidation Loan
Most credit cards require a Minimum Monthly payment of 3% to 5% of the Outstanding Balance. On a 10,000 Balance that is $300 to $500 Monthly. On a $20,000 Balance that is $600 - $1,000 Monthly. The Interest on your Credit card payments would not be Tax Deductible,
If you Refinance your House and Consolidate your Bills even at an interest rate of 6% you would only pay $60 a Month for $10,000 or $120 a Month for $20,000 (For many homeowners this would be tax deductible)Your Monthly Savings will be between $240 and $880 a Month. The Key to a Good Financial plan is to use this extra $240 to $880 a Month to build a Failsafe, your Economic Life Preserver. (If you don't own a home and still have fairly decent credit you might be able to get a signature loan from your bank or credit union.)
If you currently have a mortgage paymet based on an interest rate of 3% or Higher you may want to look at refinancing your House using a Loan where the payments are fixed for 5 Years based on a 1.95% interest rate. On a 200,000 Loan this can often mean an additional $400 a month or more in savings.
Let's Assume you save $700 a Month with a Combination of the above 2 Methods.
1 - Emergency Savings
You would want to keep at least 2 Months worth of Bills (3 Months would be Better) in a Savings or Money Market Account. Bills would include Rent or Mortgage, Utilities, Medicine, Food and Insurance Premiums. You need to make this account a Priority. Place at least $300 a Month into this account until you have reached your Goal of 2 Months Worth of Bills or $5,000 whichever is Higher. After you Reach Your Goal Continue to place $50 - $100 in this Account until you have reached Double your Goal.
(4 Months worth of Bills or $10,000 whichever is higher) Once you have reached Double your Goal you no longer need to place money in this account.
Some People will just Borrow an Extra $5,000 and place it directly in there Emergency Account.
2 - The Debit Card
After you have established your Emergency Savings you will want to establish a Debit Card Account. Open a Bank account and get a Debit Card. Deposit $100 or More Monthly into this account until your balance reaches $1500. Now If you have an Emergency car Repair, Home Repair, Dr Bill or any other type of unexpected expense use your Debit card rather then a Credit card. Your Goal should be to maintain this account at $1,500 to $3,000
3 - The Credit Card
Most people don't need to rip up all there credit cards they just need to manage them better. Cancel all but 1 or 2 of your credit card accounts. Credit Cards are an Important Part of Life, An unexpected car repair or Dr. Bill can be handled very easily with a credit card (If you don't have enough money in your debit card account). With the exception of an Emergency never charge more in any month then you can Pay in full when the bill comes. Pay off all new Charges in full within a week of getting the Bill.
4 - Insurance Needs
Insurance needs would be things like Life insurance, Health Insurance and Long Term Care Insurance. Contact an Insurance professional to discuss your needs. If you don't have any Life or health insurance look into low cost options like term Life and Discount health care until you have extra funds to go for the higher cost options (After your emergency account is established) Life insurance can often be combined with retirement planning see step 5.
5 - Retirement Savings
Use at least half your savings from your bill consolation loan to fund an IRA for you and your Spouse. Speak with your Accountant to see your IRA Funding Limits. In 2005 people who qualify could place up to $4,000 a Year into an IRA or Roth IRA. People over 50 who qualify can place up to $4,500 in an IRA or Roth IRA.
For more information and phase out rules you can view the IRS publication here http://www.irs.gov/publications/p590/. If you don't qualify for an IRA or you already have it funded look into other options like Universal Life and annuities.
6 - Some Girls (or Guys) Just Need to Have Fun
Everyone Needs and Enjoys to have a good time. Don't get so hung up on getting that emergency fund or building a retirement nest egg that you don't have fun. Budget something fun a few times monthly. Movies, Bowling, The Zoo a trip to the water park, a Nice dinner whatever it is. Even if it is only $10 or $20 a Month in the beginning when things are tight. You can always add $50 a month for a vacation fund later.
7 - The Budget Review
Once or twice a year review your budget. See how your Emergency and Retirement funds are doing. Look over your credit cards and make sure you are paying those bills in full.
If your situation changes for better or worse. You would want to do a review. Things that may trigger a review. A Salary increase or Decrease. An Added Expense like a Car Payment. A Major change to an expense, Much higher Gas Bill or Mortgage. Car Payment is Paid in Full. A child starting college or private school.
By combining a Bill Consolidation loan with the above 7 Step Financial plan you are taking the required actions to help insure you won't find yourself in credit card Hell Again.
About The Author:
Mike Makler has been Marketing Online Since 2001 When he Built
an Organization of over 100,000 Members
Experience the Benefits of an Internet Business The first benefit to owning this sort of business is the freedom you have to enjoy the rest of your life. You will be able to call the shots and name your own ...
What is Hormone Replacement Therapy? Menopause is a normal biological change in the life of a woman. There are treatments to reduce menopausal symptoms such as hormone replacement therapies. For mo...
Toxic Overload A thirty-six-year-old construction worker withered in pain as the ambulance rushed him to the hospital. Andy's cramps were excruciating and he thought he was go...
He Said, She Said: Communicating with the Opposite Sex The professional secrets to decoding what men and women really mean when communicating with each other. Added bonus: these secrets can be used both at home and...
Poker Books - Five of the Best for Big Poker Profits! Poker is fun, exciting and appears deceptively simple; so many players just jump in, play, and promptly lose their bankroll. If you are new to poker or even an ...
Important Days Ahead Humans tend to categorize things by large or small, bright or dull, special or ordinary, and so on. For instance, we categorize holidays as special with the imp...
Recommendation Letters Demystified There is a lot of confusion about recommendation letters.
Recommendation letters are often referred to in a number
of different ways including: letters of recom...
Unique Wedding Reception Entertainment The typical wedding reception entertainment scheme of pretty flowers and background music is fine for some people, but all kinds of options exist to spice it up...
Content Is King Search engine spiders are assigning more and more weight to good relevant page content. Page content is considered by many as a major part of any good search e...
Top 10 Business E-Mail Basics When it comes to your business e-mail communications, you need to make an impression that can lend to the determination that you are someone that will be a plea...
The Pain of Instant Gratification What a great world we live in. You want something, you get it! You need
something, you buy it! You don't have money, you charge it! You don't deny yourself ...
Why Your Network Marketing Efforts Are Failing Many online marketers at some point recognize network marketing as having excellent potential. Unfortunately, too many join programs that doom them to failure b...
Holdem Starting Hands The number one mistake of rookie poker players is playing too many hands. To win consistently at online poker you need to start with the basics and build up. Un...
10 Things You Can Do To Help A Shy Child There are a few points about shyness in children which will help you better understand the best approach in dealing with your child. You will need to identify t...
Print this page