Back to the Basics

The snowball started with an inspection. When Jenny took
her car in for an inspection, she had no idea that it would need
new tires and a new catalytic converter. After these expenses,
she didn’t have enough to pay one of her credit cards. She figured
she’d just make it up later, but when Jenny missed one payment,
the interest rate nearly doubled. Then the rates on her other
cards went up, even when she hadn’t missed any payments. Her
minimum payments on all of the cards increased, and suddenly
her money didn’t quite last until the
next paycheck.
This scenario is all too common these
days. It could be a lost job or unexpected
medical cost, but one month with
unplanned expenses can impact years of
your life. One way to avoid this is to go
back to the basics by creating or revisiting
your budget. With just a few easy steps,
you can better prepare yourself to weather
the financial storms.
Step 1: Understand your spending
habits.
Look at where and how you are
spending your money. Many tools exist
to help show you your spending, such as
Microsoft Money, Quicken or Mint.com,
a free online budgeting tool. Getting a
good understanding of where you spend
your money may show you great places
to save. One gentleman who started
tracking his spending with one of these tools realized that he
was spending $150 on his “daily cup of coffee.” By simply
changing where he bought it, he saved $100 a month.

Step 2: Aim to be debt free.
Now that you’ve spotted where you can create savings,
determine the best way to use them to your advantage. One
tool that may help you is Debt in Focus, an online, anonymous
tool that can analyze your financial data and help you understand
your debt. By reviewing and understanding all of your debt,
you’ll be able to see where your extra savings will be able to
make the most impact.
Step 3: Build your budget.
Build a realistic budget that covers your expenses and allows
for a little “rainy day” savings. Most importantly, be honest
with yourself as you budget. If you know you’ll go to the
movies a couple of times a month, plan it
in. If you’ve never built a budget before,
and you’d like a little more direction, look
at some of the free online resources.
Step 4: Reassess…reassess…reassess.
Once your budget is built, keep revisiting
it and finding new ways to save. A few
good questions to ask yourself are:
• Have your credit card rates changed?
• Could you get a lower rate with a debt
consolidation or home equity loan?
• Could you refinance your vehicles to a
lower rate to save?
• Have you “shopped around” for insurance
lately to ensure you’re getting the best rates?
With a simple plan and a little saving,
you’ll be better prepared if the unexpected
happens to you.

Written by Debi Choate,
Community Relations Officer Texas Trust Credit Union