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It seems like everything is getting more expensive right now. That’s no surprise, since the cost of fuel has gone up so much, and anything that has to be transported to you is going to be impacted by that increase.

Sure seems to make it harder to manage your debts, doesn’t it?

When you’re already in debt and prices start spiraling upward your situation can seem just about hopeless. It’s harder to pay extra on your debts when it’s harder to just scrape by. The overall situation just isn’t pretty. You can still work on it, however.

Step 1: Take a good look at the problem

Where do your money troubles come from? They could be a result of medical bills, job loss, poor spending habits or other reasons. You need to understand where your problem comes from and what is keeping it going if you’re going to get anywhere with this.

That’s doubly important, of course, if the issue is ongoing and you can do something about it. You don’t want to trap yourself with guilt about your debts, but you do want to acknowledge how they happened or are continuing to happen.

Step 2: Rethink how you spend your money

Few of us are so good with money that we already know where all of it goes. There are lots of little things that really add up fast that may be a part of your problem. Or it could be regular big things that you decide to treat yourself to. Or it might just be something that you have to deal with no matter what.

Get and keep receipts for all your spending for at least a month. The more detailed the better, as little purchases can hide in some of your more practical shopping. Go over them and see where your habits are going wrong.

This can help you to target the areas that you should be cutting back on. All those trips out for coffee, for example, can really add up when you could be making coffee at home. You can even add flavors at home for far less than you would at the coffee shop.

Don’t forget to consider bigger things too, of course. If you’re really serious about cutting back look at things like your cable and telephone bills to see about monthly bills that could be smaller.

Step 3: Limit yourself to one credit card

But only if you can use that one card wisely. You may need to get rid of them all if that’s the only thing that will keep your spending habits under control.

Credit cards are a highly convenient way to pay for many things. Even some monthly bills may be paid on them, which you need to consider if you’re cancelling accounts. You will want to be sure to change how those are paid.

Your credit card usage should be limited to things you need to buy and will pay off that same billing period. Pick the best credit card you have or get a better one if you need to. Go for low interest, no annual fees and cash back.

If you can’t control yourself with a credit card, use only cash. This is much harder for a lot of purchases, as you have to go to the ATM every time you run out, but if you control how much you withdraw it is much harder to overspend.

Step 4: Pick a debt to target

There are a few theories about which debt to target first. Some say to go for the lowest balance; others the highest interest rate. But whichever you choose, put any extra money you have towards payments on that debt, and do the minimum on the rest. This will allow you to rid yourself of your debts one at a time and make faster progress as you go.

Step 5: Increase your income

In many ways this is the most important step when prices are going up as they have. There’s only so much you can do with the previous steps if you’re stuck at the same income level, especially if it has been barely sufficient for your vital monthly expenses.

There are a few ways to do this. One of the simplest can be to ask for a raise at your current job. You’ll need to show that you deserve it, of course, and depending on your job it may or may not be easy to get one.

You can also consider taking on a second job. Yes, you will lose out on free time. But sometimes that is the only way to earn enough money to get out of a pile of debt. If you’re up for working in a restaurant, tips can add up quite nicely.

Another idea is to freelance or start a home business. There’s some risk in this, as you will need to spend at least a little money for most business models, but it can also be a lot of fun. Make sure that what you do does not conflict with your current employment. Do not risk more than you can afford to lose, and do not expect to get rich quick. That’s how people get scammed and lose their money.

Step 6: Don’t give up

It may take a long time to get your debts paid down if they’ve been a major problem for you. Depending on how you go at it, it could take years. But some people manage to pay down significant debts in a matter of months. It all depends on your own situation.

Weddings, on average, are expensive these days. Hugely so. Some would even say ridiculously so, with the average being somewhere around $28,000. That’s a lot of money for a one-day event.

Of course, to many the wedding is the most important day of their lives. They want the big party. The elegance. The amazing food. All of their friends and family in one place, celebrating their happiness. And there’s nothing wrong with that.

Unless, that is, you really can’t afford it. Going into huge debt for your wedding is a poor way to start a marriage. Driving your parents into debt for your huge wedding also isn’t so hot an idea.

It’s hugely important that you start planning your wedding by figuring out a reasonable budget, taking into consideration what all contributors can reasonably afford to give. This will very much so vary by family. If you keep up with what you can do, you won’t be starting your lives off together arguing about the debts you’re creating.

One of the challenges to this is that so much of the wedding industry is priced higher than regular services. Just ask around about wedding cakes and compare what you can get regular cakes for. The difference can be significant. Wedding cakes are of course more ornate in most cases, and if they’re tiered they must be made to cope with the weight, but even so the prices can be astounding.

Do not sign on for anything for your wedding without comparing prices first. Sure you may have a dream location, a dream dress, etc., but if they make it so that you cannot stay within your budget there may be more options than you thought at first. And you also may discover that you love a cheaper option just as much as one that cost more.

Check your budget regularly as you do spend money. It’s all too easy for things to get out of hand, and suddenly you have to figure out how to fit the remaining items you want into the budget.

It is, of course, very common to put a lot of these expenses onto credit cards. That’s fine, just make sure that you have a plan for paying them back within a reasonable period. Credit cards are often just the easiest way to pay for things. But debt can be such a strain on a marriage, I really don’t recommend starting out with a lot of it.

Or loading a huge debt onto the bride’s parents. Not terribly fair to them, either.

The simple truth of the matter is that you can plan quite a beautiful wedding on a wide range of budgets. There are always places you can cut back on costs, often family members willing to help out with photography and such, and options all over the place. Don’t force yourself to spend more than is reasonable for your budget.

Most people know that a good credit score can help you in many ways, even if you don’t want to be in debt. It gets you better rates on loans for those purchases for which most of us need a loan, such as car loans and mortgages.

But a lot of people assume that you need to owe money for a time in order to get that credit score. How necessary is that?

I’ll start by noting that a good credit score is a necessity, unless you earn so much money that you can pay outright for every purchase you ever need to make, including a home. But just about everyone needs to borrow money for such a purchase. You should assume that you do need something of a credit history. It goes beyond purchases. It impacts your ability to rent an apartment, insurance rates and sometimes even your career.

However, being in debt is not the only way to build your credit history. You can have credit cards and just pay them off monthly. That’s showing the kind of financial responsibility that lenders want to see too.

Now, if you really, really feel you need to carry a debt to improve your credit score, make it small. As insignificant as possible. At the best interest rate possible. Why should you pay more than you have to if you feel a need to do this?

Do note that I’m not really recommending that, but since many people feel that’s the way to build credit I mentioned it.

The biggest trouble with the theory of carrying debt to build a credit history is that it makes being in debt a comfortable thing. It should never be comfortable, especially if it’s credit card debt. It’s far better to build your credit history without carrying debt if you can manage it.

It is smart to have some credit available to you, but focus more on saving money. A solid savings account can help you through those rough times that would otherwise result in an increase of debt, or even out of control debt.

There are a lot of issues right now with people being so far into debt that they can’t get out. If you don’t have a credit history now, take a lesson from this and think about how you want to manage your credit score over the long term. A habit of debt is not the smartest way to go about it.

News reports now are full of the current credit crunch. Foreclosures are way, way up, and housing prices in some areas are dropping significantly. This is having an impact on all kinds of credit.

But for those of us with credit cards, this is a very good reminder of how carefully we should be using our credit. There’s a right and a wrong way to go about it.

If it hasn’t been a priority before or even if it has, do your best to get your debts paid down. This will give you more flexibility and make you look better if you need credit for something later. Falling home prices can mean good deals when things get a bit better, and if you can continue to manage your credit well, you may be in a good position to take advantage.

The short term impact for many has been that they have to cut spending because they don’t even have access to more credit so they can spend more. Many people have relied for years on credit to keep up lifestyles they couldn’t maintain any other way. It becomes important to spend only on essential items.

This is a time to learn about good spending habits, ones you should keep for a lifetime regardless of the economy. There are right and wrong reasons to use credit.

Good reasons include buying a house. Even if home prices drop significantly, most people would not be able to save enough to buy a home out of their savings. It would take an impractical number of years for most. Doesn’t mean you can’t, but most won’t have that kind of control.

Emergencies are another good reason to use credit. Sometimes there’s just no other way you can get through the situation.

And of course, you should use a little credit just to keep your credit score healthy. Using your credit card and paying it off monthly will help to show that you mean to have good credit.

The bad reasons are of course more fun.

There are the lifestyle reasons, such as keeping up on the latest technology. You NEED that big screen plasma or LCD television, right? The new cell phone even though the old one works? The treadmill you’ll use only as a place to hang your clothes?

Buying something fun isn’t necessarily a bad thing, but particularly now with the credit situation so poor, it’s best to not do so unless you can actually afford what you’re buying. A little extra thought can cut out quite a number of purchases.

Depending on who you ask, this may be an economic hiccup or it could be a much deeper downturn. There’s no way to know which it is yet, but it’s better to plan for the worse situation and be surprised by the better, than to assume the best and get slammed by the worst.

Times are tough right now. While the economy hasn’t quite hit the definition of a recession yet, it’s close and many families are feeling the pinch.

Even my family is feeling the pinch; my husband was laid off in January. We’re coping, but it is hard going.

Lots of people are being laid off right now and many more are worried about their jobs. Combine that with the mess that many people with mortgages are facing, and it’s looking prime for a really bad economic meltdown. People are worried that it will compare to the Great Depression.

What should you do?

First and foremost, do what you can to secure your own economic position. With layoffs possible in many industries, few jobs are completely secure, but you need to do the best you can. Get your debt levels down.

Take an honest look at how things are going at work for you. Are you a valued employee? Has your career been advancing well? Or have you just been doing the minimum to get by? If things get rough, you want to be someone who has shown the ability to keep pushing ahead. It will give you something to point to should you get laid off despite your best efforts at your current job.

Next work on your debt position. Work hard at getting your debts paid down. The term ‘credit crunch’ is being thrown around a lot right now. It’s getting harder and harder to get credit, and the worse your current profile looks right now, the harder it’s going to be for you.

While it can be difficult to do this if you have a lot of debt, try to build an emergency fund too. Something that will give you some money to work with in case of a layoff. If you can put aside at least a few months’ income, that’s money you can work with while trying to find a new job.

These steps do take time, and it’s important that you act immediately. We all hope to avoid being laid off, but there are no guarantees that we can.

But what about those who are already impacted? In debt and out of work? Is there any hope at all?

That is the time to cut back, obviously. Stop spending money on things you don’t need. Take a lower paying job if that’s what it takes. Cut the cable, cut the cell phone, cut whatever excess you can find.

Even consider moving in with family or friends if that’s what it takes. Moving in with someone can be a painful step to take, but sometimes that is what’s needed. Difficult times often call for painful measures.

Whether this turns out to be a major recession or a minor one, many people and their families will be deeply impacted. Do your best to limit the damage that may be done to yours.

Money problems really take it out of you. They’re some of the most stressful things people deal with in life, short of the death or serious illness of a loved one. Money problems are well known for even breaking up marriages.

Money problems can seem hopeless sometimes, especially times like now with inflation at a 17 year high. Short of earning more money, it’s really hard to get out of trouble. What can you do?

The number one thing to do is to figure out what can be done. Look hard at your finances. You need to look at the mistakes you’ve made and the circumstances that have put you where you are now. How can you turn things around.

Sometimes this isn’t easy. If it’s an unexpected major medical issue or a job loss, it may not have been a direct financial error that got you in that position. Sometimes there really is nothing you could have done to prevent the situation you’re in. But you can certainly work towards managing it.

Talking to other people can be really helpful. If you know someone who is pretty good with money and you trust, talk to them. They may have some insights that will help you. Odds are you won’t like everything you hear, but give it some time to sink in and you may understand what was really meant.
But beyond that, you have to think on how you can cut back. Sometimes this takes some extreme measures, such as moving into a smaller home or apartment so that your monthly expenses will be less. This is one of those steps that makes you take a bit of a step back before you can move forward, but it can work.

You have to cut back in smaller ways too. When it comes right down to it, cable or satellite television is a luxury. Internet is a luxury. Phone I wouldn’t do without personally, but restrict it to a single, affordable line and don’t overdo any calling that costs extra.

Quit eating out every day. So many people waste tons of money every day eating lunch out. Sometimes they even have leftover food from the previous night’s dinner wasting away at home. Take advantage of your leftovers and bring your lunch. This one move can save you several dollars daily, depending on how much you spend on lunches.

Work out a budgeting system. The envelope system is a classic, and there’s even an electronic version called Mvelopes Personal for those who prefer to handle everything on their computer. Figure it out and stick to it!

Changing your lifestyle is never fun. But sometimes that’s what it takes to regain control of your life overall.

Technorati Tags: money problems, lifestyle, paying off bills, debt, overwhelmed

Credit cards are a near necessity these days, and they’re much too easily abused. Wise use of them means that they’ll make your life a little easier and you won’t regret what you’ve spent your money on.

How do you use credit wisely?

The first thing to remember is to be honest with yourself about how you’re using it. If you’re going overboard and using your credit cards to hide the truth from yourself it’s all too easy to end up in a financial hole that’s near impossible to get out of.

Most important in being honest about where you are financially and especially with credit is to look at the numbers. Are you really where you think you are?

Too often the answer is no, you aren’t. There’s something you forgot when you decided that things were going well. But if things are going nicely, it’s a great feeling to know that you were right about your situation.

The second thing to remember is to not go overboard. Even if you have the credit, do you really need to buy everything you think you want? Saving and investing is often a much better plan for the long term than spending freely.

The third thing to remember is to not make excuses for what you spend. When money is tight it’s easy to dismiss running up the credit cards because of holidays and birthdays. If you can’t afford to spend the money, perhaps you should cut back. Other people will generally understand.

The fourth thing is to make sure you are getting the best possible rates on any credit cards or other debts you’re carrying. There’s no point in paying more for the money you owe than you need to.

Make sure your interest rates haven’t been climbing for no good reason. Credit card companies do sometimes increase rates without what you would think of as a real reason. If your rates are going up for no reason, and the company won’t lower them, remember that there are plenty of options out there. Remind the company of that too, and be prepared to follow up and find someone who will offer more reasonable terms.

Finally, know your own weaknesses. Do you fall for impulse purchases often? Do you just love spending money? Do you love to eat out?

If you know where your worst spending habits are, you can address them. Find ways to keep from spending excessively in those areas that really don’t work well for you.

Set a budget for those things you don’t want to give up on completely. It’s often harder to give something up completely than it is to find a way to enjoy it in moderation. There should be some room for fun in most budgets.

Technorati Tags: using credit wisely, credit, debt, budget, budgeting, personal finance

There are some very good reasons to carry credit card debt. Unfortunately, too many of us carry it for bad reasons.

But even when you go into debt for good reasons, it weighs you down. Limits you. Makes your life just that much harder.

Credit card debt is quite simply a strain on the finances.

I’ve been working for a few years myself trying to get out of credit card debt. I had been solidly on my way when we were slammed by some medical bills that wiped out all my progress and then some. It has taken a year to recover from that and get to where I feel as though I’m making progress again.

In the meantime, we’ve had to live more frugally than ever. Keeping up with all the bills becomes a struggle. The added debt was in a good cause, but dealing with it has been a strain.

What to do, what to do?

First thing to do is to live frugally as you try to get rid of the debt. Figure out what you can cut from your lifestyle to save money. There are many different ways to do this, such as eating out less, sticking to a paid-off car rather than replacing it, even cutting back on retirement savings.

With this extra money you need to work hard on paying off that debt. Do not pay the minimum. Even a tiny bit over that will be a help in the long run. The more you can pay, the sooner the debt will be gone.

Cutting back isn’t enough?

It may be time for a second job or taking a chance on a home business. You decide. But in any case, bringing in some more money is a great way to pay down your debt faster. It’s a big sacrifice, especially if your current job already takes up much of your time and leaves you feeling tired, but sometimes that is what it takes.

The home business option is not for those who need money immediately. There’s risk involved. You probably won’t earn significant amounts quickly. But it can also be a lot more fun.

Debt is a terrible thing in so many ways. It stresses relationships. It limits what you can do financially, even beyond what your current earning levels may do. It takes away money that you could use much more effectively. Once it becomes possible to rid yourself of debt, it is a very good idea to do so.

Technorati Tags: credit card debt, personal finance, money trouble, financial problems, too much debt

Many people are just about done Christmas shopping. Sadly, many have gone well out of budget. That’s so easy to do, of course.

If you’re still doing holiday shopping, take a look at where you are relative to your holiday budget. If things have gone overboard, figure out how you’re going to get it back under control. Better to do this now than to be paying off credit card bills for months and months in the new year.

If you’ve gone over budget and still have shopping to do, figure out if you can exchange things that are not within your budget. Perfect gift it may be, but is it worth the excess? It’s a personal decision, but good money management means you pay attention to these things and do what is necessary.

Get a little creative if budget is becoming a problem. Think of gifts you can give that involve more time and less money, for example. Make gifts. Grandparents often love framed photos of grandchildren, for example.

Don’t give in to the urge to spend to excess at this time of year. There are far more important things in life than great presents.

Technorati Tags: holiday budget, christmas budget, money, personal finance

Even with the holiday crunch there are some things you need to do to keep your finances in order for next year. Some will have more to do than others, but a little thought on your finances is always a good thing.

Flexible Spending Accounts

Take full advantage of these. Why not? You aren’t losing anything by it. In fact, you lose if you don’t. The money is gone if not used. So figure out what you need.
Check with your employer, however. Some allow you to incur expenses even into March.

Check on Your Retirement Contributions

401k, IRAs (traditional and/or Roth) and others. If you can put more in them, get it all taken care of now. You may have until April 15 for some of these, but now is not a bad time to start thinking and planning.

Charity

This is a great time of year to remember the less fortunate. Not only can it help to make the holiday season more special for the less fortunate, it’s your last chance for charitable contribution write-offs. So get busy and share.

Remember that giving all that old clutter in your house can count under charitable contributions too. This is one we’re working on right now in my home. Going through all the kids’ toys and figuring out which they don’t use anymore. Since we had those big fires here a while back the kids are feeling quite sympathetic with those who may have lost all their toys.

Can You Bunch Deductions?

Property taxes and other things may be better bunched into batches so that you can take the deductions every other year. If your deductions are less than the standard deduction you may want to research this and see if it will help.

Prepare now to take the best possible advantage of what’s out there for you. Consult with a tax advisor for the best results, and make your appointment now rather than finding out they’re booked for the rest of the year. A little planning can go a long way.

Technorati Tags: end of year, personal finance