A Budget is not for Babies!

Most people do not have budget.

Budgets have really gotten a bad rap! The feelings that the word ‘budget’ evokes are usually negative and constraining. Budgets are usually associated with restricting the activities that are enjoyable. It does not have to be that way! Think instead, ‘spending plan’!

Income – expenses = Spending plan!

The calculations required is grade school math, therefore, everyone is qualified to make a spending plan.

The National Syndicated Radio Host Dave Ramsey recommends a zero based budget which means the income minus the expenses equals zero. He says to “spend every dollar on paper before the month begins.”

Budgets, AKA Spending Plans, can be written on paper, saved on a computer document or created in a computer software program. A great free online budgeting tool is available at http://www.mint.com/

It is important that all monthly expenses are covered by the income coming into the home. This will avoid the need to use credit card debt for basic living expenses. Credit should not be used to purchase items which you cannot afford!

If the expenses exceed the income, a deficit is present. The expenses must be reduced or income increased to balance the budget. If the income exceeds the expenses, this surplus allows additional savings or preparing for upcoming predictable expenses.

Predictable expenses are maintenance, holidays, bills or miscellaneous things that may not come due every month. A few examples would include Christmas, tires for the car, personal property taxes, and car insurance premiums. These expenses are not surprises but they can take the wallet by surprise!

Be prepared for these ‘budget busters’ by saving some money the expenses each month. Some things are not UNEXPECTED expenses is a Savvy Saver article that details a great method to be prepared for these kind of expenses.

Virginia Saves motto is ‘Start small, think big.’ Start small by creating a budget for you family this month! Think big. You may have to be creative to make all expenses to fit into that first budget.

Budgeting is the first step toward financial freedom! Will you take that step?

That is not right! - What to do About Incorrect Items on a Credit Report

According to the Fair Credit Reporting Act of 2005 , you may obtain one credit report from all three Credit Bureaus every 12 months at www.annualcreditreport.com. You may also receive a credit report if the following applies to your situation:

·         Denied credit because of the information on credit report. Request a copy from the credit bureau within 60 day of being notified.

·         Unemployed and plan to apply for job within 60 days following the request for the report.

·         Receive public assistance.

·         Believe credit file contains errors due to fraud.

·         Victim of fraud. Contact all three agencies and request a “fraud alert” to be added to report.

If there is something incorrect reported on a credit report, submit a letter stating the problem to all three credit bureaus. A sample letter  can be found at www.myfico.com. The letter should be sent by certified mail, return receipt requested, to document the credit bureau received the dispute. Do not send original documents of receipts and keep a copy of everything sent to the credit bureaus

The credit bureaus will contact the creditor who submitted the item within 5 business days of receiving the complaint. The creditor has 30 day to respond to the inquiry or the disputed item will be removed. If the credit bureau agrees the information is inaccurate or incomplete, the credit report must be updated with the correction or remove the item. The credit bureau will notify the creditor the reported item has been modified or deleted. The credit bureau must send notice within five business days if the disputed item is reinserted because the creditor provided documentation to prove the accuracy of the report.

If the disputed item shows up again it is time for more letters. Send a letter to the original creditor disputing the item. Resend the letters to the credit bureaus as well. All correspondence must be sent by certified mail, return receipt requested.

Removing an incorrect item on a credit report can be time consuming and frustrating, but it is important to be persistent. Credit reports determine the interest rates for new credit, can affect insurance premiums rates and may be evaluated when applying for a job.

Once a problem is resolved, you may request the credit bureau notify all the past inquiries of the corrected report for the last two years. Past employers may receive the updated report for the last 6 months at your requests. Review the credit report again in three to six months.

The three credit bureaus address are:

Equifax
equifax.com
PO Box 105069
Atlanta, GA 30349
(800) 525-6285

Experian
experian.com

TransUnion
transunion.com
PO Box 6790
Fullerton, CA 92634
(800) 680-7289

For more information:

Fair Trade Commission: Facts for Consumers

Freeze on Credit 

What is on your report?

Good Debt vs. Bad Debt

The third video in the series Financial Planning for Your Future is about debt. Watch this short video and find out what is considered good debt!





Debts used to make purchases that will not increase in value over time is 'bad debt'. In other word, almost all credit card purchases are not going to increase in value, and therefore, are 'bad debt'. Items purchased on a credit card are usually either something that was not in the budget or something to be paid next month for convenience. A checking account debit card will give the convenience of the quick transaction, but not allow money to be spent unless it is in the account.


The budget is key to paying off debt. Budget for expenses and plan to pay more that the minimum on credit cards. www.powerpay.org is a free site that helps develop a plan to pay debts off more quickly.

Pay Past, Present and Future with Your Refund

Speculating about how your refund can be best spent can be a fun pass-time almost like considering how you might spend any other windfall that might come your way.  Everyone chimes in with their own wishes:  "how about a new TV or a game system, or paying off debt".  While you want to enjoy a little of the bounty that comes your way, it is also important to balance debt reduction and savings as well. 

Having a plan before the money arrives can ensure you get the best use of the funds.  Without a plan, you may find that in two months that you are not financially better off than you were before the refund.  Our temptation is to spend the money on current wants and desires while leaving debt and savings as they were before the bounty.  This is the year all that changes!

Virginia Saves recommends using the 30-40-30 plan to address your past, present and future with your refund in 2011.  It is a simple plan and works like this:

PAST:  Earmark 30% of all of your refund to debt reduction and catching up on past due bills.  This can be a great way to start power paying your debt.  Power paying your debt can accelerate your journey toward financial freedom and increased savings.

PRESENT:  Dedicate 40% of the refund to current needs and wants.  Need that car repaired or wishing for a new computer?  This is the money that can be used to improve your quality of life right now allowing you to splurge and enjoy some of the proceeds.

FUTURE:  Finally put 30% of your tax refund into a savings plan.  This can help jumpstart that emergency fund or be used for larger purchases later. 

There you have it.  A plan to address past, present and future with your refund.  If you use this plan, you will surely find your future looks brighter.  Don't forget to join the saver's movement at www.virginiasaves.org/enroll.  Together we can make our personal economies stronger!