Advice from a Budget Expert
I consider myself a budget expert. I view myself that way because I have lived on a budget all my life, and I know how to. Some of you may be skeptical about this claim, and I can understand that, so, let me tell you how I have done it.
First of all, when I was young, I took seriously the religious training that taught me “to owe no man.” Since then, I have learned it is almost impossible for the average citizen to function in our society without owing someone something. Most of us cannot get a house to live in without credit. Credit is only built when you borrow time against your income. If you even rent, you have to have good credit to be allowed to enter into a lease or rental agreement. In this case, you are borrowing against future income and time. Most people do not pay a full year’s rent, and in some cases, if you cannot meet your rental agreement, the rental agent can hurt your credit. So, when I say “owe no man anything,” I mean you must try to live within your means the best you can so that you may not owe anyone anything. Today, at 63 years old, I will have my house paid off in five years, we own both late model cars out right, and we never pay interest or fees on our credit cards. Even though I have a mortgage payment and pay a hospital bill from a past operation, I would say that I “owe no man anything.”
Secondly, understand completely what it means to live within your means. Living within your means can be defined as never having more living expenses than your income can pay off in a month and be sustained for five years. In other words, your budget needs to be a five year plan. Why five years? Because, not being able to pay down your liabilities within five years with the sum total of your assets is the definition for bankruptcy. Therefore, how can being bankrupt mean that you are living within your means?
Thirdly, stay completely away from usury. Usury is defined as exorbitant interest rates. In our society, exorbitant is a relative term and usury has been almost cast out of our legal system by deregulation. So, here is a good general rule of thumb. Never get involved in borrowing any kind of money that are simple interest loans of rates more than 5% above the prime rate. Never borrow money with compound interest. The prime rate is defined here as the interest rate currently used by the Wall Street Journal which is based on the Federal Reserve rate. That means you will need to completely stay away from credit card debt, many corporation credit cards, and most store financing because their financing usually comes with interest that is the maximum rates allowed by law. On top of that, they encourage you to go into debt by making minimum payments. In most of these scenarios, you can never pay off a loan by paying the minimum, so NEVER take on credit when there is the remotest possibility you will have to make minimum payments.
Fourthly, maintain a cash reserve equal to one year’s family salary. Combine all your total income made in the family, and you should have a savings account equal to one year’s salary. If your family makes $40,000 a year, you can put aside $8,000 for five years and accomplish your savings goal. When you reach your goal, it allows you to weather most financial storms like loss of a job, temporary health problems, and retraining for a new career. If you have to spend all or part of the money for an emergency, always replenish the reserve.
This article is not a complete assessment of budgeting, but for those of you who are skeptical about its potential, please consider this. We have lived for over thirty five years making less than $50,000 per year, raising two children to adulthood that we paid both their ways through expensive colleges, vacationed two weeks a year at some of the finest resorts in America, never missed a meal, never slept outside unless we wanted to, lived a middle-income type existence, and remain healthy individuals today. Both our children practice our budgeting methods, both are gainfully employed, and both make six figure incomes.
For some of you, it may be too late to make your budget because you have already reached the bankruptcy stage. It takes discipline and determination to live on a budget. It takes the same to start over. Filing a Bankruptcy enables you to start over here in America. Do you want a fresh start and the opportunity to try budgeting? Here at Bankruptcy Home will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
