1. Reduced Income, Same Expenses
When you have a gap in your average income, you need to control your expenses more than ever. It is necessary to keep the same ratio to allow for the cost of living between your income and expenses. If your income decreases, so should your expenses. Whether you have to cut-out expenses entirely, or minimalize them, you must control the expenses so they don't outweigh your income. The same is true for the same income, but increased expenses. If you receive the same income, but have more expenses now (due to hospital bills, medications, etc.), you need to maintain the ratio of spending that allows your income to match your expenses. A lot of unnecessary expenses must be minimalized or cut entirely, sacrifices must be made to maintain at least an equal income to expenses ratio, or higher, for your income to earn savings.

2. Poor Money Management
This is self-explanatory. Compulsive spending habits, uncontrolled spending, overuse of credit cards, or lack of communication of monetary funds between a spouse, family member, etc., lead to improper money management. Once you dig yourself into a hole, which doesn't take a lot of time or effort, it's much harder to get yourself out. Balance your accounts regularly, talk with your spouse or other who you share finances with, and make sure you aren't spending money you don't have that may have already been spent. Most importantly, don't just spend money because you have it.

3. Underemployment/Unemployment
This may be out of your control. At the same time, it may not be. If you aren't getting enough hours at a job that you need, or if you don't have a job, it is your responsibility to either get more hours, or to find another job [in addition]. We are all capable of working many hours in a week. If you are only working ten hours a week, you obviously will not be earning enough for living wages. Although your hours at a job, or even if you have a job, may not be entirely up to you, it is up to you to get more hours or more jobs to help find that extra income to support yourself and your family.

4. Medical Expenses
We all know that today's medical expenses are ridiculous. Search different insurance policies/carriers for the best prices and coverage plans. You will have to do some work to find better deals. If you're going to be paying such high insurance premiums, you may as well get the most out of your money and plan. Talk with your doctor(s) about the use of generic drugs, which are cheaper. Research different pharmacies for prescription prices, for there really is a huge difference in prices for the same drugs depending on the store(s) you buy them at. You may not be able to control the high prices, in general, of prescriptions and health care, but you have the ability to do your research for the best prices and plans.

5. Improper Saving Habits - Too Little or None at All
For many people who have little or no savings, they live off of check to check. This makes it difficult to acquire savings, or the habits to save money. If you have an extra five dollars at the end of paying bills after you receive a check, you may say it's only five dollars. Why not treat yourself to a cup of coffee or to a few drinks? Well, that is five dollars that you don't need to spend and that you can put into a savings account, or into some private fund to save. Five dollars each check will build up over time. Another issue with savings accounts is that people use them like checking accounts. Savings accounts should be kept alone. Place money into them without the ability to take out every other week. Leave that money for checking accounts. Place money into a savings fund and honor it by not touching it for a long time. Let it be, use it for when you need it most and let it build with time.

The first step in developing a budget is determining your net worth - that is, your total value/worth at any given moment. There are three criteria for determining your net worth: (1) all of the items of value (and their values) that you own; (2) your debt, or loans, that you owe to others; and (3) the total amount after you subtract your liabilities/debts from your assets (your valued items, etc).

The equation for determining your net worth is simply:
ITEMS OF VALUE - AMOUNTS OWED = NET WORTH

Assets are arranged by their influence of liquidity, or how probable it is to convert them into cash without losing much in the process. The most liquid assets are cash, checking/savings accounts, and stocks/investments in money markets. Your house will likely be your most valuable asset, while smaller assets should also be accounted for, such as vehicles, clothes, personal items, furniture, etc. These items are generally not sold for the worth you would like or that they may even be worth, but they still may acquire some additional money if you do so choose to sell. Add all of these assets, and you will have an approximate of your asset values/total.

Liabilities are the less enjoyed subject of this discussion. Debt and loans always suggest that you are losing money, not earning money. Always assess your liabilities by listing your most current debts first. Include all bills you owe, such as telephone, cable, utilities, car insurance, etc. Then assess your debts to credit cards and loans after. Home mortgages are generally the largest debts for people. And always include outstanding balances when accounting liabilities, not just the initial costs.

It is important to determine your net worth in order to best determine your overall financial standing and to monitor it over a long period of time. Ideally, you should shoot for a growing net worth, of positive value, versus a decreasing net worth over time, or any negative net worth. Net worths do change on a daily basis, so it is important to look at them as a guidance for longer periods of time, and not to account for their daily values. For example, it may be a good idea to determine your net worth on an annual basis for best comparisons over each year.

There are two major types of mortgages, those with fixed rates and adjustable rates (ARMs). Deciding between these two options (and the many derivatives of the two) can be a difficult decision. There are many things to consider, including market interest rates, mortgage length, and the amount of financial risk you're willing to take on with the mortgage.

Obviously, one of the biggest things to look at is the market interest rate. A fixed rate mortgage is preferable if market rates are low and have been declining over the past few years. Alternatively, if market rates are high and/or are expected to increase in the future, an adjustable rate mortgage may be your best option. However, it is important to calculate how much of an interest rate hike you can afford before taking an ARM. If you have very little money left over every month to make mortgage payments, an ARM may be too risky for your situation.

The length of time is also a very important consideration. Savings on an ARM are guaranteed until the end of the first adjustment period. However, even if interest rates go up you can still save money on an ARM versus a fixed rate mortgage for a few years. Typically, if your mortgage is for less than three or four years, an ARM is the best option. Alternatively, if your mortgage is for more than four years, a fixed rate mortgage is typically the best option.

The last thing to consider is your willingness to take on risk. With an ARM, there is a chance that interest rates could go up. Consequently, your monthly payments could increase substantially. You should assess your own financial condition to see if you can afford to take on higher mortgage payments if interest rates turned sour. If you cannot afford these risks, then a fixed rate mortgage may be your best option.

Click Here to Download Our Mortgage Type Worksheet

One of the most important things to consider before applying for credit cards or taking out a mortgage is your personal debt capacity - that is, the amount of debt that you can comfortably afford. One of the most accurate methods to determine this is to create a monthly budget with cash receipts for income and cash disbursements for expenses. The amount left over when subtracting these two amounts is the cash you have left over to make payments on your debts. If there is no cash left over (or negative cash left over) you should not take on new debt, since you will not be able to pay down the principle while making interest payments without drawing into your assets. This method also allows you to analyze where your money goes. By cutting your spending in some areas, you can increase the amount of money that you have available to finance debt payments.

Another related concept to keep in mind is the 20% rule, which states that your monthly debt payments shouldn't exceed 20% of your total monthly disposable income (not including your mortgage). For example, if you have $1,000 in monthly disposable income, your debt payments shouldn't exceed $200 per month. This rule, however, becomes less important for those with higher monthly incomes.

Click Here to Download Our Debt Capacity Worksheet

Many consumers are worried about the rising gas prices. Whether you are driving your car across town or across the country, everyone is looking for helpful hints on how to save money at the pump. We are all feeling the noose tighten around our wallets, so here are some tips on how you can begin saving money at the gas station today!

The number one thing a consumer can do is to change the way they drive and become more aware of their routine vehicle maintenance. Many of us use more gasoline than is necessary. If you were to make a few minor adjustments in the way you drive you may be able to save at the pump. Here are some driving tips that will help you conserve gasoline.

1. Drive Intelligently – when you are an aggressive driver you are wasting gas as well as putting others on the road at risk.
2. Quit Speeding – A driver who speeds reduces their miles per gallon by at least 15%. As your speed increases, your aerodynamic drag also increases exponentially. Rolling resistance is the dominant force below 40 mph. Every MPH above this speed costs you. We recommend driving under 65 mph to help conserve. If you can try and use your cruise control to help maintain a constant speed
3. Drive at a Constant Speed – Avoid rapid acceleration and/or breaking, use your cruse control whenever possible. By anticipating traffic and applying slow steady acceleration and braking you could increase your fuel economy as much as 20%. Avoid unnecessary idling as it wastes fuel. If you are anticipating a wait and it is possible turn off your engine. However
4. Stick to a Regular Service Schedule – This will help keep your engine operating efficiently. By replacing filters, spark plugs, and fluids as recommended by your owner’s manual, you could increase your fuel economy by 4 to 10%. When you do need your oil changed improve the gas consumption of your vehicle by using the grade of motor oil that your owner’s manual recommends. You can also purchase motor oil that contains the phrase “Energy Conserving” on the label. This oil contains friction-reducing additives that are known to improve fuel economy.
5. Check Tire Pressure Regularly – By keeping your tires properly inflated you could increase your gas mileage by up to 3%. You can buy and inexpensive accurate tire gauge to monitor your tires. Under inflated tires or poorly aligned wheels waste fuel by forcing the engine to work harder. Keep your tires inflated to the pressure as recommended by your car. You can usually find this information on a sticker attached to the doorframe or you can find it on your fuel flap. We recommend using this number rather than the number found on the wall of the tire. A single tire that is under inflated by 2 PSI can increase your fuel consumption by 1%.
6. Use your A/C and Windows Sparingly – When your air conditioner is on it puts an extra load on the engine of your car forcing more fuel to be used (about 20% more). However, if you have your windows down and highway speeds the air drag can result in a 10% increase in fuel consumption. So what should you do? If you are driving on the highway or at high speeds you should keep your windows up and use your air conditioner. However in most vehicles the defrost position on your thermostat uses the air conditioner at a much lower rate. You could also use the A/C to cool the car and then change to defrost or the vent. If you are driving in town at low rates of speed it is all right to have your window down. Even though the drag created will be less it will still be there.
7. Buy When the Weather is Cool – If you can buy your gas on cold days and drive on hot days. When you do this you pay for volume. You get more fuel for the same price because the gas is denser when cold. If you don’t have cold weather in your area, fill up in the morning before it gets to warm.
8. Wait Until the Last ¼ Tank to Fill Up – When you do this you are able to extend your gas because as the tank gets lower your car gets lighter. However, in cold weather you may not want to do this because the gas could freeze in the tank.
9. When you Do Fill Up Fill the Tank Full – If you are filling up be sure to fill the tank all the way up. You will just waste your money if you try and add $15 today and then $20 tomorrow since each time you will have to travel to the gas station and wait for a pump. Instead, fill the tank to the top and save time and money.
10. Park in the Shade – It is a known fact that gasoline actually evaporates right out of your tank, and it evaporates even faster when you park directly in the sun. If you park in the shade you will help to reduce some of the evaporation and you will keep the car cooler inside, and you will not have to use the A/C to cool the car when you get back in. If you are unable to park in the shade park so the actual tank of your car not the valve to fill it is out of the direct sun.
11. Down Shift Instead of Breaking/Shift into Neutral – Do this to slow down when possible. Not only will it help reduce wear and tear on your breaks it will also save you gas if you have a fuel-injected car. Fuel will not be shut off to the injectors while coasting, instead of keeping the engine at idle in neutral. However, you want to be sure that you are not over-revving your engine. You can also downshift while breaking to further enhance your breaking ability. If you have a standard transmission vehicle you can try shifting into neutral when going down hills or breaking to help save gas.
12. Clean out Unnecessary Items from Your Car – Remove Unneeded Racks – By removing unnecessary items from you car you will cut down on weight and less weight means better mileage. If you have a bicycle or ski rack you should remove it when you are not using it. Keeping them on your car when they are not being used just causes drag and lowers your mileage. An extra 100 pounds in the trunk can reduce fuel economy by up to 2%.
13. Use Acetone as an Additive – If you add 100ml of acetone per 40 liters of fuel to your gasoline or diesel you will increase the evaporative effect when it is in the firing chamber. This will increase the distance you get per tank by 25-35%. Most oil companies and governments will not give you this information so you will have to do the research on your own. Here is a good place to start http://peswiki.com/index.php/Directory:Acetone_as_a_Fuel_Additive.
14. Learn Where to find the Cheapest Gas - In most regions, you will find the cheapest gas prices in the same areas. In major metro areas, this seems to be outlying suburbs. It is best to avoid affluent areas when looking for a cheap fill. People in these areas are less price sensitive, and the gas stations realize this fact. Not only that, the gas stations are located on more valuable land, and land taxes will be higher. They pass on these higher costs to customers. Gas stations near major freeway exists can be more expensive that stations further away. It can pay to drive a few blocks from the freeway to find a deal. You can also check the web for the best deals in your area. Here are a couple of links to get you started.
www.PumpAndSave.com
www.FuelEconomyTips.com
www.MPGReasearch.com
www.Gasbuddy.com
www.AAA.com
www.getcheapgasnow.com
15. Find Other Ways to get to Work/Carpool – One of the quickest and best ways to lower your fuel expenses is to carpool to work or school. You can reduce the inconvenience by sharing a ride with someone that works at the same company, and lives near your home. Many companies have a bulletin board, or Intranet web site where you may be able to find someone to carpool with. Ride-share programs might also enable you to shorten the time of your commute by using the High Occupancy Vehicle (HOV) lanes. Another great option is public transportation. Passes are usually available at discounted rates. Although you have to pay to use public transportation, it is usually much less expensive than driving to work, and paying for parking. Some other options are walking, or riding bike to work. Both of these options have the added benefit of giving you exercise; however, you must live relatively close to work to be able to do this. Another amazing option is the “Sharing” program. Rather than buy a new car, sign up for membership with a car-sharing program such as Zipcar or Flexcar. These types of programs allow you to reserve and drive a vehicle by the hour. The beautiful part is they pay for the cost of the vehicle, insurance, gas, parking, and maintenance.
16. Combine Errands – Combine your daily trips and errands and try and travel during off-peak hours to avoid sitting in traffic. Several short trips taken from a cold start can use twice as much fuel as a longer, multipurpose trip covering the same distance when the engine is warm.
17. Buy Hybrid/More Fuel Efficient Vehicles – The most fuel-efficient vehicles on the road today are hybrid-electric cars. Hybrid cars combine an electric motor with a conventional, yet cleaner, gasoline-powered engine. Over its lifetime, a 50-mile per gallon Toyota Prius hybrid will use half as much gas and release half as much pollution as a 23-mile per gallon Pontiac Grand Prix. You also need to be aware that if you are driving an SUB you probably will only get 15-20 miles per gallon. There are a number of other non-hybrid vehicles available that will also help you to save money at the pump.

Millions of consumers will pay billions this year in fees that are not listed on their credit card statements, bank statements or any other financial record. From rate spikes to endless fees, it seems that credit card companies are finding more and more reasons to take your money. The most costly of these hidden fees or charges may be referred to by many different names such as “interchange fees,” discount fees”, “checkout fees”, “currency exchange fees”, or “convenience fees”.

Most consumers are ignorant to the fact that they are paying interchange fees, which are hidden in the price of virtually everything we buy and are estimated at $27 billion annually in the United States. Consumers are unaware of these hidden fees because the credit card companies don’t want you to know. Even though consumers are unaware of the fact that credit card companies and banks charge a fee on every single transaction this doesn’t keep it from happening. Retailers pay your bank and credit card companies every time you make a purchase with plastic. However, as more and more consumers start to use plastic for their purchases, the cost that the retailer is paying to your bank or credit card company goes up. The retailers then have to build this expense into the cost of their product, which is then passed along to consumers in the form of higher prices for all products. More importantly this is being passed along to almost every consumer not just the ones using plastic. However, there are certain places that charge a different price if you use cash rather than credit. For example a service station called ARCO charges a $.40 fee for debit or credit, but there is no additional fee for paying with cash. So keep this in mind, the next time you purchase a ½ tank of gas (almost 8 gallons) you will be paying an extra $.05 per gallon. Since today’s gas prices are so outrageous who would want to pay more. My advice is to be aware and if you can afford it use cash on as many purchases as possible. Reports show that the average household paid more than $230.00 in hidden fees last year. Imagine what that extra money could have done for you!

Credit card companies are also trying new ways to squeeze money out of you. They have ever changing grace periods (the time between making the purchase and your credit card company charging you interest). It used to be if you made a payment before the grace period you would not have to pay interest on that purchase. Say you start your month with a zero balance and charge an amount that you don't pay off in full at the end of the month. If your card uses the average daily balance method to calculate interest, you are charged nothing for the month you made the purchase, and interest only for subsequent months in which payment is outstanding. Unfortunately, this former interest method has gone to the wayside and two-cycle billing is taking over. With two-cycle billing, interest charges begin with the day you make the purchase and gives no consideration to when you pay off the purchase.

And if that wasn’t bad enough paying your bill by a certain date will not even guarantee you don’t get charged a fee. Card statements are very clear about what day your payment is due, but are not so up front about what time on that date your payment has to be in. Some banks have set a 9 a.m. deadline on the posted payment date which is normally before the mail even arrives. You are expected to pay by a certain time in the day. If your payment is not recorded before this time elapses you may be stuck with a late fee.

Another tricky maneuver that credit card companies like to pull is checking up on your credit report to see if you have defaulted on any other credit cards, personal and auto loans, utility bills or your mortgage. This is referred to as a “universal default.” You can make all your credit card payments religiously for a long time, but fall behind on your electric bill and, suddenly, you're a high risk borrower and you will be charged accordingly. If you have missed a payment on any of these installment contracts you can probably assume that your interest rate will sky rocket to at least 25%. For those of us who received a great introductory rate, this could be devastating.

The easiest way to avoid any type of hidden fees or costs is to pay your bill on time - as soon as you receive your bill. Another helpful hint is to pay more than your minimum so you can pay your bill off faster and ensure that you pay the bill and not just the interest. Hidden fees and costs are out there, it is your responsibility to be aware and avoid them. Credit card companies and banks won’t tell you what the hidden fees are, unless you ask them. You should never be afraid to question them or put them in a position where they have to explain their actions. To protect yourself and your credit it is important that you should always be aware of the costs and how you can prevent them from being charged to your account.

If you are already in a situation where you are beginning to default on any of your payments or are having trouble paying your bills on time, it may be time to seek outside help. You can contact a reputable debt settlement agency and see how they might be able to help reduce your debt. Most reputable firms will offer a free consultation.

When I first moved out on my own I had no idea what a budget was or what I was supposed to do with one. I had never worried about paying my bills on time because I had so few. When I was in college I was able to make ends meet and still have enough money to enjoy my weekends. However, when I moved into my first apartment this all changed. Suddenly there were bills I’d never had before and after a few months I found my savings depleted, and collectors calling to harass me for payments. I had no idea how it happened. I had a job and it seemed like I was making enough to get by before. Fortunately, I was able to call my family for help. However it was to my dismay that they were not willing to give a monetary donation. They decided to show me a simple way to set up a no-hassle budget allowing me to keep track of my money.

The first step was to determine exactly how much I had coming in each month and what my occupancy/transportation expenses were. Occupancy/transportation expenses should include items such as: rent, car payment, electricity, gas, water, car insurance, health insurance, bus fare, etc. Below is an example:

-Rent $900
-Car $260
-Electricity $98
-Water $70
-Car Insurance $45

TOTAL $1373

After we totaled my occupancy/transportation expenses we had to estimate my other living expenses. For example:

-Food $140
-Gas $130
-Credit Cards $70
-Clothing $75
-Entertainment $120
-Savings $100

TOTAL $635

Finally, we added the two amounts together to get the total amount of out going funds.

$1373 + $635 = $2008

If I was making $2300 a month I would have had an extra $292 left over for emergencies or something fun. What I typically tried to do with any extra that I had was to either put it in a savings account or start an investment account. However, it is also a good idea to keep it accessible in case of an emergency.

So how did I make it work? As soon as I got my paycheck I would pay my occupancy/transportation expenses. These expenses should always be paid no matter what and they should always be paid before anything else. Once I had written the check for those bills I would move on to my other expenses. Now with the other expenses it is important to note that you should pay cash whenever possible. If you set out an envelope for every single expense and then put the appropriate amount of cash in it, you can then put the cash for all of the bills paid by check right into your checking account the day before or after you mail out the bill. This way for all the bills that need to be paid in cash the money stayed in the envelope until needed. For example if I knew that I needed a tank of gas I would grab the envelope with the gas money in it, and then put the receipt in side the envelope when finished. This way at the end of the month you will have a record of all the check and cash transactions you have made.

By using this system it meant that I could not spend more than I had, keeping me from going over budget. I realize that even though this sounds perfect it may not always work and I found myself pulling from one envelope to cover the expenses in another or to buy something extra. However, when the cash was gone it was gone until the next month. When I started leaving my credit cards at home, I realized I was really able to start saving money.

This system is a very simple way that can be adapted to fit your needs, bills and/or budget growth. This can also be an easy way to start teaching teenagers and college students the importance of fiscal responsibility. Always remember don’t spend more than you have and you will be able to make this simple system work for you!

If you are one of the many Americans who are contemplating divorce, let me ask you two questions: How will you and your former spouse split your debts? What will you do if your ex is unable to pay his or her share of the divided debt?

It is important to understand that you and your soon to be ex are both responsible for any debts you have signed together like joint credit cards, mortgages, tax returns, or loans. You should also be aware that each state has a different way of handling debt in a divorce. In order to determine who is responsible for repayment, certain states will look at when the debt was incurred, who acquired the debt and the purpose of the debt. However, some states take all the property that has been acquired during the course of the marriage, add it up, and allow a judge to decide how the marital debt will be split. However, if you are in a state that considers only property acquired jointly, the judge will generally consider who incurred the debt and who is in the best position to be able to repay the debt. Still other states assume that debts incurred before the divorce are marital debts. If you reside in a community property state, any debt you or your spouse incurred during the marriage, regardless of who actually signed for the debt, is a marital debt for which the creditor can hold you both liable. No matter what the laws in your state are, you may be affected by the separation of debt in areas such as spousal support, child support, and division of property.

It is very important to note that even though some divorce lawyers will tell you that your creditors will honor a divorce decree that states you are no longer responsible for debts assigned to your ex; it may not always be true. Some creditors may honor the divorce decree but most, if the debt remains unpaid or goes into default, will pursue any means necessary to establish a payment. This means that they may pursue you for a debt that has been assigned to your spouse in the divorce. They may also begin to report the negative marks on your credit report, or decide that they would like to file suit against you on the outstanding debt.

I want you to understand why this is allowed to happen. The bottom line is: a creditor views debt acquired by both spouses during marriage or debts incurred on a joint credit card or line of credit during a separation (and very rarely debts acquired after the divorce) as the responsibility of both parties. Creditors do not care how the divorce court assigns the debts; they just want to be paid.

Here is some necessary information that everyone should know before filing for divorce:

- If you do share joint credit cards you should cancel them as soon as you know you would like to end the marriage. This will help ensure the balance does not increase. The best way to get an idea of exactly what you will be dealing with is to request a joint credit report from all three of the major credit reporting agencies. After you have cancelled the joint cards you should open a new credit card in only your name so that you can begin to build your individual credit score. Just a reminder – don’t forget joint items such as department store charge cards and/or service station cards. It should also be noted that a creditor cannot close a joint account just because of a change in marital status, but can close a joint account by the request of either spouse. You should also be aware that the creditor does not have to change joint accounts to individual accounts.

- If you have a joint mortgage or home equity loan or line of credit, the lender may require you to refinance in order to remove your ex’s name from the title or deed.

- If you are required to pay a portion or all of the debt incurred during marriage, you may want to think about contacting the lenders on these accounts to see if you can negotiate a lower interest rate. A lot of companies will offer you a lower interest rate if they think there is a possibility they could lose your business completely.

- If you do have joint debts you may want to think about borrowing money in your own name to help pay it off. When you do this you take a joint debt and turn it into an individual debt that only you are responsible for.

- You should be aware that your credit card, bank, or mortgage companies are not bound by your divorce decree. Whoever has signed for the debts (usually both of you) is responsible for re-payment no matter who filed for divorce.

- If you and your spouse have filed a joint tax return that you are unsure is correct, you will want to talk to your divorce attorney about adding a clause to the divorce decree that states whoever is responsible for the errors should be responsible for paying the taxes due or the penalties.

- If you are stuck with debt you cannot afford you have options. A viable debt settlement company could help you reduce the debt owed by 40-60% and have you out of your marital debt in 12-36 months.