Brokedom Got You Down? You Need the Financial Trifecta

If you’re the king or queen of Brokedom, search no further, your exile is waiting.  Three simple things can take you from your paycheck-to-paycheck existence to financial security and freedom from debt.

#1  BUDGETING

Most people never learned how to budget and don’t even know why it’s so useful and important.  I don’t know about you, but I don’t have that ‘Bill Gates money’ so ensuring that my bills are paid on time can be a bit of a juggling act.

To make things easier for myself, and what I always recommend to clients, is to write out a budget.  (Yes, write it out so you can visualize the numbers and make adjustments as you go.)

The goal of a budget is to manage your incoming cash well enough so that you have enough available each month (or pay period) to cover your essentials, like food, rent, car insurance, etc.

The purpose of a budget is to see how your expenses and spending compare to your income, and to help you make adjustments where needed.

If you don’t have enough cash to cover the basics, you need to reduce something.  However, if you have a surplus, you need to manage that surplus wisely for maximum benefit.

Here’s a simple example of what a budget might look like:

30% for housing expenses (rent and utilities)

15% for transportation (vehicle expenses or public transportation)

15% for food and personal items (groceries, cleaning supplies, toiletries, clothing)

20% for miscellaneous or discretionary spending (cell phone, cable/internet, leisure, recreation and social activities)

20% for savings                                                                                                                              

100% Financial Security

While everyone’s circumstances are different and may require deviation, the above guidelines will keep you solvent every month and ensure you have an emergency fund or cash on hand for the proverbial rainy day.

#2 SAVINGS

I write about this topic a lot.  The importance of savings cannot be understated.  It happens to all of us from time to time, and for some, more often than for others… The car breaks down, there’s an unexpected visit to the hospital, you’re laid off or placed on disability leave…  Each of these events and countless others can drastically and suddenly affect your budget leaving you short of cash.

Most people will immediately turn to credit cards and this is usually the start of their financial demise.  Charging even $100 today can cost you thousands in interest over the years.  And let’s be realistic.  If you can’t afford your regular bills this month, how do you plan to pay the bills AND an extra credit card bill next month?

People tend to be overly optimistic when it comes to their future finances.  They assume that things will improve quickly and they’ll be able to pay down their debt.  In reality, this rarely happens.

If you have savings available, you can use these funds instead, or at least first before resorting to credit cards.  Many  consumer credit cards carry an Annual Percentage Rate as high as 25% which means for every $1,000 you charge you pay back $1,250.  Eventually your minimum payments have no affect on your balance and you’re throwing your cash down the drain every month.

#3 AVOID & ELIMINATE DEBT

Having a realistic budget and a healthy cushion of savings will contribute greatly to meeting this third goal of debt avoidance and elimination.

If you budget wisely, you will be able to build savings, which will help you avoid the creation of debt in the first place.  When an emergency arises, you won’t have to resort to credit cards, thus you avoid debt.

If you already have debt, you may be able to pay if down and thus eliminate it entirely.

However, you have to be realistic about your repayment plan.  If an affordable monthly debt payment means you’re payment plan will last longer than 5 years, you’re probably not being realistic.  So much can change in 5 years that it’s unlikely you’ll be able to stick to your plan for longer than that.

Similarly, if paying off debt in 5 years or less means such a high monthly payment that you can’t afford anything else, you’re setting yourself up for failure.  Let’s face it, you can only sacrifice for so long.

Either way, having a realistic budget can help you meet this third goal.  For example, instead of allotting 20% for discretionary spending, you may use some or all of that category for paying down debt.

However, if paying off your debt is unrealistic because the monthly payments would be too high, or the payment plan would be too long, you should consider another method of debt elimination.  Give yourself a fresh start so you can focus on debt avoidance and keep your disposable cash for your necessities, your savings and your own pocket.

Most people don’t realize just how easy it is to eliminate debt.  Eligible debtors can eliminate 100% of credit card debt is as little as 4 months, with no payments at all.  YES! You read that right!  NO payments – NO debt – 4 months!

The federal law provides for debt relief under the Bankruptcy Code that allows certain filers to eliminate credit card debt with a simple process that takes only 4 months.  Chapter 7 Bankruptcy can get you on the path to a new debt-free life quickly and painlessly.   Read more about bankruptcy on my website –  https://leclawonline.com/faq/

If you’d like to know whether you’re eligible for Chapter 7, you can call, text or email for a free phone consultation – it takes only 15 minutes.

LAW OFFICE OF LEAH E. CAPECE, ESQ., LLC

PHONE 908-353-6700/TEXT 908-266-4843/EMAIL lcapece@leclawonline.com

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