Archives for Debt

How to Create a Monthly Budget

iStock_000013718070XSmallCreating a monthly budget is one of the most important financial decisions that a person or family can make. A budget can help anyone outline their income and their expenses, along with planning for future financial decisions. There are several things to keep in mind when creating a monthly budget, but once you understand the basics anyone can get better with time.

First of all, no two months are ever alike. There are always expenses that pop up during the month such as the need for new tires or for a home repair. However, this should not keep anyone from creating a monthly budget just because every possible scenario cannot be accounted for. There are fixed expenses that a person or family does have to pay every month such as utilities, mortgage payments, and insurance. These categories should be considered fixed expenses and never changed.

There are also things called variable expenses when the amount will change every month. One of the best examples of a variable expense is food, where one month you may spend twice as much as the previous month. There are many factors that can influence a variable expense, such as the time of the year or income. Overall, it is important to have all of the expenses for every month accounted for at the end so you can see what categories you spent the most money in. When it comes time to reduce expenses, targeting the highest expense areas will give you the best return on your time.

If you are struggling to create a monthly budget, there are experts that can help with the process. When working with a Miami tax preparer, you can rest assured that you will get the highest quality service on your monthly budget. There are many accounting services in Miami that will assist people of all ages and income groups in creating a budget. Overall, it is important to remember how important monthly budgets are in projecting out expenses and income as well as for showing future financial plans.

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Three Credit Card Mistakes to Avoid

The majority of consumers these days have at least one credit card. They provide a handy way to pay when you don’t have cash with you, and many banks offer lucrative rewards, but it’s important to exercise caution with credit cards. Every Miami tax preparer can tell you that credit card debt is a financial disaster. Take care to avoid these grave credit card mistakes, and you’ll save yourself a great deal of trouble down the road.

Maxing Out

Reaching your credit limit is a bad idea for many reasons. First off, the bank will charge you an over-limit fee. When combined with principal and interest, these fees make it even harder to pay off the balance. But there will be long term damage as well; your credit score will suffer severely if even one of your cards is maxed out. It often takes people decades of financial discipline and the expertise of accounting services in Miami to get out of this rut.

Taking Cash Advances

When you take a cash advance, you will be charged a higher interest rate than you would for general purchases. In addition, there is no grace period when you take a cash advance from your credit card. This means that you owe interest before you’ve even put your wallet away! Most banks charge a cash advance fee as well. You might mitigate one of your financial troubles with a cash advance, but you’ll soon be dealing with a much more serious one.

Focusing Too Much on Rewards

One of the ways banks attract new customers is by offering credit card rewards. Some of these rewards are quite useful; the points are often redeemable for airline tickets and hotel rooms. However, make sure that the value of these benefits outweighs the fees and interest. Also, ask yourself if you will really use them. It is not uncommon for consumers to get a credit card and spend more than necessary for the sole purpose of getting the rewards.

Credit cards are useful for making ends meet when you’re short on cash. However, using a credit card irresponsibly will put you in an even worse financial position. Next time you pay with your plastic, make sure that you’re not stepping into one of these pitfalls.

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Three Simple Tips to Pay Off Debt Faster

The most difficult part of paying off a considerable amount of debt is usually the first step: making a plan to become more financially responsible. After all, when personal debt starts to become five or six figures, many people become overwhelmed and fail to make any meaningful changes to their spending habits. That said, there are a few very simple tips that can be taken on by anyone who is looking to reduce their personal debt and have a steadier financial future.

1. Credit Card Payments

Though credit cards are a popular line of credit and can be convenient in an emergency, they are also one of the hardest sources of debt to get rid of. With interest rates on purchases that can exceed 20%, the best way to manage credit card debt is to avoid it in the first place. However, if you do have a high amount of debt, start by paying more than the minimum payment on the credit card with the highest interest rate. Paying minimum balances draws out the repayment period and means that you will be paying a great deal of interest. Even if just a few dollars more, try to pay more than the minimum payment on your card each month.

2. Spending Cuts

Many people wrongly assume that getting out of debt means that you will have to live like a pauper. However, a more realistic tip is to note that if your income is steady, another way to speed up debt repayments is to reduce the amount of money going out. For instance, if you stop eating out or cut entertainment expenses (such as alcohol or movies) in half, this extra money can be devoted completely to paying off debt. These relatively minor sacrifices will pay off handsomely once all your debt has been taken care of.

3. Use Unexpected Income Towards Debt

Lots of people who head home from their Miami tax preparer with a refund coming their way have already thought of a big item they would like to purchase. However, those same people using accounting services in Miami should consider putting all of that refund towards debt payments. The ongoing theme in paying off debt quickly is making minor sacrifices towards a financially secure future. A major income boost, like a tax refund, is a great way to chip away at debt.

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