In the financial world every investment or financial holding has what is a called a prospectus. A document which determines the financial integrity of the investment and its worth. In the individual household it is the credit score. During difficult financial and economic times it becomes an everyday struggle to maintain household income and still get by each day. The age old methods of savings accounts or putting money back for a rainy day, has been sacrificed to stay afloat in rising inflation of this Great Recession we live.
The struggle for many is how to pay down debt and improve financial status when there is less income in the household. This is where the importance of knowing your prospectus and what the expectations can be on them is critical. The individual household prospectus is the credit score. A free report which you can obtain from Equifax, Experian, and TransUnion. The credit score report not only is a reflection upon you in terms of your creditworthiness and debt.
The first step after one has obtained their credit score is to look at outstanding debt and those which creditors are holding you hostage to on outstanding payments. As much as we do not like seeing the writing on the wall of the credit score over outstanding payments, it just seems to never disappear and follows us when we seek credit for a loan on a purchase or refinance one. Making the phone call to the bill collector and working out a legitimate payment option is advised. Creditors want to get paid on the debt and collectors will not refuse the willingness of someone to work on it getting solved.
Credits scores can ruin or greatly enhance someone’s ability to own and determine one’s financial position in the eyes of businesses. Once you have determined your credit position the next step is to access your household personal finances. This information will work together in assisting you with your credit score. Knowing where your income goes in terms of your debts is a direct reflection upon your credit.
The National Foundation for Credit Counseling (NFCC), founded in 1951 has published informational material on resolving household finances. In a recent study they found those involved with paying down on debt, 89 percent valued this more than the savings account, the reaming 11 percent chose savings first.
There are some important tips that are necessary in paying down debt. The first tip is and you might say well this is contrary to the previous statement, however, having adequate savings is still required in order to pay down debt. If there is ever an emergency situation and you are not able to afford the circumstance, then the likelihood is also the same when it comes to paying the interest rates, late charges, and miscellaneous fees on your limit with the debt.
The next step in resolving household finances is tracking your spending or your outlays on your income. If you know what you are spending and where your income is going then you have a better chance at controlling your debt and setting a limit.
This leads to the third step, set up a budget. The figures you collect from knowing your debt can then be applied to a plan for limiting your debt and increasing your savings for payment on outstanding loans. Budgets are not tools for shifting funds from one debt to another or acquiring additional credit to manage them. Budgets are tools for getting to know your household finances and then planning your income.
The fourth step for resolving household finances is set goals. Once you see from your credit report your outstanding debt accounts, know your household expenses and have your budget in hand, now you have a plan and can set your goals for paying down debt. Also, you know what to tell debt collectors what you can pay in working with them on your collections affecting your credit score. Your family and your household you will want to include in this process. Everything you work hard for and earn is a shared resource not just outside the household but more importantly in your household. Time and money go hand in hand and time is money. How we spend our time determines our income and planning ahead.
The final step is retirement and investments. With your budget in place you will be much more successful in approaching a goal for retirement and investments. It should not be a step we end up regretting or one we avoid. However, when money is tight and there is nothing left for this step it then can get neglected. This is why budgeting and planning are essential to stability and growth in household finances. Nothing is completely planned in life but tomorrow is going to come and starting to plan ahead for more tomorrows is essential for today.
Taking action is not limited to good economic times and becomes even more a necessity in times of financial distress. There are professional credit counselors and also financial advisors with your insurance company there to assist you with your budget process. Those you are already obligated to for your home and auto offer free assistance in setting up your budget. Do not wait for trouble to strike and you are left with an extreme circumstance occurring before you decide you have had enough with your financial situation and it is time to resolve it.