As the economy slowly recovers, and people return to work after long layoffs, the financial recovery begins. The California Society of CPAs offers these strategies for people to get their economic houses in order.
Reexamine financial goals. Before establishing a budget after being employed, examine financial goals. Start by making a list of short-term goals (e.g., new car, health insurance) and long-term goals (e.g., your child’s college education, retirement). Next, ask: How important is it for me to achieve this goal? How much will I need to save? Armed with a clear picture of their goals, work toward establishing a budget that can help reach those goals.
Identify and reexamine current monthly income and expenses and create a budget. Recently unemployed need to start by adding up all of their income. In addition to their regular salary and wages, they need to be sure to include other types of income, such as dividends, interest, and child support. Next, they need to add up all of their expenses which includes: credit cards and college loans, etc.
Next they need to see where they have a choice in their spending. It helps for them to divide expenses into two categories: fixed expenses (e.g., housing, food, clothing, and transportation) and discretionary expenses (e.g., entertainment, vacations, and hobbies). They will also want to make sure that they have identified any out-of-pattern expenses, such as holiday gifts, car maintenance, home repair, and so on. To make sure that they are not forgetting anything, it may help for them to look through canceled checks, credit card bills, and other receipts from the past year. Finally, as they list their expenses, it is important for them to remember their financial goals. Whenever possible, they need to treat their goals as expenses and contribute toward them regularly.
Once they have added up all of your income and expenses, they need to compare the two totals. To get ahead, they should be spending less than they earn. If this is the case, they are on the right track, and they need to look at how well they use their extra income. If they find themselves spending more than they earn, they will need to make some adjustments. They need to look at their expenses closely and cut down on their discretionary spending. And they need to remember, if they find themselves coming up short, they don’t need to worry! All it will take is some determination and a little self-discipline, and they will eventually get it right.
Consider consolidating debt to get monthly payments down to reduce expenses. If a recently unemployed worker has a lot of debt, they may want to consider debt consolidation. Debt consolidation is when a person can roll all of their smaller individual loans into one large loan, usually with a longer term and a lower interest rate. This allows them to write one check for a loan payment instead of many, while lowering their total monthly payments.
No comments:
Post a Comment