Experienced drivers know that if they want their vehicles to run properly for years to come, regular maintenance is essential. Household finances can benefit from the same advice. To improve a budget that isn’t running as smoothly as it could, or to prevent a financial breakdown, consumers should consider performing a financial “tune-up”.
Schedule a Budget Meeting
Improving one’s financial standing requires full participation and equal effort from both partners. Before any real change can occur, it’s a good idea to gather all bills, bank statements and other financial documents. Allotting adequate time to sit down with one’s spouse and go over household finances with a fine-toothed comb is essential.
The first step is looking for budget leaks and behavior patterns that cause late payments and other detrimental effects on household finances. Budgeting software is incredibly helpful, including the many new free online budgeting programs.
Next up is an honest, blame-free discussion of how these behaviors can be changed. Examples include scheduling set bill payment days, re-allocating bill payment responsibilities, or even something as simple as having plenty of stamps on hand.
Other Household Budget Considerations
Many couples are unaware of the numerous leaks in their budgets. Like a leaky engine, these budget holes can cause more serious problems in the future if not adequately addressed.
Some are as simple as downgrading to a smaller cable or phone package. Many households have TV channels and phone features they never use. Bundling services with one company can create even greater savings.
Auto insurance is another area of the budget that is often overlooked. Many drivers stay with an insurance agency out of familiarity or loyalty. Complacency could be costing many households a lot of money.
Online vehicle insurance comparison sites make no-obligation rate and coverage comparison simple and quick. Having a current insurance coverage statement handy while shopping for car insurance online ensures that switching to a new company won’t affect coverage.
For households that have already fallen behind on credit card and loan payments, it’s a good idea to contact creditors. Credit card companies in particular may be happy to lower the payment amount or interest rate on a delinquent account. It’s in their best interest to receive less money than agreed upon rather than no money at all. In today’s economic climate, credit issuers are accustomed to these types of calls.
Accelerating Debt Payment
Having a grasp on the current state of one’s household finances makes moving forward easier. Plugging budget leaks leaves more money available for paying off installment loans, credit cards and lines of credit.
Budget calculators make it easy to find out how long it will take to pay off a given bill. Many personal finance and industry-specific sites boast free calculators that allow users to input the current balance and interest rate to find out how much extra, and how many payments, it would take to pay off the debt.
Since many consumers have multiple loans and credit cards, prioritizing early debt payment is the final step. Many financial advisers recommend paying off debt with the highest interest rate first.
However sound this advice, some find it difficult to see the light at the end of the tunnel if the debt with the highest interest rate is also the one with the largest balance. If paying off smaller balances with lower interest rates first is a better motivator, then taking this route would be advisable.
Budget Maintenance as Prevention
Performing a financial tune-up may seem daunting, but it’s the most effective way to get back on track. From creating sound bill payment habits to shopping for less expensive auto insurance, budget “maintenance” helps households avoid the need for costly repair down the line.