Organize

Financial distress can be caused by many factors: illness, loss of employment, divorce, temporary disability, overspending, etc. Determining your financial stability is important and requires a close analysis of all aspects of your finances. Many consumers who are in financial peril do not realize the severity of their situation until the problems are right upon them. Therefore, taking a pro-active role in managing your finances may help you to prevent and/or alleviate financial distress.

STEP 1: ORGANIZE

The first and most important step in determining your level of financial well-being is to complete a budget worksheet. Your budget should give you an accurate view of money coming in and out of your household. The CCMS budget and debt restructure application provides all of the necessary tools to examine your budget in an easy, effective manner. Or, you can download our CCMS budget spreadsheet for a more condensed, less detailed summary. If you prefer to complete a budget over the phone or if you have any questions while completing your budget on-line, please contact a certified credit counselor at (800) 920-2262.

PREPARING YOUR MONTHLY BUDGET

There are several main points to keep in mind when filling out your budget worksheet:

• First and foremost: Be honest and realistic.

  Remember, the ultimate objective of your budget is to gain an accurate snapshot of your current financial situation so that you can make appropriate adjustments. Omitting items or underestimating amounts is counterproductive to this objective.

• Use statements, bills, receipts etc. in order to provide accuracy.

  Determining an accurate record of your expenses is critical. If you don't keep a folder of your past statements and receipts, start doing so. If you already keep record of your receipts then use them when configuring your budget.

• If you must make an educated estimate on an item, estimate on the high side.

  It is best to be surprised in a positive way then to be disappointed because you estimated lower expenses.

• Record any foreseeable changes in your expenses that may occur in the near future.

  If you expect or know that a regular monthly expense will increase or decrease in the near future then include it in your budget.

MONTHLY EXPENSES

Secured expenses are expenses that you pay on a monthly basis, typically at the same amount. These items may include your mortgage payment, your rent, property taxes and car payments. The payments on these items rarely change because, in most cases, the terms of payment have already been established.

Your regular living expenses are expenses that are paid on a monthly basis for items that have not been secured with collateral. Examples of these expenses are food costs, clothing, gasoline, etc. These expenses are more easily adjusted because they typically vary each month.

UNSECURED DEBTS

After completing your monthly expenses you will need to record your current outstanding unsecured debts. Unsecured debts are debts that were extended to you without you having to provide collateral. Unsecured debts include credit cards, gas cards, department store cards and personal loans from finance companies.

When listing your unsecured debts you should include:

• The name of the finance company that issued the credit.
• The current balance on the account.
• The normal minimum monthly payment on the account.
• The current Annual Percentage Rate (APR.)
• The status of the account (current, past due, over limit) and, if necessary, the number of months past due.

If your account is currently over its credit limit then your minimum payment will be equal to your regular minimum payment plus the over limit amount. Likewise, if your payment is currently past due then your minimum payment will be equal to your regular minimum payment plus the past due amount. For calculation purposes, please record the regular minimum payment on your budget worksheet.

NET MONTHLY INCOME

Net monthly income includes all of your household's income that is brought home after the deduction of taxes, medical insurance, 401k payments, or other items from your paycheck.

THE NEXT STEP

Your budget will answer the following critical questions:

• What are my current total monthly expenses?
• How much disposable income do I have each month?
• What is my current expense-to-income ratio?

In many instances, consumers may not realize the amount of money they spend on specific items until they have completed a budget form. Your budget will allow you to locate areas of possible overspending that you may not realize on a day-to-day basis as well as providing you with a clear view of your overall disposable income.

After organizing your current budget and unsecured debts you should take an objective view of your situation. The results of your budget worksheet should provide you with the information needed to make appropriate changes. After completing your CCMS application or CCMS budget worksheet, please continue to the next section of this tutorial:

STEP 2: REVITALIZE

If you are unsure of how to organize your finances or if you have questions about budgeting please contact a certified credit counselor at (800) 920-2262. All counseling sessions and personal information are kept strictly confidential. A CCMS counselor will review your current financial situation, answer your questions and provide you with a recommended course of action that fits your needs.