Creating a Budget

A budget is a tool to help you plan, prioritize, and manage your income and expenses. Review your budget often and update it when you are experiencing a change in income and expenses.

Creating a Budget

Write down your monthly take-home pay. Or if you’re out of work, your unemployment compensation. If you’re in sales – or work on commission – you may have to estimate, since your income may vary from month to month. List income you receive from any source, like a part-time job, a tax refund, gifts, unemployment, public assistance, dividends, and alimony or child support. Add the entries to determine your actual income for that month. Keep in mind, some of these amounts may fluctuate.

List how much you deposit in savings each month from your take-home income, even if it’s only a small amount.

List your fixed monthly expenses – the predictable, set amounts for the must-have items and services that you pay for each month – like rent or mortgage, car payment, and telephone, cable, or Internet access.

List your variable expenses – the amounts that change, as well as the expenses you pay weekly, monthly, quarterly, semi-annually, or every year – like groceries, clothing, haircuts, property taxes, auto and homeowners insurance, and gas and electric.

List estimates for once-in-a-while expenses – like birthday and wedding gifts, or holiday gifts and entertainment.

Total your fixed and variable expenses and divide by 12 to get a monthly estimate.

If after paying your bills and putting money in savings, you still have funds, you can carry over the balance for the next month or use it for unexpected expenses. If this month’s balance is negative, look for ways to cut back on the variable expenses.

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Vehicle Reposession

If you’re like most people, you rely on your vehicle to get you where you need to go – and when you need to go – whether it’s to work, school, the grocery store, or the soccer field. But if you’re late with your car payments, or in some states, if you don’t have adequate auto insurance, your vehicle could be taken away from you.

To Do

If you know you’re going to be late with a car payment, contact your creditor right away. It’s easier to try to prevent vehicle repossession than to dispute it later.

• Many creditors will work with customers they believe will be able to pay, even if a little late.
• You may be able to negotiate a revised schedule of payments.
• If you can reach an agreement to change your original contract, get it in writing to avoid questions later.

If your vehicle is repossessed:

• your creditor may decide to keep it as compensation for your debt or resell it in a public or private sale.
• you may be able to buy back the vehicle by paying the full amount you owe (usually, that includes your past due payments and the entire remaining debt), in addition to the expenses connected with the repossession, like storage, preparation for sale, and attorney fees.
• check with your state consumer protection agency. Some states have laws that allow you to “reinstate” your loan. This means you can reclaim your car by paying the amount you are behind on your loan, plus your creditor’s repossession expenses.
• a creditor may not keep or sell any personal property found inside the vehicle.

Using Credit Cards

Using credit cards wisely can help you avoid a credit calamity.

What You Need to Know

Whether you’re using your credit card to buy a laptop or a box of laundry soap, you have rights and responsibilities under the law.

Payments – Pay promptly. If you don’t, your credit card issuer may charge you late fees and additional finance charges.

Errors on Your Bill – Card issuers must follow rules for correcting billing errors promptly. They are required to send you a statement outlining the rules when you open an account, and at least once a year while your account is open. A summary of these rights is often included on your billing statement.

If you find a mistake on your bill, you can dispute the charge and withhold payment on that amount while the charge is being investigated. You still have to pay any part of the bill that’s not in dispute, including finance and other charges.

Unauthorized Charges – If your credit card is lost or stolen, report it to the card issuer as soon as possible. Some issuers have 24-hour toll-free telephone numbers to accept emergency information. If you report the loss before the card is used, you can’t be held responsible for any unauthorized charges. If a thief uses your card before you report it missing, the most you’ll owe for unauthorized charges is $50. If the thief uses your card number, not your card, you have no liability for the unauthorized charges.

Disputes about Merchandise or Services – You generally can dispute charges for goods or services you find unsatisfactory if you’ve made a good faith effort to resolve the dispute with the seller, the charge is for more than $50, and you made the purchase in your home state or within 100 miles of your current billing address.

Refunds of Credit Balances – If you have a credit balance on your account, perhaps because of a return, you can keep the credit on your account or write your issuer for a refund if it’s more than a dollar. Your card issuer must send you a refund within seven business days of receiving your request. If you don’t ask for a refund and you don’t make any other purchases for more than six months, the issuer must make a good faith effort to send you a refund.

Tips for Using a Credit Card Safely

• Never lend your card to anyone.
• Never sign a blank charge slip. Draw lines through blank spaces on charge slips above the total so no one can change the amount.
• Never put your account number on the outside of an envelope or a postcard.
• Always be cautious about disclosing your account number on the telephone or online unless you know the person you’re dealing with represents a reputable company.
• When you go out, carry only the cards you expect to use that day. If your wallet or purse is lost or stolen, it minimizes your loss and the resulting headache.
• Keep your receipts so you can reconcile the charges on your bill.
• Keep a record – in a safe place separate from your cards – of your account numbers, expiration dates, and phone numbers of each issuer to report a loss quickly.

Choosing Credit Cards

When you are shopping for a credit card, it’s wise to compare fees, charges, interest rates, and benefits. Some credit cards that look like a great deal at first glance may lose their appeal once you read the terms and conditions of use and calculate how the fees could affect your available credit and your payment.

What You Need to Know

Credit card issuers generally must disclose the important terms of use regardless of whether they require you to complete an application.

Fees. Many credit card issuers charge membership and/or participation fees. Issuers use a variety of names for these fees, including “annual,” “activation,” “acceptance,” “participation” and “monthly maintenance.” These fees may appear monthly, periodically, or as one-time charges: they can range from $6 to $150. What’s important is they can have an immediate effect on the credit that’s available to you. For example, a card with a $250 credit limit and $150 in fees leaves you with $100 in available credit.

Transaction Fees and Other Charges. Some issuers charge a fee if you use the card to get a cash advance, make a late payment, or if you go beyond your credit limit.

Annual Percentage Rate. The APR is a measure of the cost of credit, expressed as a yearly interest rate. The APR must be disclosed before your account can be activated, and it must appear on your account statements. Your card issuer also must disclose the “periodic rate” – the rate the issuer applies to your outstanding balance to determine the finance charge for each billing period.

Grace Period. A grace period lets you avoid finance charges if you pay your balance in full by the date it is due. Knowing whether a card gives you a grace period is important if you plan to pay your account in full each month. Without a grace period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account.

Balance Computation Method for the Finance Charge. If you don’t have a grace period – or if you plan to pay for your purchases over time – find out how the issuer calculates your finance charge. Which method is used to compute your balance can make a big difference in how much of a finance charge you’ll pay – even if the APR and your buying patterns stay pretty much the same.

Balance Transfer Offers. Many credit card companies offer incentives for transferring your balance – moving your debt from one credit card (Card Issuer A) to another (Card Issuer B). Each offer is different – and the terms can be complicated.