Over the last few months quite a number of families in Kelowna are cutting spending, trimming costs on everyday expenses and eliminating some things all together. 
I have had many requests for more information on the 2009 budget.
In today’s economic crisis, many families already drowning in debt are now having to deal with excessive penalty fees for everything from missed payments to over‑limit spending. Fixed Debt Can Save Money
Most credit card debt is “revolving” debt. Because of the way the interest is calculated, it’s difficult to tell how long it’s going to take you to pay off the balance. Revolving debt is compounded when additional monthly charges are added to the balance.
With installment loan debt, payments are scheduled for a fixed amount payable over a specific period of time. It’s easy to tell when the entire amount borrowed will be paid off and – even with a similar interest rate and monthly payment amount – the pay‑off date will generally be much sooner than with a comparable revolving account.For example:
If a client charges $15,000 on a credit card with a 15% interest rate (APR) and pays $525 per month, it will take 15 years to pay off the debt and the client will have paid an additional $8,156 on top of the initial charge.
With an installment loan (fixed), the same loan amount of $15,000 with a 15% APR, with the same $525 per month payment will take the client just three years to pay off – and they’ve only paid an additional $3,674 on top of the loan.
With a fixed loan, the client could save more than $4,000 in interest and pay off the loan in three years instead.Protect Yourself
In an age where “easy credit” is not always what it seems, it pays for clients to be educated about the credit cards in their wallet. Failure to manage credit cards could wreak financial havoc.
1.USAToday.com, September 17, 2008 This comparison between fixed and revolving devt assumes revolving payment (minimum) of 3.5% of the remaining balance or $20, whichever is greater. First month’s payment is shown and term assumes continued payment of minimum amount. No additional debt incurred and payments decrease over a time period and also assumes payment of 3.5% of initial loan amount, no additional debt incurred and payment amount remains fixed throughout the term of loan. This illustration is hypothetical only. Each debt situation will vary.
According to the February 1,2008 issue of Newsweek, the average household "owes 20 percent more than it makes each year." With the current financial crisis, that percentage may even increase as families go deeper into debt just to maintain their lifestyles.
Avoid the revolving consumer debt trap.
Most credit card debt is revolving debt. Because of the way interest is calculated on revolving debt, it’s hard for clients to know exactly how long it will take to pay off their balance. All that interest can add up to big bucks along the way.
With fixed debt, clients make payments over a set span of time. It’s easy to tell when the principal will be paid off and – even with the same interest rate and monthly payments – the pay off date is usually much sooner than with revolving debt. Consolidating revolving debt into one fixed rate loan can potentially eliminate those debts sooner and reduce a client’s monthly payment.
Understand compound interest.
With a revolving debt account, compound interest can eat away at a client’s financial health. But when a client uses compound interest in their favor, it can really help savings grow. The more a client saves, the more interest they can potentially earn on that money.
Make a lifestyle change.
When it comes to reducing debt, little changes can make a big difference. By separating “wants” from “needs,” and making the “needs” the priority in spending, clients can begin saving toward their future.
Economic woes and an increase in consumer prices have made sticking to a budget even more difficult for families across North America. People who were already struggling financially under the burden of debt and poor savings, may be feeling the pressure even more intensely now.Here are six tips to help you have more and spend less.
1.Cut energy use
Simply sealing a home properly can help a homeowner eliminate 25% of their heating and cooling costs. Many utility service providers provide free or discounted energy audits. If this option isn’t available, clients can go the professional route, or do a self check using the steps found at energystat.gov.
Another way to prevent leaks is to add insulation, use caulk, spray foam and weather stripping to seal leaks around windows and doors, and in attics and basements. Plug devices with standby power, like TVs and stereos, into a power strip so they can be turned off all at once.
2.Spend less on groceries
With the cost of virtually everything at the grocery store going up, this is one area budget area clients can’t afford to ignore. Some have turned to coupon clipping (a household of four that uses them strategically can save 25% a year), but this is only effective if shoppers use them for items they already use or need.
Warehouse clubs can be a good source of cost effective purchases, but shoppers should weigh the benefits against potential negatives: the tendency to eat more because the food is going bad, and the potential for impulse shopping (many stores put electronics and other goodies out front).
Grocery shoppers can save up to $1,200 annually from cutting just half of their unplanned purchases.
3.Trim entertainment costs
When eating out, skip the drinks, and instead of ordering two entrees, order one appetizer and split a meal. Or dine out during breakfast or lunch, when the entrees are typically cheaper.
Movie tickets now top $10, so hit the matinees instead for discounted admission. Join the local theater’s loyalty club for freebies, get discount tickets in the local Entertainment Book, or head to the drive in, where tickets are usually cheaper.
4. Improve gas mileage
The easiest way to spend less on gas is to simply use less of it. Consolidate errands into one trip, or walk to the grocery store instead of driving. Speeding or braking sharply and frequent lane changes cuts fuel economy by 35%.4
5. Shave car insurance
Most insurers will shave prices for anti lock brakes, having an accident free record, taking a defensive driving course, or using the same insurer for both auto and home coverage – adding up to as much as 25% off a client’s premium. Shopping around for competitive quotes is a great way to potentially save.
6. Boost your income
Costs are rising across the board and a few extra dollars each month can go a long way to relieving the financial pressure of a weak economy and higher expenses. Business opportunities are great ways to do something enjoyable while padding the bank account.
While we can’t control rising costs, changing a few habits can help you hold onto more of your cash!
1Money, July 2008
2Kiplinger’s, August 2008
3Money, July 2008
4Kiplinger’s, August 2008
5Money, July 2008
6Money, July 2007elown
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Plan for Financial SUCCESS !