Saying No-No-No to Holiday Overspending!

There are many holiday traditions which are beautiful, meaningful, and worth repeating year after year. However, the tradition of holiday overspending has become all too common among American consumers. Trust me, I understand the temptation to overspend during the holidays and I have heard every excuse in the book given to try to justify this bad habit. "I want to do something really special for my loved one this year because he/she has been going through a difficult time. I'm not worried about charging gifts on my credit cards because I will pay the balances off in a few months with my tax refund. Money is so tight during the rest of year so my family and I deserve to have a little fun during the holidays."

It is much easier for consumers to talk themselves into overspending during the holidays than at any other time of the year. Social pressure, pressure to please loved ones (whether the pressure is real or perceived), and incessant retail marketing can make it difficult for many consumers to stick with a spending budget they can actually afford. However, the truth is that consumers do not have to fall into the debt trap in order to have a happy and meaningful holiday season with their loved ones.

The Plan

The single most effective way for a consumer to swear off holiday overspending once and for all - and to actually achieve this goal - is to start with a plan. As a reader of the HOPE4USA Credit Blog you know that having a written budget to follow for your monthly expenses is essential to financial and credit success. (Need help creating a monthly budget? CLICK HERE for a free HOPE4USA Budgeting Guide.) However, with all of the extra expenses present during the holiday season it is also important to have a separate, written budget for holiday spending as well.

How It Works

When starting a holiday budget it is important to begin by listing the amount of money which is actually available for spending, not the expenses. Starting with the amount of money you can actually afford to spend (without going into debt or dipping into non-holiday savings) will help you to build the most effective budget possible.

Let's say that you determine your total available spending limit for the holidays should be $1,000 or less. The next step should be to divide those funds into spending categories such as charitable giving, Christmas presents, holiday treats and meals, decorations, and unplanned expenses. The funds can be allocated within the spending categories however you see fit. Here is a possible example:

·        Charitable Giving - $100 (10% of available funds)

·        Christmas Presents - $550 (55% of available funds)

·        Holiday Treats and Meals - $200 (20% of available funds)

·        Decorations - $50 (5% of available funds)

·        Unplanned Expenses - $100 (10% of available funds)

Once you have separated your available funds into separate spending categories you can move on to determining how much you will spend for each person on your Christmas gift list. One of my favorite strategies for budgeting Christmas gifts is to list each person for whom you wish to buy a gift in their order of importance. Next you can determine which percentage of funds you wish to spend on each person and calculate those percentages against your pre-set budget to find out your gift "allowance" for everyone on the list. Here is an example.

·        Spouse - 20% ($110 in the example budget above)

·        Child #1 - 15% ($82.50 in the example budget above)

·        Child #2 - 15% ($82.50 in the example budget above)

·        Grandchild #1 - 10% ($55 in the example budget above)

·        Grandchild #2 - 10% ($55 in the example budget above)

·        4 Friends - 5% each ($27.50 each in the example budget above)

·        Misc. Friends, Teachers, Neighbors, etc. - 1% each ($5.50 each in the example budget above)

Make the commitment to set a budget and stick to it and you will make the holiday immensely more enjoyable for yourself and your family this year. As a bonus you can give yourself and your family the gift of starting 2015 off on the right foot financially, without a Christmas overspending hangover.

Merry Christmas from HOPE4USA! Click the image to the left to download the HOPE4USA Basic Christmas Budget worksheet and set yourself up for a holiday season without regrets.

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Merry Christmas from HOPE4USA! Click the image to the left to download the HOPE4USA Basic Christmas Budget worksheet and set yourself up for a holiday season without regrets.

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Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here. 

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Kicking the Habit of Overspending

Does the arrival of your monthly credit card bill strike fear into your heart?  Have you ever discovered that your checking account is empty without knowing where your paycheck could have possible gone so quickly?  Do you have more new pairs of shoes in your closet than you can count?  If you answered yes to any of these questions then you may have a problem with overspending.

Overspending is one of the most common causes of poor credit scores and unbalanced budgets.  Of course, typically consumers do not set out to overspend; however, without a solid plan for spending it is easy to find yourself in the uncomfortable situation of having more bills than money over and over again.  When you find yourself short on cash that is when bills get paid late (or not at all) and credit scores begin to slip.

Keep in mind, over-spenders are not bad people!  Our team of credit experts at HOPE4USA has helped many, many people to overcome credit problems, a sizable percentage of whom arrived at those credit problems due to overspending. The good news is that if these clients were able to fix their overspending problems and turn their credit reports back around then it is possible for you to do the same.  Here are a few tips to get you started on kicking the habit of overspending:

1.) Write down every dollar you spend for the next 2 weeks.

Analyzing your spending habits is the first step to help you find out if you have an overspending problem and, if so, how severe the problem has become.  Wives and girlfriends, if you are asking your spouse or boyfriend to track their spending you may want to note that men are typically a little more resistant to doing so. My suggestion? Make it easy for them!  Give him a simple 3X5 card to keep in his wallet. Just ask him to jot down the amount spent and where he spent it if he does not want to save receipts. You will still get the basic information you need this way and he may be more likely to follow through with your request.

2.) Make a spending plan (in writing) and stick to it.

You may be wondering, “What exactly is a spending plan?”  A spending plan is a written list of your monthly income (paycheck, alimony, child support, etc.) and your monthly expenses (rent, utilities, car payment, etc.).  In other words – it is a budget.  You can even CLICK HERE to download a free copy of the HOPE4USA Basic Budgeting Worksheet - no strings attached. The key is to get started. (Note: if you are a current HOPE4USA client you can ask your case manager to review your completed budgeting worksheet offer advice and suggestions. Talk about a great membership perk!)

3.) Trim the fat from your spending plan.

Once you have reviewed your 2 week spending list and completed your budget worksheet, look for areas where spending can be cut.  Now, I’m not talking about sucking all the fun out of your life so be sure to resist the urge to respond negatively to this suggestion.  However, I am suggesting that you make a plan to get the things that you really want out of life (i.e. a new home, a new car, college education for children, family vacations, etc.) by figuring out what you can live without in the present. You may be able to find hundreds of extra dollars per month by reducing cable TV plans, cell phone plans, entertainment expenses, eating out expenses, or shopping.  Don’t be afraid to take an honest look at your spending habits and see if a change can and should be made.

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Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here. 

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HOPE for a Debt-Free Life (Part 1)

HOPE for a Debt-Free Life!Part 1 By Michelle Black

Does the mere mention of “debt” make your blood pressure spike a little? Do you begin to mentally kick yourself when you think about the amount you owe to creditors on a monthly basis? Is the stress of having more bills than money causing you to be unhappy or, even worse, causing tension within your entire family?

If you answered yes to any of the questions above then I am very excited to be sharing some great debt-payoff-tips with you over the next few weeks. The good news I would like to begin with is that, no matter what your current debt situation looks like, there is a way to turn it around. At the HOPE Program one of our favorite phrases is “There’s no such thing as a HOPEless situation!” There is so much truth in that powerful statement. If you could just take that single statement to heart and know that, with a little hard work and a solid plan, you can turn your financial and credit situation around, it would offer you a tremendous amount of stress relief!

Are you ready to hear some more? Then let’s get started with tip #1:

Track Your Spending.

My next tip is going to involve setting up a workable budget for your household. However, before a workable budget can be properly established you must have a clear idea of where your money is going currently. The easiest way I have found to track your spending is to carry a 3X5 card in your purse or wallet for a period of 4 weeks. Every time you spend any money (cash, charge, or check) be sure to write down the location of the purchase and the amount of the purchase on your 3X5 card. Remember to spend normally during this 4 week period. You will want an accurate picture of your spending habits when you get ready to plan your monthly budget.

Check back soon for my next tip to help you move closer to your debt free lifestyle!

Your Tax Refund Could Equal Healthy Credit If Invested Wisely!

Every year at tax refund time we have many clients wisely choose to  invest part of their tax refund check towards achieving a healthy credit report. Wouldn’t you love for 2012 to be the year when you finally reach the higher credit scores you desire? Wouldn’t it be wonderful if 2012 was the year when you were finally able to stop those pesky collection calls and possibly even become a homeowner? HOPE would love the opportunity to help you reach your goals! You can join the ranks of the 85+ HOPE graduates who have completed the program with credit scores healthy enough to purchase a home in just the last 4 months! Call or email us today to schedule your own personal, no obligation credit analysis with one of our credit experts to see if the HOPE Program is right for you. We can’t wait to hear from you soon!

Do I Have Too Many Credit Cards?

Credit Cards - What Is the "Magic" Number? By Michelle Black

Have you been thumbing through your stack of credit cards lately and wondered, "do I have too many?"  This is one of the most common credit questions I receive, so I thought I would share a little bit of insight into the matter.

The answer to the "how many credit cards should I have?" question is not necessarily the same for every person. As a general rule of thumb, it is advisable to have 3-6 open credit cards on your credit report. So, I can very easily advise that if you have less than 3 credit cards, you need more.  That being said, if you have more than 6 credit cards open right now I am NOT advising that you immediately close any accounts.  It is very important to have some professional guidance when and if you decide to close existing credit card accounts.  Closing the wrong account can potentially cause your scores to drop significantly.

If you already have 3 or more open credit card accounts is much more important to focus on your credit card balances rather than the actual number of credit card accounts you have.  Did you know that if you have a credit card with a balance that is over 50% of your credit limit then your credit scores will be lowered even if you are paying your bill on time every month?!?! This means that if you have a credit card with a $500 limit and you charge more than $250 on the card then your credit scores are affected negatively.  Your best bet is to keep all of your credit cards paid off to a zero balance.  (HOPE members have access to our "Snow Ball Effect" debt pay off plan to help begin eliminating credit card balances during their membership.)  By keeping your credit card balances at zero you also get to avoid paying those pesky interest fees and, therefore, save yourself some money!

Another fact about your credit card accounts that you should be aware of is how extremely important it is to make sure that your credit card is paid on time every single month.  Since 35% of our credit score is determined by our payment history it is easy to see how one single late payment can cause a huge drop in our scores.  In fact, I have seen a credit score drop as much as 100 points due to a single late payment on a credit card account!  Keeping your credit card balances at zero gives you further insurance against late payments as well.

We at HOPE would like to thank those of you who participated in our Facebook credit poll last week which asked the question "How many credit cards should I have open?" If you are not already a fan of our HOPE Facebook page we want to invite you to follow us on Facebook and/or Twitter for access to HOPE's latest credit tips, special offers, and giveaways! Congratulations to Jill Lowe who won our credit poll contest last week and will be receiving a free professional credit analysis with a HOPE credit specialist!

If you have questions or need credit related advice, please feel free to give us a call at 704-499-9696.  Our friendly staff is waiting to hear from you and will be happy to help.