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Organizing personal finances worth investment of time and effort, experts say

Order from chaos?

January is national “Get-Organized Month,” and the start of a new year is a great time to get your financial house in order, says Chris Burford, program director for the Consumer Credit Counseling Service of Jackson (CCCS), a non-profit group that provides financial counseling help.

Getting organized can save time down the road. It can also save money and reduce stress.

“Being organized about your finances can have a positive impact on many areas of your life,” Burford said. “The task of getting organized can be fairly simple, and can reap huge rewards. By taking the first step to get organized, you’re well on the way to building financial freedom and reducing stress. If you feel like you need help, contact a reputable non-profit credit counseling agency. Experts can assist you in getting your financial life on track.”

There is no one “right way” to approach organizing finances. Computer programs are popular these days. A computer calendar can remind you when it is time to pay bills. And by inputting expenses into a spreadsheet application, totals in different categories are automatically tallied. This is particularly useful for tax records because much of the work is done by the time you get ready to file income tax returns.

There are many products available for managing finances.
“With so many products available, the biggest challenge may be deciding which system is right for you,” Burford said. “Each person’s style dictates their organizational approach. For instance, some people work really well with folders in filing cabinets; others prefer using hanging files on walls so they can see their files. CCCS offers fool-proof tips for organizing finances. They require an initial investment of time and an ongoing commitment, but the pay-off will be worth it.”

In these days when identity theft is one of the fastest-growing crimes, it is also a good idea to request a free copy of your credit report from each of the three bureaus each year. You can set up a regular schedule to get reports by visiting the Web site www.annualcreditreport.com. You can also receive your free report by calling (877) 322-8228, or by mailing a request form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

“Carefully review your credit report and promptly address inaccuracies in writing,” Burford said. “You will want to contact each of the reporting agencies if you find errors on your report. (Equifax — 800-685-1111; Experian — 888-397-3742; TransUnion — 800-888-4213). By regularly getting reports, you can keep tabs on your credit standing, address questions and protect yourself from credit fraud or identity theft.”

In addition to protecting yourself from identity theft, monitoring credit reports regularly can catch any errors in reporting and help you keep a handle on your total financial picture.

Making cuts

Simplifying your finances by cutting down on the number of bills is another way to do a better job organizing finances. But while cutting down on the number of credit cards can make it easier to keep track of spending, make sure you know how canceling credit cards might impact your credit score.

“There is some strategy to figuring out how to simplify,” says Dr. Bobbie Shaffett, a family resource management specialist with the Mississippi State University (MSU) Extension Service, Starkville. “Sometimes people will cancel credit cards to simplify their finances. If you are going to do that, cancel the newest ones. If you cancel the credit cards you have had the longest, it could make your credit score go down. People decide: ‘I’m going to get rid of all my credit cards.’ Then it is harder for them to get credit.”

While having separate store credit cards can make it harder to keep track of total spending, Shaffett says using the store cards when there are special discounts makes sense. And it doesn’t hurt to have separate store cards as long as you don’t charge up beyond your ability to pay. Credit scoring agencies like to see consumers who have shown responsibility managing a broad range of types of credit such as a home mortgage, a car note, credit cards and store credit cards.

Start with the basics

When considering financial organization, one of the most basic things to know is how much income you have and what you are spending each month.

“Many Americans are bankrupt,” she said. “They just don’t know it. When you find out you are spending more than you make, it is sad news. But at least you know. It is like if you have a heart blockage. At least now you can get it corrected. It is better to know and then start taking some action. A financial checkup is sort of like a treadmill. It is no fun. You don’t want to do it. But if you don’t do it, you could have hidden problems.”

It can be as hard as keeping a diet log for every calorie of food consumed. But by writing down every cent you spend, you can decide where to economize or how to budget. For example, instead of just going to the grocery store whenever you feel like it, have a certain budget for groceries. When that is spent, cook some food you already have on hand in the pantry rather than going out to purchase more.

Shaffett said it can also be fun to have a “spend nothing” week. While it may not be something you want to do that often, it can be interesting to try to go a week without spending anything.

This is the time of year the Extension Service recommends people do a financial checkup. In addition to keeping tabs on income versus outgo, Shaffett recommends making sure that no more than 20% of your income is going toward credit debt (not including interest payments on the mortgage).

“That is a stop sign,” she said. “If you have 20% of your income going in credit payments, you could be heading for a crash. If you went to the bank and applied for a loan, the bank might tell you that you don’t have the right debt-to-income ratio to qualify for a loan.”

It is also important to compare spending to savings. Shaffett said you should have at least one and preferably three or more month’s worth of expenses in a rainy day savings account.

“Then you can weather most storms like a short time of unemployment or an illness,” she said. “People who don’t have at least $1,000 in an emergency savings account don’t sleep well at night. One car repair could be a disaster for you. Another thing is what people call an unexpected expense. When a bald tire blows out, that is not unexpected.

That is neglect. If your roof, air conditioner, washing machine or dishwasher is 10 years old, you can expect they will need to be replaced. If you have some savings and have anticipated the expenses, you can save up money and pay cash.”

Sometimes people ask whether they should pay off debt or start a savings account. Shaffett recommends coming up with a strategy to save while also working to reduce debt.

The MSU Extension Service has financial health publications and a short video available on the www.MSUcares.com Web site as well as through local County Extension Offices. Look for the Financial Fitness Checklist, information sheet No. 1762; the Financial Fitness booklet with worksheets, publication No. 2398; or the seven-minute Financial Fitness podcast.

“Your MSU Family Resource Management Extension area agent can also provide Financial Fitness workshops or presentations for groups and materials for individuals to complete basic money management exercises,” Shaffett said. “She may also be able to refer you to MSU Money Mentor volunteers in your area who can provide one-on-one encouragement and support to those who wish to shape up their spending. For more information, call your local MSU Extension Service County Office.”

The CCCS also provides credit counseling. Call CCCS at (601) 969-6431 or visit the Web site www.cccsinc.org.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.


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