We hope you find this helpful.

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2 Since we began helping families in economic distress in 2009, we ve heard the same refrain over and over: I just don t know how to budget my money during these difficult financial times! So we ve asked some financial whizzes in town for their suggestions, and offer this introduction as a guide. We hope you find this helpful. 2

3 When creating a budget (just a word to describe how much we should spend and save each month), we focus on cash flow which is how your money flows in and out each month. 3

4 Income = How much you earn each month Expenses = How much you spend each month Cash Flow = Income minus Expenses If your Cash Flow is positive, you are saving money and increasing your net worth. If your Cash Flow is negative, you are going into debt to pay your monthly expenses. 4

5 Example of a Monthly Cash Flow Statement Income: Salary $ 2400 Expenses: Rent $ 1250 Groceries $ 400 Phone Bill $ 100 Movies, Restaurants $ 150 Cable $ 50 Car Payment $ 300 Utilities $ $ 2350 Cash Flow for the month is therefore ($ $2350=) $50. Good news! The income is greater than the expenses. This shows a positive cash flow. Can an even greater positive cash flow be created?... 5

6 Remember that $50 in positive monthly cash flow? Let s see if we turn that into $150 in positive monthly cash flow. If we reduce our expenses for movies and restaurants by $100 each month Income: Salary $ 2400 Expenses: Rent $ 1250 Groceries $ 400 Phone Bill $ 100 Movies, Restaurants $ 50 Cable $ 50 Car Payment $ 300 Utilities $ $ 2250 Cash Flow for the month is ($ $2250=) $ This will put $1,800 per year in a new savings account! 6

7 Look carefully at YOUR bills and statements. Some income entries you may need to include on your cash flow statement are salary, interest, dividends, etc. Some expense entries you may need to include when creating your cash flow are rent or mortgage, heat, electricity, gas/heating oil, cellular phone/landline, cable, car payment, gas, groceries, transportation costs (gas, parking), healthcare costs, repairs, clothing, childcare, health and car insurance. Look carefully at your cash flow statement. Then determine your budget - where you can cut spending and start saving. 7

8 Reduce expenses. Increase income. An additional job may be a necessity. Open a savings account you never touch. By separating your savings account from your checking account you avoid the temptation to dip into your savings. Start Small. o o Look at your excess monthly cash flow and determine a reasonable amount that you can save. Remember - several small lifestyle changes can add up to big impact over time. 8

9 Strategies that work. Always Pay On Time o Even if you can only make the minimum payment, it is important to ALWAYS make your payments before they are due. You will avoid any late fees and you will be less likely to receive shutoff notices. Renegotiate Overdue Bills o Many utility companies will reduce the amount you owe if you commit to paying a small amount each month. Consider Suze Orman s suggestions, which follow: 9

10 If you are in credit card trouble, you must cut up all of your credit cards now, with the possible exception of one card for emergencies; do not carry this card in your wallet, however. If you have an unpaid credit card balance and not much saved up in emergency savings, pay only the minimum due on your credit card balance and instead make it your top priority to build as much of an emergency cash fund as you can. Ideally, you want an emergency savings fund that can cover your living expenses for up to eight months. With rising unemployment, having a big emergency cash fund is vital, even if it means curtailing your credit card repayment strategy. It is true that if you pay just the minimum on your credit card there s a chance it may indeed hurt your credit score. But the single most important action to take in this severe recession is to build savings so you and your family will be able to have money to cover your basic necessities if you lose your job. However, if you have an emergency savings fund that can cover your living expenses for up to eight months, you must pay more than the minimum payment on your credit cards every month, as much more as you possibly can. (This is because, if you owe a credit card company $5000 at 18 percent interest and all you do is pay the minimum each month it will take you over 30 years to pay it off.) You must pay off the credit card with the highest interest rate first, and the rest in descending order. Understand everything about how your credit card works--all fees, how the company charges you, all about the so-called grace period, everything. After you pay off one credit card, you must apply the money you have been paying that particular company to paying off another credit card. If you doubt that you can do this yourself, you must get in touch with a wonderful nonprofit agency known as the Consumer Credit Counseling Service; they can be reached by calling They will help you organize and consolidate your debt. You must never let this happen again. After your debts have all been paid off, you are to apply the money you were paying all those months toward creating your future. 10

11 Figure out your cash flow. Make a budget. Then stick to it. Increase your savings. Open a savings account. Deposit as much as you can - every week. Start paying off your debts (the most expensive ones first). Pay by cash whenever possible. Wishing you and your family financial health! 11