Everyone needs a financial safety net. To develop one, you must begin by having responsible
money management habits. Acatastrophic event or the accumulation of massive credit card
debt can wreck even the best of households. By establishing budgets and engaging in reg-ular
planning, you can insure against such disasters.
Here’s how to get and stay on track:
Allocate time to plan your financial future
Time is the biggest obstacle to plotting a budget. In order to best keep track of your finances,
take a few hours each week to review your expenses, credit standing, and/or tax situation. Also,
use the time to figure out long-term issues such as how your decisions will affect your spouse,
kids, and aging parents.
Create an annual household budget
Plan various categories of spending—food, clothing, shelter, vacation—year-round. To plot your
budget, figure out how much you spent on goods and services the previous year. Make sure that
you identify which expenses will be fixed (bills that are consistent or recurring) and those that
are variable (items that are subject to change or onetime events). Update your annual budget on
a monthly basis.
Set up a monthly cash flow statement
Develop a worksheet that helps you track how you are spending money each month. While your
annual and monthly budgets give you a record of anticipated income and planned expenses, the
cash flow statement keeps you abreast of how much money you have at regular intervals, usually
at the beginning or end of the month (see BE Cash Flow Monitor).
Manage your credit
Keep your debt under control. You can do that by paying off your credit cards each month and,
if you need them for trips, stick to one or two. If you already have mounting bills, start paying
as much as possible so that you can wipe out the debt as soon as possible. Prioritize by paying
off credit cards with the highest rate of interest first.
Check on your credit regularly
Since lenders can easily obtain your records when you’re applying for credit, knowing firsthand
what information agencies have collected on you can save you a lot of time and headaches later.
You don’t have to wait, for instance, until after you have been turned down for an auto loan or
a mortgage to find out discrepancies. This is easy and relatively inexpensive to do.
Keep good tax records
There are several things that you can do to maximize the ease and benefits of the tax-planning
process. The most important: keep all your receipts and pertinent documentation. Bring all your
paperwork to your tax specialist rather than in piecemeal fashion.
To Engage In Sound Budget, Credit, and Tax
PRINCIPLE NO. 4
16
FAIR CREDIT REPORTING ACT
Consumers are permitted to see their own credit files. If credit is denied because of information in the
report, the consumer must be informed by the lender. Consumers have 30 days to examine reports,
correct errors, and send reports to all creditors who received the reports in the past six months.
Information on credit reports remain on file for a given time period:
1. Suits and judgments against a consumer: 7 years
2. Bankruptcy: 14 years
3. Collection accounts, arrests, and other negative information: 7 years.
E
Declaration of Financial Empowerment
steps

calculations
B.E. Cash
Flow Monitor
INCOME
Take-home pay
Bonuses
Self-employment income
Net income from rental properties
Interest
Dividends
Other (specify)
TOTAL INCOME
EXPENSES
Mortgage or rent
Property taxes
Income and Social Security taxes
not withheld by employer
Alimony, child support
Installment and credit card payments
Insurance:
Auto
Homeowner’s
Life
Health and other
Food
Utilities
Furnishings and home improvements
Transportation (gas, repairs, commuting)
Day care
Pocket money
Clothing and personal care
Medical and dental bills
(not covered by insurance)
Educational expenses
Entertainment, recreation, vacations, gifts
Contributions
Miscellaneous
TOTAL EXPENSES
SURPLUS or DEFICIT
(income minus outgo)
$___________
___________
___________
___________
___________
___________
___________
$___________
$___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
___________
$___________
$___________
resources
Websites:
www.myvesta.org
www.nfcc.org (National Foundation for
Credit Counseling)
www.turbotax.com
www.irs.ustreas.gov
Organizations:
Equifax 800-685-1111
Experian 888-397-3742
Trans Union 800-888-4213
Books:
7 Money Mantras for a Richer Life: How to Live Well
with the Money You Have by Michelle Singletary
Girl, Get Your Money Straight!: A Sister’s Guide to
Healing Your Bank Account and Finding Your
Dream in 7 Simple Steps by Glinda Bridgforth
How to Pay Zero Taxes: Your Guide to Every Tax
Break the IRS Allows by Jeff A. Schnepper
Ernst & Young Tax Saver’s Guide
by Ernst & Young L.L.C., Margaret Milner Richardson
& Peter W. Bernstein
Management Practices
17
PRINCIPLE no.4