Financial Planning When Money Is Tighter Than Tight


There is a lot of solid financial planning advice out there. However, none of it really applies to lower middle class families or to low-income families. Since a much larger percentage of this country is made up of low income to low middle income households, advice on finances needs to be restructured to suit single-parent households and low-incoome two-parent households. Here is some better financial planning advice for these very specific families and individuals.

Pay Down Your Debt As Fast as You Can

Paying down your debt may be easier said than done, to be sure. Yet, the less debt you carry, the fewer bills you have to worry about every month. Solid financial advice for anyone carrying any sort of debt is to skip saving money until your debt load is so low that the money you spend on paying it off still leaves you with a little left over. This also applies to any mortgage debt you carry. If you cannot afford one more debt and/or one more monthly bill, do not attempt to be saving money in an account. Apply the money you have toward paying off your mortgage, car and education loans and credit card debt first.

Do Not Worry about Kids' College Funds

When you cannot save money because of your current debt load and you do not have two nickels to rub together after you bills are paid, do not be concerned with college for your two-year-old. Sure, college tuition is constantly rising, but you are attempting to plan your children's educational future without knowing well in advance if your children want to go to college. Look at it another way: If you are trying to save for college for your kids and that is at least a decade or more down the road and you can barely feed your kids now, skip saving for college so that your kids are healthy and well-fed. You will find a way if your kids want to go to college. They may surprise you and get tons of scholarships!

Pay Down Your Highest Interest Rate Debts FIRST

Another solid bit of advice for low income and low middle income households is that you should pay down your debts with the highest interest rate first. For example, if you have three credit cards carrying a balance at 18%, 22% and 24% interest, a mortgage at 5.6%, and school loans for your own education at 8%, you should be paying off the credit cards first. Their particularly high interest rate means that your minimum monthly balance never pays off what you owe.

Continue to make payments on your mortgage as planned and on your school loans as you can, otherwise defer the school loans until you are able to get to those. The interest rate on the school loans will collect, but not at the exorbitant rate of the credit cards. Your mortgage probably has a 30-year term on it, with the lowest interest of these, making the interest much more manageable.

Pay attention to your financial planning for both now and in the future.


10 April 2017

Learning More About Finances

After we bought a house, I started realizing that we were going to need to learn to save a little money. We had become pretty laid back about spending because we were so accustomed to making so much extra each month, but with a mortgage, we found ourselves running out of money on a regular basis. I decided to get real about our finances, which is why I set up a financial plan to stick with year round. You wouldn't believe how much of a difference that simple plan made. We went from scraping together money to head to the grocery store to sticking with a rock solid budget.