The first part of organizing personal finance is to avoid surprises. One of the worst things about opening the mail in January is the discovery that the credit card bills are a lot higher than we expected.
This sort of mail shock can be avoided by keeping a running list of any charges as they are made. This serves two purposes: first, you will know what is coming and second, you will spend less as you watch the total on the list grow.
The second part of no surprises is planning for the big ticket items that come up every year such as property taxes, insurance and vacation. These are foreseeable expenses, and with planning you can be ready when they arrive.
The last part of no surprises is to set up a savings account for unforeseen expenses. Unfortunately, every year there is something that will come up as an unexpected expense. It is far better to have money set aside so that you won’t have to scramble to pay the bills.
One of the side effects of the current downturn is that credit lines for home equity loans and credit cards are being unexpectedly reduced for many consumers. In some cases you may not know that your line has been reduced until you try to use it. This can be an ugly situation if you were counting on borrowing to pay a bill.
In order to avoid this sort of surprise, don’t give your lenders any reason to reduce your line. Problems that can trigger reductions are late payments and too many applications for new credit. Unfortunately, this can create a difficult situation since you may want to have extra credit available, but applying for extra credit can cause you to lose the credit that you already have.
Before you get caught in this situation, stop by your local bank and ask for a financial review. This is free and won’t affect your credit.