How to Make a Better Budget

Budgeting Together

Having a budget is essential in order to better manage your money and reach your financial goals, such as paying off debt or saving to buy a home. A budget can help you set spending limits and feel more in control of your money. So, we’ll be going over how to create your own personal budget.

Budgeting First Step: Track Your Income and Expenses

The first step of budgeting is finding out your net monthly income. To calculate how much money you will be taking home, you will need to deduct taxes, insurance costs, and business expenses from your monthly salary. This will leave you with an exact amount that you will be receiving at the end of each month, known as your net monthly income.

No matter how much you earn, it is still possible to end up with no money if you don’t know how to spend it properly. So, the next step is the figure out how to allocate that amount by tracking your expenses and seeing exactly where your money is going. Start by dividing your expenses into two categories, fixed and variable expenses. Fixed expenses are recurring monthly payments such as rent and phone bills which typically remain the same each month. Variable expenses tend to vary based on consumption, such as groceries, gas, entertainment, and eating out.

Step 2: Find Savings in Your Budget (Yes, You Can)

To determine areas where you can save more money, review some of your credit card and bank statements from the past few months. If your net income is greater than your total expenses, then you can start putting aside the extra money for your retirement or emergency fund. However, if your expenses exceed your net income, then you must look for ways to cut down on expenses as soon as possible. This involves going over your variable expenses and identifying unnecessary expenses such as subscriptions that you no longer need or eating out too often. Variable expenses are typically easier to cut down on in order to stick to a strict budget., but you may even need to look to adjust your fixed expenses in case you are still going over your budget.

Step 3: Make Plans for Savings and Paying Down Debt

While budgeting differs depending on each person’s situation, the 50/30/20 budget is a popular choice that works in most circumstances. Under this strategy, your net income will be split 50% for needs, 30% for wants, and 20% for savings or paying off debt. It is absolutely critical that you commit to paying down debt and then setting aside savings. The entire point of budgeting is to help you generate “future-forward” momentum in your financial life. The only way to do that is to free yourself from debt that may be choking your ability to save for the future. The next step? Save for the future.

This is why budgeting is key. Looking at the reality of the numbers that shape your life allows you to get clear about what is happening in your financial life. Think about it this way: what are your big life goals? Retiring? Traveling? Being financially secure and independent? You can’t do any of those things if you find yourself having to shovel part of your money each month into a credit-card debt hole. So make a plan to get out of that hole, today. (Consider debt consolidation loans as an easy option: you can pay off all your cards and pay a single monthly bill that charges you less interest than your cards.)

Budgeting Is Never Actually “Done” — And That’s Good

Also, your initial budget isn’t set in stone, and it must be adjusted regularly as your financial situation changes. When you get out of debt, you revise your budget to set aside an emergency fund. When the emergency fund is complete — 3 to 6 months’ living expenses — then you can start saving for the good stuff: retirement, investing, more. Keep making plans and keep revising your budget — and build yourself the stable financial future you deserve.

With a Recession on the Horizon, the Time to Pay Down Debt is Now

The time to pay down debt is now

The nearly double-digit inflation that ripped through the American economy in spring and summer of 2022 left most financial experts asking a key question: Is a recession next? That’s because the Fed (aka Federal Reserve System, or America’s central bank), has hiked interest rates three times since the beginning of the year in response to inflation and in an attempt to slow down the economy. And financial experts are predicting another rate hike this month

Paying down debt is always a number-one piece of advice to build financial stability, but when the economy is unstable and a recession is possible, it becomes critical to dump debt. 

Why Pay Down Debt to Prepare for a Recession? 

Recessions are defined by slow economic growth and greater uncertainty. This slowdown shows up in several ways on a macro level, like decreased GDP (Gross Domestic Product, i.e. how much America is producing and selling). But for people (as opposed to economies), recession usually leads to 3 telltale things: 

  • Cost of living goes up
  • Wages are cut and layoffs become more common
  • A decrease in consumer spending caused by (1) and (2) above, which further deepens the economic slowdown

“Recessions cause consumers to almost instinctively protect their financial position, by spending less and looking for ways to protect their income” says Jessica Owens, financial advisor at Funding Hawk. “Both are smart moves. But if you are carrying significant credit card debt, now is the time to make aggressive moves to resolve that debt.”

Owens details the reasons:

You want to free up your credit as protection

A less-secure job market means you need to put yourself in a position to be resilient, should you experience job loss or wage cuts. And part of that resilience comes from having a solid emergency fund in place or ensuring there’s wiggle room on your credit cards.

You want to avoid increasing interest rates

With interest rates likely going to continue to rise, carrying a lot of credit card debt is likely to get even more expensive than it already is. An additional percentage point of two added to already sky-high interest rates can push your balances into the danger zone, and possibly max you out. 

This is why debt consolidation loans are a good option at this moment, before a recession strikes. If you have sufficient household income, you can qualify for a loan that is likely a much lower rate than your high-interest credit cards. But you’ll want to roll all your credit card debt into a consolidation loan soon. After a recession, interest rates are likely to continue to climb.

You may not be able to access loans as economy contracts

Once the economy is in a full-blown recession, capital tends to freeze and stay in place and accessing new debt – i.e new loans or new credit cards — becomes much more difficult and burdensome. In other words, lenders become more cautious in the same way consumers become more cautious. 

Debt Consolidation Loans are a Good Option —If You Act Now

With all the above looming economic changes in the wings, now is the time to make a definitive plan to manage any credit card debt you are carrying. And transferring that debt to a debt consolidation loan is a relatively straightforward manner for doing just that if you don’t have the means to pay debt down right now. 

“Debt consolidation loans allow you to basically pay off all of your high-interest credit card debt with a single loan,” says Owens from Funding Hawk, which specializes in debt consolidation loans. “And many people qualify for a lower interest rate than what they are currently paying,” she says.

Both your monthly income and your credit rating will both play a role in determining what kind of interest rate you can get for a debt consolidation loan. And your total debt load also plays a part. You are able to do some online research to see what your new monthly payments might be with a debt consolidation loan, using online calculators

But the surest way to find out if a debt consolidation loan is right for you is to speak with a consultant. The consultant will ask you a few questions and be able to provide an analysis of your situation right away. The most important step is to take the first step, before a recession further dampens consumers’ ability to manage their finances.

Clay Advisors Reviews and Debt Consolidation

read clay advisors reviews

Credit cards are a part of daily life: we use them as an easy way to buy groceries, gas, and other regular household items, and plan to pay the bill in full every month. But life happens: a medical emergency, a car breaks down, you need a new air conditioner, one thing after another. And suddenly you don’t want to even open your credit card bills. Now you’re wondering: just how much debt is too much? And maybe you are reading Clay Advisors reviews to decide if they can help you. Let’s start with the first question:

How Much Credit Card Debt Is Too Much?

There are a few simple rules of thumb that let you know if you are carrying too much credit card debt. Ask yourself the following questions:

  • Are you paying only minimum payments on your credit cards each month?
  • Do you find yourself always worrying a little bit about the debt you have?
  • Is your debt-to-income (DTI) ratio greater than 35% — meaning the percentage of your income that goes to paying existing debts is higher than 35%? To figure out your DTI ratio, take the $$ you spend monthly paying debts, and divide by your monthly gross income (before taxes and benefits, etc.).
  • Do you pay some of your bills late or skip payments because you don’t have enough money to pay them?
  • Is your credit utilization over 30%. Credit utilization refers to the percentage of your available credit you are using, so if you have $10,000 credit, and are carrying balances of $3,000, you are using 30% of your credit.
  • More than half of the credit cards you own are maxed out.
  • You don’t know how much you owe in total.

If you answered yes to even one of these questions, then now is the time for you to make an actionable plan to reduce your burdensome credit card debt. Find your way back to the freedom of a debt-free life.

Make a Plan to Become Debt-Free with Clay Advisors

Feel like you have no idea where to even start with getting a handle on your credit card debt? Then it is a good time to reach out for some kind, patient expert advice from people who know credit card debt and how to get out from under it: the financial consultants at Clay Advisors. They can talk to you about debt consolidation and explain how rolling all your debts into a single payment can make it easier to attack your problem.

Can I Trust Clay Advisors?

If you have been to the Clay Advisors website, maybe you have read the reviews of customers who were in circumstances a bit like yours. Clay Advisors reviews are helpful, but sometimes other people’s words aren’t enough. Here’s a different perspective: let’s talk about what exactly Clay Advisors will do for you and decide if those are services that would help you.

  • Assess Your Financial Situation. Clay Advisors can help you assess your situation by walking you through whether you are carrying “too much debt.” A typical evaluation will assess your debt-to-income ratio and your total monthly payments for the debt you are carrying. After evaluating your debt, they can offer real solutions to put you on the path to financial freedom. 
  • Explain How Debt Consolidation Works. Clay Advisors is one of the best debt consolidation companies out there. A financial consultant can explain to you in one simple call how consolidating debt balances into a single payment can help put you on the road to paying off your obligations in full.
  • Make the Call With No Risk to Your Credit Score. Speaking to an advisor at Clay does not impact your credit score, so the call is a free, no-risk step you can take to try to get control of your financial life.
  • What is Debt Consolidation?

Debt consolidation means rolling all your collective debt balances into a single debt — usually a loan, but sometimes a debt settlement program — so that you are paying a single bill instead of many bills. Taking out a debt consolidation loan won’t reduce your overall balance right away, but sometimes it’s possible to make that single monthly payment less than what you are laying out right now, so you can get a little breathing room. 

What Are Pros and Cons of Debt Consolidation? 

Whether a debt consolidation loan is for you depends on your specific financial and personal circumstances. That’s why it’s important to talk to a consultant who can help you understand your position. Here are the general pros and cons of a debt consolidation loan. The consultants at Clay Advisors are at the ready to talk to you and learn more about what you need. 

Pros

  • You can reduce multiple payments down to a single payment
  • You can potentially lower your interest rate
  • Clear a path to debt reduction and elimination
  • Can help improve your credit score after a time

Cons

  • You may not qualify for the lowest rates 
  • Extended loan terms may cost more in the long run
  • There are sometimes origination fees for the loan

How Can Clay Advisors Help Me?

Carrying a significant amount of debt is the number-one financial problem any household needs to address. Having too much debt makes it difficult to borrow money, penalizes you with high interest rates and erodes your credit.

And so making a clear plan to resolve your debt is a the key first step to financial freedom. And will remove a serious blockade to potential future wealth. Learn more about debt consolidation and if it’s right for you, by filling out the Clay Advisors application to see how they can help you today.

Guide to Money Management

Being able to manage your money responsibly is a skill that is simple to learn but difficult to implement in our everyday lives. That being said, here are some essential steps to take when looking to improve your money management.

Create a realistic budget

One of the first steps to money management is setting a realistic budget that you can stick to. You’ll need to make a list of all your monthly expenses such as rent, transportation costs, and living expenses. This will help you see exactly where your money is going and highlight areas where you can make changes to your spending habits. It is also a good idea to refer to your budget frequently to make sure that you won’t exceed it by the end of the month.

Limit recurring charges

If you are currently subscribed to services that you barely use, then you are missing out on potential savings every month. It can be very easy to forget about these payments as they are charged to your account automatically by default. With a budget in place, you can easily identify which services are charging you at the end of each month. After tracking your expenses, make sure to cancel all unnecessary recurring charges in order to better manage your money.

Build an emergency fund

Building an emergency fund is an essential step in money management that is often overlooked. Life is full of uncertainties so it is a must to have some extra money saved up for when things go bad. The easiest way to build an emergency fund is to set up automatic contributions that are deposited into a savings account every month. The goal is to separate this emergency money from your checking account in order to reduce the temptation of spending instead of saving it. The minimum amount that you should have saved up is three months’ worth of expenses, but having, even more, is always better. Even if you aren’t able to add much to your emergency fund, a small amount can still save you from unexpected emergencies.

Pay off high-interest debt

High-interest debt can be a huge obstacle when trying to achieve financial freedom and manage your money. Paying off high-rate debt like one of unpaid credit card balance is a must. In order to save the most money, you should make the minimum payments on all debt while prioritizing paying off the card charging the highest interest rate. Then you can start gradually moving on to paying off cards with lower rates. While this method isn’t the most motivating, it will always result in paying less interest over time.

Top 4 Investing Strategies

There are plenty of different ways to invest your money nowadays, but strategies may be more advisable than others for maximizing your returns. So here are the top four investing strategies that you should be aware of.

Diversifying with Index Funds

Index funds attempt to reduce the risks of individual stocks by allowing investors to own a well-diversified list of stocks. Popular choices include S&P 500 and the Nasdaq Composite which feature companies from almost every industry. Index funds can yield great results with reduced risk thanks to your diversified portfolio. Also, they are simple as you won’t need to research individual companies and corporations. On average, S&P 500 has returned around 10 percent annually which is excellent in the long run. Furthermore, these funds can be purchased with incredibly low expense ratios which makes them even more appealing.

Dollar-cost averaging

Dollar-cost averaging (DCA) is an investment strategy used to reduce risk when buying your investments. Instead of purchasing your assets at all at once at one price, DCA lets you make several small purchases.  This decreases the risk that you are purchasing the asset at a higher price than necessary. This is contrary to the strategy of timing the market where investors attempt to purchase assets at the lowest price possible. Of course, correctly timing the market will yield the best results, however, it is practically impossible to predict short-term changes in prices. Therefore, dollar-cost averaging can help minimize downside risk by dividing large investments into smaller equally-spaced payments.

Cryptocurrency

Cryptocurrency is a kind of digital electronic-only currency that is intended to act as a medium of exchange. It’s become extremely popular recently thanks to the possibility of getting incredibly high returns on your investment. In addition, Cryptocurrencies are usually liquid assets that can be bought and sold at virtually any time. However, this type of investment is also very risky since cryptocurrencies are highly volatile. This means you could end up losing all your money by making a bad investment.

Income Investing

Income investing is an investment strategy that focuses on building a that regularly returns cash payouts, usually on a quarterly basis. This can help investors create a steady income stream in the form of dividends. The cash returns can be used for anything or reinvested to purchase more stocks. Dividends can either increase or decrease depending on how well the company is doing financially. Just like regular stocks, income stocks can still drop in value and lead to losses which is the main risk in this type of investment.

Debt-To-Income Ratio: What Is It and Why Is It Important?

Debt-To-Income Ratio What Is It and Why Is It Important

A recent study found that only approximately 29% of American adults are considered financially healthy. A big part of improving financial health is paying off debt. Some people seem to think that the best way to obtain the little extras they need in life is by taking out loans or using credit cards. Debt-to-income ratio is vital to your financial standing.

While using credit or loans will help you buy something faster, it can also affect your financial health. When applying for any loan, one of the main things a lender will consider is your ratio. Below is information about this term and the importance of a low debt-to-income ratio. 

What is Debt-To-Income Ratio?

The term debt-to-income ratio is used to compare a person’s monthly gross income and their monthly debt expenses. If you want to calculate your own ratio, you will need a few basic pieces of information. 

Making a list of your monthly personal loan, car loan and credit card payments is the first step in this calculation process. Once you have the total amount of payments you are making monthly, you need to figure out your monthly gross income. 

You will then divide the debt payments you have by your income and that percentage is your debt-to-income ratio. Be sure you calculate your monthly income before taxes to ensure you get an accurate ratio. 

The Importance of a Good Debt-To-Income Ratio

When applying for a loan, the lender you use will consider many factors before approving your request. One of the main things a lender wants to know is how much debt you currently have. If your debt-to-income ratio is high, it will be difficult to get a loan for a significant amount of money approved. 

Calculating your ratio before applying for a loan can help you greatly. Most lenders will approve loans for applicants with a ratio of 36% or below. If your current debt-to-income ratio is higher than this, you may need to address this issue before applying for a loan. Avoid making money mistakes by applying with low ratio.

Great Tips For Lowering Your Debt-To-Income Ratio

Is your current ratio high? If so, it is time to do something about it. One of the first things you can do to lower this ratio is to pay off your outstanding debt. Most American consumers have around $3,000 worth of credit card debt

Regardless of how much debt you have, it is crucial to make a comprehensive plan to pay it off quickly. This is a good way to reach financial stability. You also need to avoid taking on any new debt until you get your current debt-to-income ratio down. By recalculating your ratio monthly, you can estimate how much progress you are making. 

Education is Power

The more you know about what lenders look for when inspecting a loan application, the easier it will be to get approved. By following these tips, you can lower your debt-to-income ration and get the funding you need with ease.

3 Outdoor Activities for a Great Labor Day Weekend

3 Outdoor Activities for a Great Labor Day Weekend

Most people view Labor Day weekend as the official end of summer. After this holiday, most children will be back in school. If you are trying to have a great time with your family this Labor Day weekend, now is the time to start planning activities. 

Over 60% of Americans claim they plan on traveling this Labor Day. Whether you plan to travel or stay home to celebrate this holiday without spending much, consider participating in the outdoor activities for Labor Day weekend below. 

1. Explore Nature on a Family Hike

During the summer months, the weather outside is absolutely beautiful. This means it is a great time to take your family on an excursion into nature. One of the best ways to give your children a sense of how enjoyable the outdoors can be this Labor Day is by taking them on a hike. 

Luckily, there are around 6,000 state parks in the United States. These parks have a combined total of 14 million acres of land. Many of these parks have great hiking trails that are perfect for individuals and families. 

If you plan to go hiking with your family this holiday weekend, be sure to check the weather in the area you will be traveling to. The heat during this time of year can be brutal. If the temperatures are going to be hot where you are hiking, be sure to bring along plenty of water and sunscreen for the family. 

2. Biking Can Be Lots of Fun

Getting your children off of their electronics and into nature can be difficult. As you start to plan outdoor activities for Labor Day weekend, be sure to poll the family. With the results from this poll, you can start to narrow down the list of outdoor activities at your disposal. 

Taking a family bike ride can be a lot of fun. Most children love riding their bikes. If you plan to travel to an area to take a bike ride, you need to make sure you can safely transport them in your vehicle. 

If some of your children cannot ride a bike due to their age, investing in a rear-mounted seat for them is crucial. With these rear-mounted seats, your baby or toddler will be able to enjoy the bike ride with the rest of the family. This activity is fun without making a money mistake.

3. Plan a Beach Day

A day at the beach is perhaps one of the most popular outdoor activities for Labor Day weekend. If you live relatively close to a beach, now is the time to start booking your accommodations.

The best way to make your day at the beach enjoyable is by planning ahead. Getting to the beach early will help to ensure you and your family get a great spot right on the water. You also need to make sure you have plenty of sunscreen, sandwiches and drinks to go around. 

Making Memories with Your Family 

Now that you know more about great outdoor activities for Labor Day weekend, it is time to start planning. By planning your trip well in advance, you can focus on making memories with your family yet maintaining financial stability.