Balancing the Books: How to Create an Effective Budget

The word "budget" seems to conjure up feelings of sacrifice or deprivation in many who hear it. When it comes to your business and your personal finances, however, a budget is the cornerstone of successful money management. 

Contrary to popular belief, creating an effective budget is not overly difficult, time-consuming or complicated. 

The following three simple steps can help you are on your way to making a budget that works, while taking control of your business or even personal finances. 

Analysis

The first key step is analyzing your financial situation. You need to know where you are bringing money in and where you are spending it. 

You may find that you are spending in areas of your company that isn’t as necessary. You also may find areas of your business where you could be bringing in more money. Constant analysis of your finances will also help you to innovate and stay competitive within your market. 

A budget is really nothing more than a list of monthly income and monthly expenses. The details, however are quite important. 

When taking stock of your business's financial footing, make sure to include every detail from monthly inventory or labor costs to the styrofoam coffee cups in the office. 

Set up monthly reports

You should be able to view the financial health of your business at any time. Ideally, you should have weekly, monthly, quarterly, and yearly financial reports. 

This way you can see the financial activity of your company at all times. These reports will also help you to analyze your company finances showing you where you can cut spending and where you can be bringing in more money. 

Setting up a monthly balance sheet report and profit & loss statement will allow you to get a quick snapshot if the finances quickly and effectively. This can help in building an effective budget by showing you how your cash flow runs throughout the month. 

For example, if you see that your company regularly needs more inventory during certain months, you can then budget those costs accordingly. 

Stick with it

Budgeting is never fun. In a perfect world, it would be nice to just take your money and spend it on all thing things you need and want to keep ahead of your competition. 

But unfortunately this is not a perfect world and everything has a cost. When you have an effective budget, it will help you understand the risk versus the reward when it comes to spending your company money. 

Creating an effective budget takes time and effort, and may need adjusting along the way. The time spent creating a budget is extremely valuable, and you will want to make sure that once you have a budget in place that you stick to it or make changes as necessary. 

A great budget or plan is rendered worthless if it is not consistently put into action.

Don't know how to make a budget? You needn't worry. There are professionals like Navicor Consulting available to assist you. 

These consultants have but one job: To help you improve the bottom line. Money spent in this regard will find its way back to your business many times over. 

Budgets can be a very powerful tool in the world of business and personal finance. If you do not have an effective budget in place, you should make building one the focus of your business. 

A budget is like the foundation of a new and beautiful home; it must be very solid to support everything else and any weakness in it will stand in the way of achieving full potential.

How to Choose the Right Bank for Taking a Personal Loan

What is a Personal Loan?

Personal Loan is an amount taken from a financial institution against which no security is required. 

This loan amount can be used for various purposes like—marriage, medical emergencies, household expenditures, and even vacations.

The amount you take as a Personal Loan is not monitored by the bank and can be repaid through a fixed installment scheme over a fixed period of time.

How should you Apply for a Personal Loan?

You can apply for a Personal Loan in 4 easy steps:

• Step 1: Go to the bank website and fill the online application form.
• Step 2: Once the bank approves your application, select the loan amount and tenure.
• Step 3: In this step, a bank representative will get in touch with you for collecting the relevant documents. 
• Step 4: Post document verification, the loan amount will get credited to your account within 3-4 days. 

Documents Required for a Personal Loan

The requirements vary from one institution to another. However, the following documents are common to almost all banks and NBFCs:

• Identity proof
• Residence proof
• Bank statements (3 months)
• Salary slip (3 months)
• 2 passport size photographs

How Should you Choose your Bank?

Every bank or NBFC offers various Personal Loan schemes with the aim of attracting more customers. Each has different policies and norms and choosing the right one is anything but easy and usually leads to a lot of confusion.

Here’re a few ways you can bid adieu to that confusion and choose the right lending institution. 

Pre-approved Personal Loan

If you’re already associated with a bank and have a good relationship with them you’ll come across text messages and telemarketers pestering you to take a Personal Loan. 

This is called a pre-approved Personal Loan. In this case, the bank or NBFC has already considered you to be eligible to take a loan; in some cases, you won’t have to even submit any documentation. Pre-approved loans can save you a lot of time. 

Rate of Interest

It’s important you do a lot of research on the interest rates offered by each bank. 

Every bank tries to offer low-interest rates to get your attention but they have almost invisible terms and conditions that will lead to an increase of the interest rate once you have availed the loan. 

So, make sure look for loopholes and read the terms and conditions well before go forward with your application. 

Flexi Personal Loan

Flexi Personal Loan is a very borrower-friendly loan. In the case of flexi Personal Loan you can pre-pay the loan amount with idle funds at no extra cost. 

You save a lot of interest as you only pay for the utilised amount; which means you won’t be charged any interest on the prepaid amount.

Loan Amount

While taking a Personal Loan you might have a set amount which you’ll require to fulfil the task. 

Every bank has a fixed amount they can loan to you based on your eligibility. Do sufficient research to see which bank or NBFC offer the amount of fund, you’re in need of.

Prepayment Charges

While repaying the loan there may be situations when you come into an unexpected windfall or get a bonus at work and want to pay off a part of your loan. 

Make sure to choose a bank or NBFC that doesn’t charge any prepayment penalties. This holds true for foreclosure charges too. 

EMI

Using the online calculator for calculation of Personal Loan EMI that you’ll be paying. This will give you a figure that you need pay off on a monthly basis and you’ll get a clarity on how affordable this loan is.

Multiply the EMI with the tenure and subtract the loan amount. This is the interest that you’ll be paying. Consider all these while making the final choice. 

Processing Fee and Time

The processing fee is the amount charged by banks for processing your loan. This amount is cut from the loan before crediting the sum to your account. 

Banks charge up to 3% as processing free so it’s always better you go for the institution that charges you the least.
Processing time is the time taken to approve and credit your loan. 

Pre-closure Charges

Not many people may know this but you can pay your entire loan before the tenure. You can pay off the entire loan amount anytime before the loan tenure. 

Banks charge an interest on pre-closure that ranges from 2-5% on the outstanding amount. Another thing to keep in mind is to find out if the bank even allows pre-closure; in some cases, the bank may allow this but only after a certain time.

Researching online is the best way to begin your search for the right bank or NBFC. 

Every bank has all the information available on its website, and with proper research, you’ll be able to find the right bank based on your repayment abilities and one offering you affordable interest rates. 

 So, you need know everything about loan before applying that will help you to choose the right one.

Chapter 13 vs. 7: What You Need to Know About Bankruptcy

Are you facing overwhelming medical bills? Have you acquired more debt than your monthly income can cover? 

When you've done all you can to pay your debts and it's not enough, you may decide to consider filing for bankruptcy. To decide whether filing Chapter 7 or Chapter 13 is better for your particular circumstances, compare these pros and cons.

Chapter 7

If you're willing to give up some of your assets in order to satisfy your creditors, Chapter 7 may be your best option. 

Considered the "liquidation bankruptcy," this filing means you'll relinquish certain possessions such as real estate, vehicles, stock, and other personal property. Chapter 7 is also an option even if you have few or no assets to offer.

The court will sell these assets and use the proceeds to satisfy your creditors. 

The creditors must accept the final settlement they receive and discharge your obligation, even if you have few belongings to sell.

Chapter 7 is not intended to wipe you out by taking everything you own. Instead, it provides a clean slate for starting your life over. 

To this purpose, property which is considered necessary for living is exempt from being sold. This usually includes at least one vehicle, some furniture, equipment you need for work, and perhaps even some equity in your home.

As state laws differ on what may be considered exempt, you may want to contact a lawyer from a firm like Demers Gagnier Inc. to assist you in determining whether your income qualifies for this filing and which properties you may be allowed to retain.

Chapter 13

Chapter 13 is for those seeking to protect their home from foreclosure, or who have a business they don't want to be liquidated. 

It's also ideal for those who desire to pay off their debts rather than have them discharged.

This type of filing consolidates your debts into one affordable monthly payment, typically over a five-year period. 

Once the plan is established, you make payments to an independent agent who disburses the funds to your creditors. These payments can also include a system to help you catch up on your mortgage payments over time.

After You File

Neither Chapter 7 nor Chapter 13 discharges student loans, divorce and child support settlements, or your home mortgage. In addition, expect your bankruptcy to remain on your credit report for seven years. 

Despite these drawbacks, the best benefit of a bankruptcy filing is the relief you get from having a chance to start over.

Does It Make Sense to Refinance Your Home in Your 50s?

There may be many advantages to refinancing a home loan. You could get a lower interest rate or even cash out your equity. 

However, if you are 50 or older, does it make sense to refinance your mortgage when retirement may be just around the corner? 

Can You Lower Your Interest Rate?

According to the experts at Republic State Mortgage Co, most people refinance to lower monthly payments or even shorten the terms of their loan. If you took out your mortgage before the Great Recession of 2008, you should certainly refinance your loan. 

You could save hundreds or even thousands of dollars per month that can be put into your 401k, IRA or other long-term investments. 

Even if you reduce your interest rate by a point or two compared to what it was when you borrowed the money, that point can still represent a significant savings. 

Are You Paying Mortgage Insurance?

A bankruptcy, low income or other circumstances could have put you in a position where you could only qualify for an FHA or similar home loan. 

FHA loans typically require you to pay mortgage insurance, which may add hundreds of dollars to your loan payment each month. If you have sufficient equity, you should refinance and get rid of that burden. 

Will Cashing Out Equity Help Your Financial Situation?

Taking out a second mortgage may help you consolidate credit card or other debt at an interest rate similar to that of your original mortgage. However, losing equity in your home could make it harder to sell if you wanted to downsize in the future. 

Therefore, you should project how much it would cost to pay off other debts under their current repayment terms compared to what it would cost to pay your mortgage for an additional 10, 20 or 30 years.

You Want to Pay Your Loan Before Retirement

Ideally, you will pay off your mortgage before you retire, or have it mostly paid down when you hit retirement age. If you decide to refinance your mortgage, make sure that you don't significantly increase your loan's term. 

Otherwise, you could be using money that you need for health care or other expenses in retirement to pay down a mortgage you could have completely paid off already if you resist the urge to refinance.

Should you refinance your home after you turn 50? That depends on your unique financial situation. However, if you think that refinancing can save money that will be used to fund a retirement account or otherwise help secure your financial future, it may be a strategy worth considering.