In the last article I began with an overview of credit and its impact on our lives. These series of articles will educate, empower and explain step-by-step how to accomplish a debt-free lifestyle and what I believe is most important a debt-free mindset. Step one was understanding credit, and obtaining credit reports from the three credit reporting agencies, Equifax, Trans Union, and Experian.

The basics of credit and debt are quite simple. We are in debt because of the misuse of credit and because we are unable to distinguish between a want and a need. This article will guide you over the basics of budgeting. Budgeting is a misunderstood and misused word in our vocabulary for if anyone were to look and read its true definition it merely means to plan; and it is important to use if we are to accomplish financial, professional and personal goals.
The basics of budgeting is to understand the difference between a want and a need. A want is something you can do without and no hurt, harm or danger will come to you - a need is something essential to the preservation of your life. In this “instant gratification” and “me generation” society many find themselves unable to distinguish between a want and a need. A want is when you are thinking about buying a new car because your car is seven years old and all of your friends are buying new cars, or going by the hat lady’s shop to purchase a new hat for the Church anniversary because you do not want to wear the one you wore last year. An example of a need is car insurance for the car you drive, because it assures you with peace of mind that if an accident occurred, you are covered in some form, at least from a possible jail sentence because as we all know it is against the law to drive a vehicle without car insurance.
It’s all about planning, and budgeting. In order to budget properly, you must know how much money is going out and how much money is coming in. Understand budgeting is an ongoing process and it takes time to familiarize yourself with the process. For example, how many of us have said “I have no idea where all my money went?” Budgeting is planning - and in order to properly plan it is essential to know how and when to keep track of your spending habits for the next 30 days. An important aspect of budgeting is planning - by looking at what is owed and who you owe, speaking to your creditors, changing due dates, asking for a lower interest rate; or asking if they could waive a late fee because you have never been late before. Remember the past can remind us of what not to do in the future. The second is writing it down. So many consumers do not want to write it down because they do not want to see it in black and white or red and green. (You will understand the red and green concept a little later.) Talking to your creditors and explaining your current financial situation is helpful. Did you know that for those counties that were affected by the flood in 2001 in Texas, that the creditor Discover would place their cardmembers on a deferment - if the cardmember called in to explain that they were affected by the flood - directly or indirectly.

The credit scales our credit reports come from are the three credit reporting agencies - Equifax, Experian, and Trans Union. A copy is needed from each because different agencies report different things on different people - and guess what? When a mortgage lender, or banker is interested in giving a loan for a home mortgage or to refinance a loan they get a copy of a tri-merge - a combination of the three. That is why it is important to get a copy of all three. I am only a Certified Consumer Credit Counselor so what do I know. I also suggested that you receive a free copy of the Fair Credit Reporting Act from the FTC by telephone 1-877-FTC-HELP (1-877-382-43S7).

Swygert is a credit counselor with the Credit Corner, 9955 South Post Oak#415, Houston, TX, 77004. Call 713/799-8570 for more information.