Budgeting Can Minimize Your Need to Borrow
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Budgeting is an important aspect of finance and the better your budget is the
lesser the requirement for loans. A well managed budget can become your all
important tool especially when it comes to debt management. If your budget is
sound then it will help you to keep a track of your daily or monthly
expenditures and you will also be able to keep a tab on your loans if any.
There are many people who suffer as they donít have the income stream or
savings to pay back the loan amount. The result is heavy fees, fines or even an
increased interest rate that is charged to the loan. At the end of the day, you
will probably end up paying up the entire loan amount plus 1/3rd of the loan in
interest and fees. High fees and interest rates offered by banks worldwide has
become a concerning factor, which is slowly leading to their unpopularity.
Creating a Budget
Creating a budget is quite easy although managing it might be a little
difficult. There are different types of budgets like personal budgets and debt
consolidation budgets etc. If you are thinking of making a personal budget then
the first thing is to define where you would want to be in life and define or
re-define your goals. If you intend to start your own business then you will
have to make serious budgetary considerations. This is why pre defining your
goals is essential while creating a personal budget.
Secondly, you will need to understand the underlying importance of budgeting.
As you are aware of homeownership is quite unpredictable as well as expensive.
You might encounter certain sudden requirements that may include internal
damages, scraping off paint, internal repairs etc. Every home needs a repair
sometime or the other. It is always better to be prepared in advance. Hence, it
is always suggested that you should always include repair costs in your budget.
A budget is basically a comprehensive plan that will help you to cover all
your expenses youíre your current income. If you are able to plan a good budget
then it can provide you with money on a regular basis for any uncertain event.
One of the key factors governing homeownership is budgeting.
Here are some tips for creating budgets and maintaining them:
1. You need to have complete information regarding the due dates of your
2. You should have a fair idea regarding the kind of money you spend monthly
3. You need to plan for all your periodic expenses like property taxes, car
insurance, homeowners insurance etc.
4. When you are drawing a budget, you need to keep away from making impulsive
purchases as it can completely deflate your budget.
5. Mention the requirement of regular home maintenance and internal or
external repairs in your budget. According to experts, you should ideally keep
1% of the purchase price of your house for any types of repairs or for annual
6. Adhering to your regular savings plan is critical.
7. Make note of your fixed expenses and keep some percentage away for any
emergency or variable expenses
8. Keep track of all your financial statements and this should include your
income statements, bank statements, utility bills etc.
9. Before creating a budget, make a note of the various sources of income
especially if you are self-employed.
10. Lastly, create a comprehensive list of all expenses being incurred in the
last few months. This will help you to create a sound budget.
It can often require a little work to maintain a budget and there are times
when it may go out of control. If your budget goes out of control then you will
need to stop there and then and formulate your budget all over again. This time
include the expenses or the reasons that forced the budget to break. To follow
the right course and to maintain your budget, you need to keep tabs. keeping
regular tabs of your expenditure helps. You can keep weekly or monthly tabs
depending on feasibility and what is comfortable.
If you are able to maintain and follow your budget then it will be easier for
you to even payout your loan requirements. Today, the market is rapidly changing
especially with peer to peer networks and social lending communities appearing
on the horizon. These networks charge lower interest on loans and the main aim
is to make the buyer as well as the lender to feel responsible towards each
other. Lending hubs have appeared in the UK and the US and there are a couple of
community borrowing hubs expected to capture the Australian market soon.
As interest rates in Australia have continued to rise and typical interest
rates on home loans are now often 8% or more and personal loans can be anything
up to 35% depending upon your credit profile. Whilst the social lending and
online P2P loans are still new in Australia Lending Hub at http://lendinghub.com.au
intends to revolutionise this industry by offering a product that can help
borrower consolidate their credit cards and refinance multiple personal loans.
Lending Hub (just like Prosper in the US) seeks to offer a tool for borrowers
that will assist them in maintaining their personal budget by keeping the
repayments to an affordable level. If you are interested in further developments
in the Australian and New Zealand peer to peer market then you can also check
About the Author
Ivan Mantelli is an accomplished writer and is also the CEO of Lending Hub,
which is the new social lending platform in Australia. You can find more details
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Article Published/Sorted/Amended on Scopulus 2008-02-09 21:51:54 in Business Articles