Budget Credit & Counseling

Credit counselors review money management and budget plans with clients to provide practical assistance with managing their money. Often, clients believe they just need more money in order to survive when they may just need to examine their spending patterns. Sometimes, financial emergencies such as health issues create budget issues, but these can be avoided through good financial planning

Budget Planning

Many credit counseling companies assist clients with budget planning if an individual does not know how to do it himself. The client needs to total all income, including yearly payments such as bonuses, taxes or interest. Next, the client lists and totals all expenses in three separate categories: fixed, flexible and discretionary. Fixed expenses remain the same from month to month, such as a house payment, loans or insurance. Flexible expenses must be spent each month but can be increased or decreased as needed. Utilities, groceries and gas fall into this category. Discretionary expenses are wants that are not needed, such as Internet, cable or cell phones. If the client cannot balance his budget, this category should be reduced until he is able to do so.

If there still seems no possible way to equalize income and spending, companies such as Consumer Credit and Budget Counseling offer a debt management plan and work with creditors to reduce payments and lower interest rates. This may impact credit reports negatively, although it will not impact credit scores.

Spending Less

Credit counseling agencies often recommend that clients find as many ways as possible to spend less money. Resources from the Federal Deposit Insurance Corporation indicate that in addition to making a budget, additional ways to decrease spending include reducing banking costs and reviewing insurance policies. Refinancing, careful monitoring of bank accounts and credit cards and updating insurance information once every six to 12 months contribute to better budgets.

Saving More

In addition to spending less, consumer credit counselors encourage clients to save more. Further information from the FDIC indicated that this can be done in several ways. An emergency savings account acts as a "back up" in case of unforeseen expenses. Planning for short- and long-term goals such as college, retirement and vacation helps prepare for the future. Setting aside even a small amount of money, from $10 to $25 per month, begins the habit of saving. Saving a financial windfall instead of spending it also helps build up a financial reserve. Comparison shopping for all purchases helps stretch money further.

Borrowing Wisely

Budget counselors advise consumers to borrow money wisely. The FDIC further recommends that clients review credit scores periodically. Careful shopping for credit products, such as banking services, loans and credit cards, helps defray costs. Avoiding short-term but costly solutions such as car title loans or payday loans will save additional expenses.

Managing Credit Payments

Credit counselors advise clients to manage credit payments wisely. The FDIC further recommends that client speak with lenders if they foresee issues making payments. Proactive solutions such as initiating contact with loan holders to coordinate a solution should result in the most optimal outcome for all.