This is one of most important steps in budgeting process. The one step that most of us forget to do. The biggest budget busters are these "unexpected expenses". They’re not really unexpected. Most of us just have a tendency to treat them as if they are unexpected. You don’t plan for them. Consequently you will not be financially prepared when they need to be taken care of. You know that car and home require some level of maintenance, but do you actually have a plan to pay for that expense? Or, when hot water heater goes up, will you be forced to resort to help of credit card companies. This is what they hope you will do. Of course property taxes have to be paid. Will you have payment when it is due?

To reduce debt and maintain a successful budget you have to plan for these "variables". If not, you will inevitably use credit cards to bail out and you’ll be defeating yourself. The variable expense allowance in your monthly budget will allow you save for these expenses and will be your defense against creating more debt. This is an essential step in building financial security, investing in yourself, and remaining debt free.

~ Set a reasonable amount for your monthly savings allowance. This will be an emergency fund that can bail you out in case of tragic circumstances such as a serious illness or unemployment. Start with 10-15 % of your income and cut back to as little as 5% if you need to balance budget. But, do save something! Anything is better than nothing. If you have to start small, as your finances improve, you should increase your savings allowance to reach at least 10% of your income.

Of course, once you have all of these figures in place you may find that you don’t have enough money to cover all expenses. You not alone. I was amazed at how much more I was spending than I was earning. It finally made sense to me why I couldn’t get ahead. Why my debt kept increasing no matter how hard I tried to budget. This is when you have to start eliminating unnecessary spending, trimming down expenses by using some money saving strategies, or possibly considering an extra income.

It isn’t always an easy process. It depends on how much of your spending is "unnecessary", how much you’re paying out for debt, and how much you want to be free from debt and financially independent.

One things certain, if you take control of your money, and are committed to living debt free, you will find success. If you just keep doing what you’re doing, things will not change, but will inevitably get worse. You will continue to invest in credit card companies, spending money that you don’t actually have, and don’t have a plan to pay back.

So start with a good spending plan that cuts out unnecessary spending, reduces monthly bills and expenses to bare minimum, and eliminates credit card use. Save money in every area of your budget. Remember, $10 a month doesn’t sound like a lot. But, a savings of $10 per month is $120 per year that you can apply somewhere else in budget.

Every dollar you free up helps bring budget into balance. Helps you live within your means. Don’t spend more than you have. It doesn’t get any more elementary than that!

Good Luck and Success! Live Debt Free to Be Free. You Deserve It!

Interest Only Mortgages One new trend in mortgages that is very popular right now is interest only loans. The buyer may elect to make lower payments for two years, five years, or ten years.

Adjustable Rate Mortgage (ARM) Generally, a homebuyer is locked into a certain interest rate for a 3-year period with an ARM loan. After this rate fluctuates with prime rate. Rebecca Nichols, a mortgage broker, says, “I usually recommend people commit to an ARM rate for 3 years. When value of home has gone up, I recommend they refinance into a 30-year fixed mortgage or another ARM, depending upon whether they want to stay in home.” There are interest only ARM loans available too. These loans are popular with real estate investors because mortgage is easier to cover if they lack a tenant for several months. Interest only ARMS often homebuyers will be able to obtain a bigger house or something closer to what they want with an ARM.

80/20 Combo – Fixed or ARM Some clients prefer to avoid paying mortgage insurance, which is not tax deductible. If this is their preference, Nichols recommends “finance 80% of loan in one loan, and 20% in another. ARMS can also be split this way.

30 Year Fixed Mortgage If you plan on residing in same home for at least 20 years, this is perfect way to go. It’s a standard, fixed rate for whole loan duration. Remember to shop for a mortgage, just as you would for auto, home, health insurance, or auto loans. Be wary of obtaining your lender on internet. Some sites may promise rock bottom interest rates, but hidden costs and fees can add up. Also, having a lender present at closing is an invaluable resource to homebuyer. The loan officer or mortgage broker should be present to make certain loan documents are correct and answer questions. A lender on another coast is probably not going to provide you with this type of service. If you’re in market for a home and a mortgage, choosing right lender will help you get more bang for your buck and type of dwelling you desire.