How to avoid the pitfalls of creeping debt.

Written by Debs, DebtSteps.com


Reducing debt usually isn't a high priority for people until they have already gotten into trouble with overspending. Using a few basic guidelines, and debt calculations, can help you see when your debt load is getting intorepparttar danger zone.

Budgeting Guidelines

First off, creditors use budgeting guidelines when reviewing and approving credit. If your debt exceedsrepparttar 112580 financial communities recommended guidelines, then you have a higher risk of credit applications being denied. Getting, and keeping, your debt in line with recommended budgeting guidelines, is an important step in debt reduction. Userepparttar 112581 following recommended budgeting guidelines (the same ones used by Financial Institutions) to reviewrepparttar 112582 items in your budget:

  • Housing 35% - Mortgage or rent, taxes, repairs, improvements, insurance, and utilities;
  • Transportation 20% - Monthly payments, gas, oil, repairs, insurance, parking & public transportation;
  • Debt 15% - Credit cards, personal loans, student loans & other debt payments;
  • All other expenses 20% - Food, insurance, prescriptions, doctor & dentist bills, clothing & personal;
  • Investments & Savings 10% - Stocks, bonds, cash reserves, retirement, rental real estate, art, etc.

Debt Income Ratios

The second step is calculating your debt income ratio. Once you know what your ratio is, you will understand just how important debt load is to your overall financial picture. Your debt income ratio isrepparttar 112583 percent of your monthly take-home pay that goes to paying debts.

You calculate it by takingrepparttar 112584 amount needed to repay debts each month, including rent or mortgage, and divide by your take-home pay (your net pay after taxes). Remember, this is "Debt" ratio, so only include actual debt repayment inrepparttar 112585 calculation.

Credit To Debt Ratio

Just because you pay off a credit card is no reason to close your account. One little known fact aboutrepparttar 112586 Credit to Debt Ratio isrepparttar 112587 reverse effect it has on your credit score. If you pay off a credit card, and closerepparttar 112588 account, you are actually negatively impacting your credit score. The reason for this negative effect is inrepparttar 112589 calculation ofrepparttar 112590 Credit to Debt Ratio itself. This ratio isrepparttar 112591 relationship of your debt total vs. your credit limit. You calculate it by dividingrepparttar 112592 total credit limit of all credit cards and loan accounts byrepparttar 112593 total ofrepparttar 112594 actual debt (spent total). Now, if you pay off a credit card, you are reducingrepparttar 112595 actual debt, which is great, but, if you closerepparttar 112596 account, you are also dramatically reducingrepparttar 112597 credit limit you have, and usually by a higher percentage thanrepparttar 112598 debt reduction. Pay Yourself First

How To Turn Your Bookkeeping Nightmare Into A Money-Maker

Written by Wayne M. Davies


For most self-employed people, bookkeeping is about as much fun as a root canal. But like it or not, it must be done, otherwise you'll end up overpaying your taxes big time.

Perhaps this article will help you see this tedious task in a new light. Follow along with me and I can turn your bookkeeping nightmare intorepparttar best paying part-time job you ever had.

How much money do you make right now -- per hour -- at your "regular" daytime job or in your business?

Is it $15 per hour? $25 per hour? $50 per hour? Make a mental note of that amount, ok?

Now, let's say by "keepingrepparttar 112579 books" this month, you are able to find $1,000 worth of deductible expenses.

Let's also assume you are inrepparttar 112580 35% tax bracket (15% federal income tax plus 15% self-employment tax plus 5% state tax).

So, for every $1,000 of deductions, you save yourself about $350 in taxes ($1,000 x 35% tax rate).

One more assumption: it takes you about 2 hours to properly record and document that $1,000 of deductions.

Hmmm. You spend 2 hours and save $350 bucks.

How much money did you just make for yourself -- per hour?

$175 per hour! Whoa -- now, compare that to how much you make per hour working in your business or at an employee job. Which "job" paid you more?

Even if it takes you 4 hours -- it's like having a job that pays you $87.50 per hour. Still a pretty good hourly wage, don't you think?

How does that make you feel about bookkeeping? Not such a bad deal after all, is it?

Withrepparttar 112581 end ofrepparttar 112582 year just aroundrepparttar 112583 holiday corner, here's a simple six-step bookkeeping system that will put thousands of dollars of tax savings in your pocket and keeprepparttar 112584 IRS out of your life.

1. Maintain a separate bank account for your business. Never use your personal bank account for business expenses. Having a separate bank account automatically createsrepparttar 112585 "shell" forrepparttar 112586 perfect documentation system.

If you don't have a separate business bank account, now isrepparttar 112587 time to get one.

2. Maintain a separate credit card account for your business. Same deal asrepparttar 112588 bank account -- pick one credit card that you use exclusively for business expenses. 3. These 2 accounts (one bank account and one credit card account) should only be used for business! Never "co-mingle" business and personal financial information.

The only income that goes into your business bank account is business income. The only expenses that are paid fromrepparttar 112589 business bank account and business credit card account are business expenses.

4. For each major income and expense category, create a simple filing system each calendar year -- one file folder for each major category. Every time you write a check or userepparttar 112590 credit card for a business expense, you assign that expense torepparttar 112591 appropriate expense category and filerepparttar 112592 supporting documentation (receipt, invoice, cancelled check, or whatever) intorepparttar 112593 corresponding file folder.

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