Some Sobering Statistics About Our Economy

Initial filings for state unemployment insurance aid for the week ending April 7 rose to the highest level in two months to a 342,000 from 323,000 the prior week, the Labor Department said.

The total number of unemployed still on the benefit rolls after drawing an initial week of aid rose by 38,000 to 2.53 million in the week ending March 31.

What this all means is that Americans will be using their credit cards to help pay their living expenses, essentially making them a prisoner of debt.

This has become an accepted practice in the United States.

Households are able to meet their needs by using various credit available to them. In a world being fueled by the marketing of new forms of credit, and a greater acceptance of debt, the wider distribution of credit cards could indicate that lenders are including a larger number of risky borrowers who are likely to include households with lower or less stable incomes.

Research has shown that consumers with a positive attitude toward the use of credit were more likely to use credit cards from both banks and retail stores, and 43 percent of these credit card users have said it was acceptable to borrow to cover living expenses.

Other factors that might affect the use of credit when income is cut include level of education, health status, and the possibility of receiving government health insurance. A low level of education is likely to mean that people have jobs or occupations with lower pay and could also mean that people are less likely to understand the terminology or information about lending that is used or made available in the borrowing process.

From my book "Your Guide to Perfect Credit"

Knowing how to manage money can help you make smart choices. You'll be more likely to avoid credit traps that can undermine your ability to attain your financial goals. You'll be in a better position to pay off debt and build savings. Being smart about money can help you buy a house, finance higher education or start a retirement fund.

There are several steps you can take to make sure that you and your family don't become a statistic. The first step being: establish goals. Without goals, it's difficult to accomplish anything. When you think about your future and what you want to achieve, setting goals is a helpful way to establish a timeframe.

Short-term: such as paying off credit card debt, saving for a vacation or buying new clothes

Intermediate: such as saving to buy a car

Long-term: such as saving for education or for retirement.

Estimate the cost of each goal and the date you want to achieve it. Then figure out how much you need to save each month. Which leads me to Step 2: Creating a budget.

Now that you've figured out your financial goals, you are ready to create a budget that will help you attain them. Print the budget work sheets below and write in your budget figures. Start by writing down your expenses (under Current Monthly Expenses).

Monthly fixed expenses
Start with monthly fixed expenses such as regular savings, housing, groceries, utilities, and car payments. Put these continuing obligations under the heading: Fixed.

Use checking account statements, credit card statements, receipts and other records to help you complete this estimate. Be realistic - it's better to estimate high than low.

Remember that savings is considered an expense even though you keep the money. You work hard. You deserve to keep some of what you earn every month. Savings is the key to meeting your financial goals.

Make estimates for all money spent - regardless of how you pay: cash, check, credit card, debit card, automatic checking account withdrawals or savings through work plans such as 401K or 403B plans.

Monthly variable expenses
Once you have noted all your fixed expenses, write down your expenses that vary each month such as clothing, vacations, gifts and personal spending money. Put these expenses under the heading: Variable. You might have these expenses every month, but the amount you spend could change.

Get a handle on variable expenses by writing down every expense for a month - even small purchases. Use a small note book or other informal method to track your spending. This is very important because it's the best way to understand your current spending behavior. Get receipts for all purchases - especially those you make with cash. Record and categorize each transaction. You may be surprised at how much you spend in certain categories.

Use a notebook to write down every purchase you make for one month. I call this My 30 Day Challenge. This is the best way to understand your current spending behavior.

List your monthly income
Now that you have figured out your expenses, write down your monthly income after all taxes and deductions. Write this under the heading: Monthly Income. Make sure this figure reflects the total take-home pay for your household after all taxes and deductions.

Now compare expenses to income
One of the advantages of doing a comparison of expenses to income is that it provides a quick reality check. If you are spending more than you're bringing home every month in income, you have a deficit. If you're spending less than you're bringing home, you have a surplus. In either case, it's time to step back and consider some options.

If you have a deficit: Spending more than you're bringing home, ask yourself:

Can I spend less in some of my variable expenses?

How much interest am I paying with credit card and other loans?

Where did my money go? (Consider writing down everything you spend for a month.

If you have a surplus: Spending less than you're bringing home, ask yourself:

Am I saving enough to meet my goals?

Are my spending estimates accurate?

Have I included all my fixed and variable expenses?

Save your way to a more secure future.

An estimated seventy-five percent of families will experience a major financial setback in any given ten-year period. The economy and the job market are good now, but that could change. It's smart to be prepared for financial thunderstorms.

Save early, save often
A consistent, long-term saving program can help you achieve your goals. It also can help you build a financial safety net. Experts recommend that you save from three to six months worth of living expenses for emergencies.