If your budget shows you have more expenses than income, there are many ways to get out of trouble. Remember, everyone has different priorities. You will have to make the decisions that are right for you.

What payments should I make first if I don’t have enough money to pay for all my bills?

First, pay off your necessary household expenses, such as rent or mortgage, utilities, and food. You need to pay your rent or mortgage to ensure you don’t get evicted or have your property foreclosed upon. Think about the health and safety of your family when making these types of decisions.

Many utilities, such as the telephone company, electric company, and gas company, have programs to lower your bill if you qualify. If you think you need assistance, contact your utility company.

What should I do if I can pay off my monthly household expenses, but am having trouble paying off my loans?

Pay off the loan with the highest interest rate first to save on interest payments.

Talk to your creditor. Your creditor may be willing to reduce your payments or change the terms to accommodate your situation. Some creditors might offer extensions, smaller payments over a longer period of time. Some creditors might accept partial payments.

Get a debt consolidation loan. Be cautious of this option. If loan fees and interest rates are too high, it may not be the best option for you.

Get professional advice. Reputable credit counselors can help you deal with your financial problems. Some organizations charge little or nothing for their services.

Be cautious of companies that promise to fix your credit problems right away. Credit repair can be a long process that might take several years.

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.

• Carry only small amounts of cash in your wallet so you won’t spend it.
• Use direct deposit. You will be less likely to spend money if it goes straight into your account.
• Control your use of credit cards.
• Don’t go shopping just for fun.
• Take your written savings goals with you as a reminder.
• Buy only what you need—don’t buy things just because they are on sale.
• Use coupons to save money.
• Use a grocery-shopping list to prevent impulse-buying.
• Take your lunch to work instead of eating out.
• Shop around to get the best deal for big-ticket items, like cars and appliances.
• Pay your bills on time to avoid late fees, extra finance charges, utilities being turned off, eviction, repossessions, and the costs of a bad credit rating.

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.

• Remember, if you have a problematic credit history, building credit can take some time. Here are some steps to help you build your credit.
• Get a copy of your credit report and review it for errors. Take action to address any errors you find.
• Apply for a small loan at the bank, thrift, or credit union where you have checking and savings accounts.
• Apply for credit with a local store, such as a department store. They typically have a lower credit limit and a higher annual percentage rate (APR), but are generally more willing to lend you money. There is usually no fee for department store cards.
• Make a large down payment on a purchase and negotiate credit payments for the balance. If you do not have a credit history but have a large down payment, there is less risk you will not make the payments. For example, if you are buying a used car for $5,000 and have enough cash, you might consider making a down payment of $1,000-$3,000. Although the loan will be very small, it can prove you make your payments on time.
• You might ask a friend or relative with an established credit history to be a cosigner for you. A cosigner promises to repay the loan if you don’t. The lender should report the payment information for both you and the cosigner to the credit reporting agencies.
• Pay your bills on time. This will help establish a good credit history, so you can get credit in the future.
• You might ask the lender to review your history of making rent and utility payments to demonstrate your ability to pay.

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.

Repairing Credit on Your Own

• Start by contacting credit agencies to get a copy of your credit report.
• If there are errors on your credit report, you can contact the credit-reporting agency to request an investigation.
• Contact your lenders to renegotiate payment plans.

Repairing Credit Using Credit Counseling Agencies

If you decide to use a credit counseling agency, the Federal Trade Commission provides the following tips for choosing a credit counseling agency and questions to ask regarding services and fees and repayment plans:

• Interview several credit counseling agencies before signing a contract.
• Before signing a contract, check with your local Better Business Bureau, state attorney general’s office, or local consumer protection agency to check whether there have been complaints filed against the company. A reputable agency will send you free information about itself and the service it provides without requiring you to provide any details about your situation. If the agency won’t do this, find another agency.
• Ask questions about services and fees and a repayment plan. (For a list of questions to ask credit counseling agencies, see “Choosing the Right Counseling Agency.”)

The Truth About Credit Repair

Only consistent efforts and making payments on your debts will improve your credit.

Beware of companies that:

• Promise to erase your bad credit or remove bankruptcies and judgments from your credit file. No one can have accurate information removed.
• Promise you fast and easy credit repair. If you have bad credit, it can take years to repair your credit legitimately.
• Offer to create a new identity for you. If you make false statements on loan applications, or use a fake Social Security number, you will be committing fraud. You can also be charged for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information.
• Want you to pay for credit repair services before providing any service. The company might not be legitimate.
• Will not tell you your rights and what you can do yourself. Remember you can order the credit report yourself. If you see errors on your report, you can also request that the credit reporting agencies make appropriate changes.

Keep in mind, many states have laws that regulate credit repair companies.

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.

The following is a list of questions to guide you as you talk with credit counseling agencies. These questions will determine if you are speaking with legitimate and professional counselors who are genuinely interested in helping you.

Services and Fees

• What services do you offer?
• Do you have educational materials? If so, will you send them to me? Are they free? Can I access them on the Internet?
• In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
• What are your fees? Do I have to pay anything before you can help me? Are there monthly fees? What is the basis for the fees?
• What is the source of your funding?
• Will I have a formal written agreement or contract with you?
• How soon can you take my case?
• Who regulates, oversees, or licenses your agency? Is your agency audited?
• Will I work with one counselor or several?
• What are the qualifications of your counselors? Are they accredited or certified? If not, how are they trained?
• What assurances do I have that information about me (including my address and phone number) will be kept confidential?

Repayment Plan

• How much debt must I have to use your services?
• How do you determine the amount of my payment? What happens if this is more than I can afford?
• How does your debt repayment plan work? How will I know my creditors have received payments? Is client money put into a separate account from operating funds?
• How often can I get status reports on my accounts? Can I get access to my accounts online or by phone?
• Can you get my creditors to lower or eliminate interest and finance charges or waive late fees?
• Is a debt repayment plan my only option?
• What if I can’t maintain the agreed-upon plan?
• What debts will be excluded from the debt repayment plan?
• Will you help me plan for payment of these debts?
• Who will help me if I have problems with my accounts or creditors?
• How secure is the information I provide to you?
• Will this appear on my credit report?

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.

Set and Meet Your Personal Savings Goals

• What will I do now to save for my goals?
• What will I do by the end of the month to save for my goals?
• What will I do by the end of the year to save for my goals?

Consider these factors when making important savings decisions:

• How much do you want to accumulate?
• How long can you leave your money invested?
• How do you feel about risking your money?

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.

Consider your needs vs. your wants. Think about items you purchase on a regular basis. These add up. Where can you save?

• Do you eat out at restaurants a lot?
• Can you cut back on daily expenses, such as coffee, candy, soda, or cigarettes?
• Do you have services you do not really need, such as cable television or a cell phone?

Set up a direct deposit and an automatic transfer to your savings account.

• When you get paid, put a portion in savings through direct deposit or automatic transfer.
• If you have a checking account, you can sign up to have money moved into your savings account every month. What you don’t see, you don’t miss!
• U. S. Savings Bonds can be purchased through payroll deduction.

Pay your bills on time. This saves the added expense of:

• Late fees
• Extra finance charges
• Disconnection fees for phone, electricity, or other services
• Fees to reestablish connection if your service is disconnected
• The cost of eviction
• Repossession
• Bill collectors

If you use check-cashing stores regularly, you might be paying $3 - $5 for each check you cash. This can easily add up to several hundred dollars in fees every year. Consider opening a checking account at a bank or credit union.

If you get a raise or bonus from your employer, save that extra money.

If you have paid off a loan, keep making the monthly payments to yourself. You can save or invest the money for your future goals.

If you receive cash as a gift, save at least part of it.

Avoid debt that does not help build long-term financial security. For example, avoid borrowing money for things that do not provide financial benefits or that do not last as long as the loan. Examples include: a vacation, clothing, and dinners out in restaurants. Examples of debt that helps build long-term financial security include:

• Paying for a college education (for you or your child)
• Buying or remodeling a house
• Buying a car to get to work

Save your change at the end of the day. Take that change and deposit it into the bank (every week or month).

When you get a tax refund, save as much of it as possible.

If your work offers a retirement plan, such as 401(k) or 403(b) plan that deducts money from your paycheck, join it! Most employers will match up to $. 50 on each dollar you contribute. The matched amount is free money!

If you decide to make investments, do your homework. Know what you are investing in. Get professional advice if you need it. You should have enough money in savings to pay for 2-6 months of expenses in case of emergency. Make sure you have an emergency savings account before considering investing in non deposit products.

If you own stocks, reinvest the dividends to purchase more stocks. Some companies offer an easy way to do this called a Dividend Reinvestment Program (DRIP). This process increases your investment faster, similar to compounding.

If you are interested in learning about investing, you might want to consider an investment club. The National Association of Investment Clubs (NAIC) is the corporation that supports this investment style. Investment clubs are groups of people who work together to understand the process and value of investing even small amounts of money (as little as $5-$10).

*This personal finance tip is taken from the FDIC’s Money Smart curriculum. For more information on Money Smart, visit www.fdic.gov.