Are you having trouble managing your finances? Do you seem to never have enough money at the end of the month to pay all your bills? If so, one solution you may be considering is utilising a budgeting company. These companies have gotten a lot of attention lately, and they seem to always be promising to help you get out of debt.
They make it seem easy, but think about it, you have been trying to manage your money for so long, so it cannot be that easy. What is their trick and are they safe and effective at helping people with their finances. The main questions you may be having are how do budgeting companies work and is it the best solution for you.
How Do Budgeting Companies Work?
When you work with a budget company, they will take total control of all your income. In fact, they will actually be considered the legal owners of your money. However, the government has implemented several safeguards to ensure the company only uses your money for your best interests. This does make them safe to use.
The budgeting company will set up a separate bank account to securely place your money in. Out of this account, the company will pay all your bills and they give you an allowance to use out of what money is left once the bills are paid. If you have overdue or outstanding bills, the company will work with each creditors you owe money to and negotiate a set price for you to pay each month. These payments will also be paid out of your special account.
There are government services that are free which also provide financial assistance with budgeting and borrowing services, if you don’t want to engage a paid service provider. Either way, below are some of the pros and cons of budgeting companies.
One of the main advantage of utilising a budgeting company is that it takes the money out of your hands and makes it impossible for you to spend more money than you have available. It will definitely reduce the chance for impulse shopping, since you will not have access to the money.
It can also alleviate some of your stress, since the responsibility for paying the bills and talking to your creditors has shifted to the budgeting company. It also ensures that your bills will be paid on time each month and effective payment arrangements have been made with all of your creditors. Slowly over time, your outstanding debts will start to decrease, which should leave you with more spending money each month.
The downside is that utilising a budgeting company does come at a cost. The company will charge regular fees and these fees can be rather expensive, especially over the course of time. This ultimately means less money in your pocket and less money to put towards paying down some of your debt. In addition, while the government does insist that the companies use your money for your benefit, there are no regulations on the experience of the financial planners you will be working with.
In many cases, these planners have no real financial education or experience. While they may be able to manage your chequebook just fine, they are going to do very little when it comes to preparing for your future or helping you set short or long-term goals. This basically means that when you are done using their services, you will be no better off then you were before because you will still not have the skills needed to properly manage your money.
In some cases, using a financial planner may be the best solution, but only as a last resort. The better plan is to create your own money management plan and make a commitment to stick to it. You can create your own special account that you place all the fund in that are needed to pay your bills and then put your spending money in another account. In theory, this would work the same way, it just makes you responsible for your own finances and teaches you valuable lessons as you go along.