The consumer credit counseling business is a huge industry in America, since the average American is a mere three paychecks away from facing huge, potentially devastating financial difficulty. Each year, more than a million Americans turn to credit counselors to try to help themselves regain control of their financial burdens. But just how the credit counseling business works is a mystery to most consumers. What’s involved when you hire a credit counselor?

It may come as a bit of a shock, but the first thing you need to understand is that consumer credit counselors don’t work for YOU! That’s one reason their ads on television, radio, and in your email box shout, “Our services cost you nothing!” However, any business needs to derive income from somewhere, so if they’re not charging you, who does pay them? In truth, they work for the lenders. Here’s how it works:

Regardless of what their commercials would have you believe, credit counselors don’t renegotiate the overall amount of your debt–that is, the total principal balance you owe to your creditors. Instead, they negotiate with the various lenders to decrease your interest rates. For instance, let’s say that you’re paying somewhere around 18 percent on the charge card you want help with (some stores still charge as much as 21 percent). A credit counselor will contact the cardholder and negotiate a lower interest rate–sometimes as much as half the original rate.

That’s the good news. The not-so-good news is that your minimum payments will still be based on a 90/10 split, meaning that 90 percent of your monthly payment will still go toward paying interest on the card. That means, as is the case with any credit card payment, it will be well worth your while to pay a little more than the minimum each month, in order to whittle down your principal. It will save you significant amounts of money in the long run.

But how can credit card companies continue to make money by cutting interest rates in half, and what do they have to gain by doing so? The first reason is because they know that it’s better to get something, which they’ll do if you continue to pay them, even at a reduced interest rate, than to risk having you default on the entire amount. The second reason is because, even at the reduced rate, the lender is still making a healthy profit. They have borrowed that money at a significantly lower rate–sometimes as much as 66 percent less than the rate they’ll be charging you. (That’s why the financial institutions have big buildings; they make huge amounts of profit.)

Credit counselors CAN save you money, there’s no doubt about that. But don’t be fooled into thinking that they work for YOU, because they don’t. In the end, credit card companies love credit counselors, because the counselors truly work for them. That’s why you don’t pay for credit counseling services. The credit card companies are happy to pay them for you.

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Deciding whether or not you can stay at home after you have a baby can be a big decision. Emotions play a big factor, especially after holding your precious newborn for the first time. It’s hard to imagine leaving this tiny little thing with a stranger. On the other hand, you can gain a tremendous sense of accomplishment from your job that you couldn’t feel after a day of changing diapers and wiping up spit up. No matter how you face it emotionally, if you are considering becoming a stay at home mom at all, you first need to figure out if you can financially afford to do it.

Make a Budget

The first step you should take is to record your expenses. For at least one month,
better yet three, record everything you spend from latte’s to toilet paper to dinners
out. Everything needs to be accounted for. There is no need to go on a budget diet
yet, the goal is to find out how much you currently spend and on what items, so that
if you find you do need to scale back, you can recognize where to do so.

There are a couple of ways you can go about recording all of your purchases. One is
you can carry around a little notebook and make a note every time you buy
something. The other way is to charge everything you purchase with your debit or
credit card and use your monthly statement as your notebook of purchases.
However, if you choose to charge everything to your credit card, you must promise
yourself to pay off the full amount when your statement comes. Going into credit card debt is not going to help you achieve your goal of becoming a stay at home
mom.

Once you have every cup of coffee, every grocery trip and every pair of new shoes accounted for, it’s time to write it into a budget worksheet. Use a budget spreadsheet that will add up all of your expenses and subtract them from your income.
When you have the form filled out, look at your bottom number. Hopefully this will
be positive. Now go up and delete your income at the top. Don’t forget to delete any
expenses that occur from you working (dry cleaning bill, gas costs, lunches out,
etc.). Remember also that your taxes will change once you drop down to one income
and you may be able to change your withholdings to bring more monthly income in.
Go to the IRS website and use their tax withholding calculator with only your
husbands paycheck information to see how much you can change your
withholdings. If your bottom number is still positive, then you are fortunate enough
to be able to be a stay at home mom without much fiscal sacrifice. However if it’s
now dipped to a negative number, do not despair, it’s time to look over your
expenses and find ways to minimize them.

Saving on Your Expenses

Saving money doesn’t always have to be painful. Many women say that one of their
biggest jobs as stay at home moms is to seek out bargains and make sure the
family sticks to a budget. Consider this a lesson in what could be part of your new
job description. Below are four big-ticket expenses that most households face. Let’s
take a look at these and see if we can’t save a couple hundred dollars right off the
bat.

o Mortgage or Rent. This is often a couple’s largest monthly expense.
The obvious way to reduce this cost is to move to a less expensive place to live, but
that’s not always the best option for your family. Try looking at refinancing. That
can be a fantastic way to lower your monthly mortgage payment and may make it
financially feasible for you to be able to become a stay at home mom. Plug some
numbers onto an online refinancing company to see if this might make sense for
you. If you rent, ask your landlord if there is anything you can do around the
property that could reduce your monthly rent. Ask if you can help manage their
other properties, take on the yardwork, do other chores or even sign on for a longer
lease for a reduction in rent.

o Credit card, car payments and other ‘bad’ debt. These kinds of
debts you want to try and get out of as soon as possible. Make is a goal to get out
of credit card debt before you decide to become a stay at home mom. There are a
number of credit cards that offer zero percent interest for a specific amount of time.
Take advantage of these offers to reduce your monthly bill and use the amount you
would have paid with your old card towards paying off the principle. Condense your
monthly expenses and throw everything you can towards paying your credit card
debt and car payment off so that your time for being a stay at home mom will be
less stressful.

o Grocery Bill. You can easily reduce your grocery bill by planning a
weekly menu and making a shopping list. Designate one night a week for sitting
down with the grocery ads and your cookbooks. Come up with seven different meals
that take advantage of the weeks grocery sales and write down the list of
ingredients you will need. There are many great website services that will plan your
weekly meals and e-mail you a weekly shopping list too. Make sure to clip coupons
from the Sunday paper and from coupon websites. Also try the generic version of
your favorite brand. Chances are you’ll never notice the difference.

o Utilities. Take Dad’s advise and start turning off the lights when you
leave a room. Replace incandescent lights with florescent, get a hot water heater
blanket for your hot water heater. There are a number of different ways you can
reduce your energy bill. Don’t hesitate to call your utilities and ask how you can save
money on your monthly bill. You phone company can find a more efficient and
cheaper plan for you and the garbage company can suggest a smaller garbage can
size. Also ask yourself if you really need all of the gadgets you’ve become
accustomed to: Do you really need that cell phone now that you won’t be
commuting? Do you really need the fancy cable TV package or can you live without
it for a few years?

Keep moving down each category on your budget worksheet and ask yourself how
you could reduce costs. In this day and age most families have to make sacrifices
for a parent to become a stay at home parent. Remember that it’s temporary
though. Children grow up before you know it and being a stay at home mom may
just be more satisfying than any payroll job you could ever have.