debt relief tips

5 Ways to Find a Financial Role Model

February 29, 2016 by arizona

How do you know when its time to seek out a financial role model? If you can’t seem to stay within your budget every month or catch up on savings and debt repayment, a financial role model can help you finally create a budget that works for you and stick to it so that you can meet all of your financial needs and goals. You can seek professional help or simply find someone who has had similar struggles and managed to figure out on their own how to manage their finances. Help from either source will give you the tools necessary to enable you for financial success.

[Read: How to Improve Your Financial Health in 2016]

Check out these 5 options for finding a financial role model that works for you:

Talk to your bank. Banks are full of financial advisors who can make the perfect financial role model. They want their customers to be financially successful so that they don’t become a risk to the bank, so this can be a great option for finding someone who genuinely wants to help you and knows how best to do that. If you’ve been a loyal customer for some time, call and ask about an opportunity for complimentary financial mentoring to get you started. Financial help doesn’t have to be permanent. It may simply take a few sessions to set a reasonable budget, and discuss things like investments or paying off larger items like a car or student loans. Whatever your needs may be, someone at your bank will know how to help.

Ask for help from financially successful friends. Do any of your friends run their own successful businesses or have a good system for managing their finances? Friends and neighbors who have achieved financial success at an early point in life make great financial role models. They’ve managed to figure out their finances on their own and can surely offer some good advice to others who are trying to do the same. Ask them directly for help or see if they can offer any useful resources. Books or websites that they’ve used, or even their own previous financial mentors, can be a huge help to your financial success. A good approach can also be offering to take them out for coffee or lunch in exchange for discussing how they learned how to manage their finances and allow you to learn from both their mistakes and accomplishments.

Explore online mentoring options. With everything available online these days, there are also numerous financial sites out there, and some of them offer help with financial management for a simple fee. Do your research and find a company or organization that offers a step-by-step program for setting up a budget that allows you to pay all of your necessary bills and make room for a little bit of spending and saving for a rainy day. You can also try free budgeting websites like Mint or any of their many similar competitors. These programs allow you to pace yourself and better track all of your spending and saving, sending you reminders and tips for how to stay on the path to success.

See if anyone in your family can offer advice. It can be uncomfortable to talk about personal things like financial management with older family members, but chances are they probably went through some of the same struggles when they were getting started and can likely offer some help. Talk to family who have managed to pay off large sums of debt, avoid debt altogether, or have simply come up with great hacks for saving. Explain that you want to focus on paying off debt or creating a budget and savings plan, and ask if they would be willing to serve as a financial role model. Family can be very understanding of your mistakes or just your simple need for a little bit of help figuring things out when it comes to confusing financial issues.

Socialize and network in your city. Networking is a great way to socialize with successful people in your community or other networks. Check with your school’s alumni association or try networking events for your workplace or people new to your city. Any of these events will surely have older and more financially successful attendees who may be very willing to be your financial role model if you simply ask for their help. You can also socialize online, reaching out to financial bloggers or authors who have managed to be good mentors to others before you.

[Read: Five Habits for Financial Success]

Your own reading and research on financial planning can be beneficial, but it doesn’t beat the benefits of working with a personal financial role model. Role models help set you up for success then hold you accountable for achieving that success. Don’t be shy, ask for the help you need and you’ll be on the road to financial stability before you know it.

The Gov’t Aims To Protect Low-Income Users Of ‘Payday’ Loans

February 19, 2016 by arizona

More than 200,000 low-income U.S households often borrow a brief loan every month. However, when it comes to the paycheck, they have less cash. Therefore, they get something to overcome the situation thanks to the payday loans. However, these types of loans often land them in unwanted debts. This can go as far as their vehicles being possessed and their bank accounts being closed.

[Read: Important Facts about the Regulation of Payday Loans]

On Thursday some rules were proposed by the Consumer Financial Protection Bureau to help Americans avoid many debts. There is a multibillion-dollar industry that the government is seeking to set standards for since it has been regulated at the state level only.

While in Birmingham, Alabama, president Obama was quoted saying, “The idea is pretty common sense: If you lend out money, you should first make sure that the borrower can afford to pay it back.” But if you’re making that profit by trapping hard-working Americans in a vicious cycle of debt, then you need to find a new way of doing business.”

On the other hand, a warning has been given by the payday industry claiming that credit will be available to a few improvised Americans if the rules get implemented. They added that before setting additional rules, the CFPB should further study the borrowers’ needs. The C.E.O of a trade group for companies that offer payday loans registered as Community Financial Services Association of America, was quoted arguing that, “The bureau is looking at things through the lens of one-size-fits-all,”

Payday Loans ‘Disaster’

However, some troubling pictures are also getting revealed. Wynette Pleas of Oakland, California, narrates how she underwent a hard time back in 2012 after borrowing a payday loan. In order to pay the electricity bill and buy groceries, a mother of three, including a blind son, Pleas borrowed $255.

She worked for limited hours only, as a part-time nursing assistant. Upon realizing that she wouldn’t meet the two-week deadline, she told her lender. Despite lacking the funds, the lender attempted to withdraw the repayment straight from Pleas’ bank account. This resulted into a bounced check and a $35 overdraft. Unfortunately, the bank closed Pleas’ account after the incident was repeated five more times.

Pleas and her family started receiving calls from collection agencies. She was astonished to learn that a debt of $8,400 accumulated from the borrowed loan. The possibility of going to jail faced her at that point. Pleas, who is trying to rebuild her life and her finances, said that it was not even worth it.

A Washington-based think tank known as Urban Institute released a Census data analysis stating that in 2013; approximately 2.5 million households received payday loans. Even though hiring has steadily improved, the number of households with such loans has surged 19% since 2011.

Greg Mills, a senior counsel at the Urban Institute, said “These are predatory loan products. They rely on the inability of people to pay them off to generate fees and profits for the providers.”

Greater Due Diligence

Apart from the payday loans, the rules also apply to vehicle title loans. It would be upon lenders to ensure that the borrowers could repay the entire debt on time, before extending a loan due within 45 days. To confirm that borrowers would not default the loan, borrowing history, incomes and other financial obligations would need to be checked.

Generally, a 60-day “cooling-off” period would be given between payday loans and “affordable repayment options” would be required from lenders. Loans couldn’t require a car as collateral, impose multiple finance charges or exceed $500.

In order to regulate high-cost payday loans with payback terms ranging between 45 days and six months, similar rules were proposed by CFPB. Before the bureau revises the proposals for public comments and then finalizes them, a panel of small business representatives and other stakeholders would review all the rules.

A 2013 CFPB analysis on payday lending was followed by the proposals. According to the report, borrowers paid the equivalent of a 339% annual interest rate for an average $392 loan that lasted slightly more than two weeks.

The fees build further since 80% of the loans were rolled over as the median borrower earned under $23,000. Nearly half of payday borrowers had transactions exceeding 10 over 12 months because they had either borrowed again or rolled over existing loans.

Creating Consumer Traps

The executive vice president at the Center for Responsible Lending, Gary Kalman, said, “They end up trapping people in longer-term debt.”

[Read: The Truth about Payday Lenders]

Some states have attempted to curb payday loans. According to a report by the Center for Responsible Lending, Montana and Arizona have capped annual interest rates while Delaware and Washington limit how many loans a borrower can get each year. However, other states take it lightly. According to Texas Appleseed, 1,500 complaints were filed against borrowers to collect money in Texas.

Advantages of Small Money Moves

February 18, 2016 by arizona

Money, in small increments, can sometimes make a better impact on our financial standing than larger moves. Usually, this is because smaller moves are less missed but can become more habit-forming when continued. Here are some suggestions of small money moves that can make a successful impact on our finances as they grow into positive habits.

[Read: What Are the Worst States for Saving Money?]

Make Small Money Moves to Savings

Putting a small amount of money in a savings account or contributing to an IRA is a good idea. If you chose this option, set it up as an automatic payment so you won’t be tempted to skip a month here and there. A regular amount being set aside each month will build over time and you will hardly miss it from your main account. Besides, there is no harm in paying yourself first. You worked for the money and need an emergency fund to fall back on. As an example, if you brought home $1200 a week and put $10 in savings and 1% in an IRA, by the end of the year you would have $120 in savings and $624 in that IRA without missing it. Now those two small money moves are simple and reap a decent reward.

You should consider starting a change jar. Every six months take that jar in for deposit (you will probably need to find a coin sorter first.) You will be surprised how much you can save in coins alone. If you like, those crumpled bills in your pockets can have their own jar, too. No take backs, though.

Extra Money towards Payments for Small Money Moves

If anyone has debt that they are trying to get out from under, this is a great way to do just that. A little extra money added to a payment can reduce a debt and the interest at the same time. This works with most creditors. That is why we often hear credit card experts say to pay more than the minimum amount on our credit cards. A creditor cannot charge you interest on the expected balance if you were to pay the minimum, they have to charge interest on the balance you have after you pay the minimum plus the extra you sent with it.

You can apply this to most mortgages, car loans, loans in general, credit cards, and even some monthly bills. A few creditors out there require you to make a full advance payment when using this small money moves a tactic to help yourself get out of debt and make extra payments a habit. The idea is to reduce the principle balance, so check with the company that is holding the loan or mortgage.

Knowing Your Taxes When Using Small Money Moves Tactics

It is important to know your tax bracket in order to use the small money moves tactics effectively with a 401(k) or Traditional IRA. Simply put, when your income surpasses your normal tax range, taxes go up. It is more beneficial to contribute more money to the 401(k) or IRA.

How Projections can Help Small Money Moves

Projections can help small money moves by showing us how small money moves can grow over the course of time. This is a great incentive to boost our morale to start or even keep going when we get into a slump. It can help with showing us different kinds of projections. As an example, there are calculators for retirement, social security, and investments, 401K and savings growth. All of these calculators can help us make decisions making small money moves as well as solidify our determination to continue to stay on our course of action.

How Organization Can Help Small Money Moves

When we know that we are sinking in debt, it is hard to face the reality of just how bad it really is. Once we force ourselves to take stock and organize where we can see exactly where we are, we can then make small money moves to pull ourselves out of that debt. It may not have taken long for us to get there, but with determination, we can remove debt this way.

Making Small Money Moves by Purchasing Second-Hand

Most of us have seen articles or programs about high fashion and getting the same look at a fraction of the price. This is along the same idea. Why pay full price when there is a comparable item out there for less? There is literally thousands that can be saved when we purchase something second-hand. It could be the same brand, just a little worn. Some items have been so well kept that it is hard to tell that they are second-hand. It can be fun just hunting for a comparison to what we originally want, anyways. Making small money moves like this would be a challenge to put the extra we would have spent into savings or another account.

Time to Cancel to Make Small Money Moves

There is something that is unnecessarily being charged to most of our accounts that we no longer have need of, or worse yet, signed up for accidently. Well, now is a good time to cancel that subscription. It is a waste of money that could be used elsewhere, or better yet, be put towards savings. We did not miss it when it came out of our account before, so why not put it where it can do some good. This would be filed under small money moves that wouldn’t affect us.

When Small Money Moves are in Place There is More Time to Relax

When we have implemented small money moves and other techniques to help ourselves save and reduce debt we can turn our attention to other things that are important to us. The ability to relax and enjoy life with our family is much more enjoyable when we know that the strategies we put into place will help us overcome debt and live more comfortably, being financially responsible.

[Read: Useful Shopping Hacks That Will Save You Money]

Every little step we take to make our lives better financially will help us in other areas of our lives. No one likes to stress over his or her financial situation. With these small money moves, we won’t have to. Small money moves will lead to huge rewards when they become the habits we need them to be.

How to Earn More on Your Savings

February 12, 2016 by arizona

You would be surprised how much your interest rate really matters. For instance, the same amount of money put into a savings account with a 4.7% interest growth can make you thousands of dollars more in ten years than the same amount in an account that earns .45% interest. With that in mind, let us take a look at how you can make your money work for you, instead of you always working for it.

[Read: Ideas For Saving Money During The Holiday Season]

Shop around before settling on a savings account.

It is important before you open a bank account to shop around for the best interest savings. The first results you might find from a web search engine may not always be the best options. Frequently you can find better local deals with small local banks or with credit unions. Mainly it is important to keep these numbers in mind before opening an account.

Make Stock Investments

Putting money into stocks can of course be much riskier than into an insured savings account, but you should also take into account that the rewards you can reap can be much higher. Stocks can go up in value, or they can drastically decrease. Standard advice is not to invest money you need in the next five years. And be sure to do your research before you invest!

Mutual Funds

In a mutual fund your money will be joined with the money of other investors and invested in possibly a variety of stocks or bonds. This way instead of making one single investment, you have better odds of success because your money is in different areas and more diversified.

Bonds

Buying a bond is like loaning out money to companies or a government agency. It is like letting them use your money and in the mean time getting an IOU with interest. This is generally a lower risk than a stock would be, but because of that they have lower interest rates than stocks, although it is still higher than most banks.

Peers Lending to Peers

In this sort of arrangement you act as the bank. There are peer-to-peer lending sites on which people can post loan requests. You fund their loan and will earn an interest rate until it is paid back. On the other hand nothing is insured, so whoever borrowed your money can default on your loan. It is important to research the risks of peer to peer lending before you get involved. But once you have decided to lend, if you meet the requirements, there are a variety of sites out there on which to begin.

The Real Estate Market

An investment for the long term which may be becoming less common is investing in real estate. This requires a great degree of patience, research, money, and time. The rewards for this sort of investment can be quite significant, but it isn’t really just easy money. What you get out of this investment depends on the work you are willing to put into it. Just remember, tenants and repairs and demands can be a hassle – be sure you are prepared for it.

Microloans

Microloans are exactly what they sound like – very small loans. This is similar in concept to peer-to-peer loans which we discussed a couple of items back. These small loans can fund projects across the globe. With smaller loans it is also more likely to be certain of getting your money repaid than with larger loans, though even if you have similar interest levels, your pay off will be smaller.

Collection

Most things which people collect are for the enjoyment of owning whatever that thing is. While most people collect with the intention of keeping their collection, a very neatly maintained and orderly collection can be sold for a great deal of money, depending on the item collected and the market for it. Perhaps you already have a partial collection of something and are able to complete the collection. Full collections sell better than partial ones would, and usually the older the collection is, the more valuable it tends to be.

With a great imagination, there is no end to the possibilities of how you can make your money work for you. The first step before carrying out any of these plans is to look at the finances you have and see how much you will be able to invest, as well as considering how much it would set you back to lose that money if something should go wrong.

[Read: What Are the Worst States for Saving Money?]

Before investing money, especially a great deal of money, it may be advisable to consult an accountant or other financial advisor. Just having another set of eyes who can look over your accounts and make a prudential judgment about how much you can invest can only help you out!

For some more information on investing your money, check out this video:

How to Figure Your Debt Reduction

January 16, 2016 by arizona

The hardest part of debt reduction is knowing where to begin. Many people live paycheck to paycheck and wonder where the money is going to come from. They feel lucky if they have a few dollars in their pocket when they receive their next check. There is much more waste when we live like that. Sure, some bills get paid that prevent shut-offs and even the minimum balance on the credit card, but what happens to the rest?

[Read: Solutions to Pay off Debt]

We go get a few things to eat at the grocery store, get coffee before work each morning. Maybe get lunch with co-workers. We just have to have money in our pockets just in case something comes up that we want to do before that next paycheck. Let’s not forget that we deserve to relax after a hard day’s work with a beer or wine cooler. What is necessary, though? All this adds up after awhile and there are alternatives that not only are better choices but also are better for you.

People, in general, tend to waste about 15% of their monthly income on frivolous things. Many times are not realizing where their money went. Considerations need to be made to find the money to place towards debt reduction.

Debt Reduction Strategy #1

This is preparing you for finding where the money went that is going to be used to help you reduce your debt. You are going to do this for a month.

You can keep receipts
make a note when you spend and what on
however you decide to track your spending

The point is to determine your spending habits so you can see at the end of the month where you can make changes. Debt is not something you want hanging over your head forever so you need to have a solid plan where you can cut corners and use this for your debt reduction. When you see how much is wasted, you can find ways to reduce it and use the money left for this strategy on debt reduction.

Debt Reduction Strategy #2

This is a strategy based on survival needs. We each have basic essential needs:

a roof overhead
food in our stomach
warmth for comfort
away to keep clean and
a way to work

Take those needs out of your check each week and place the rest towards debt reduction. For many, this is difficult because it takes more than one paycheck to make a payment on rent, heat, electric or groceries, not to mention the weekly gas that gets you back and forth to work every day. You have to have a strong resolve to hold that money back for your needs when you see the money go out for debt reduction. You realize you are still living paycheck to paycheck, but this time, you are making progress and will be able to reap benefits from it if you can just stick with it.

Debt Reduction Strategy #3

Automating the Debt is what I like to call this strategy. Make a list of all the credit you have that needs to be eliminated. This should be your credit cards and loans. Now list your debt from the lowest amount owed to the highest amount owed. Now, pay off the lowest amount first. The preference here is for instantaneous satisfaction. Once you feel the success of accomplishing that goal, it gives you the incentive to move on to the next.

This time, the money it took to pay off that first amount is going to be added to the minimum payment you were paying on the next amount. As an example, there are two credit cards and a personal loan that needs to be paid. The cards have a balance due of $375 and $4,789. The loan has a balance of $2,953. The plan would be to pay off the $375 on the credit card the first month and make the minimum payments on the loan of $100 and the other card of $125.

Now it is the next month. I only have two debts, one loan, and one card. Since I made minimum payments last month on both of them I will continue to keep putting that same amount towards each but I am now going to add the freed up amount of $375 to the loan minimum payment. I know have $475 to put towards paying off that loan and still make the minimum on the card that is left. That automation is called satisfactory debt reduction!

Do you realize that when the loan is paid off that you will be applying $600 towards that credit card? That is money that you thought you didn’t have. When you make that final payment on your credit card you will have just automated your debt reduction strategy into retirement.

It doesn’t matter whether you use one of these strategies or any of the other strategies out there. Debt reduction should be important to you because it affects your purchasing power and your ability to get or keep a job, in some cases.

It is hard when you have a household that either has needs that do not fit into such drastic cuts as outlined above or are adverse to the idea of drastic cuts. That is understandable. Not everyone is up to the task. You will find ways if you are serious about debt reduction. It may take you a little longer, but your resolve will push you through. That is just who you are. You will find creative ways to work around the situations that arise and find ways to debt reduction that may end up as the newest strategy. The above strategies have been tried and are successful for people. They work for some, but not everyone thinks or does things the same way. Find what works for you.

[Read: How to Pay Off Lingering Debt]

Oh, and by the way…that $600 we were discussing earlier. Put that in a “Oblication Fund.”

Solutions to Pay off Debt

January 3, 2016 by arizona

Debt is similar to a mountain that has to be conquered. It takes resolve, determination, willpower, and purpose. There are stories of inspiration all over the internet about people young and old who have managed to pay off debt. Achieving this goal is no small task and they have probably cut corners everywhere they could. There are other options than becoming frugal. That is only going to take so much out of your debt, anyways. Let us try to get a little creative here…

[Read: 14 Signs you’re headed For Big Trouble with Debt]

Pay off Debt with Extra Money

Extra money can mean accelerated debt reduction. There is no better way to pay off debt faster than more money in the household. Ask for a raise; get a second job or a side job. Anything that will put money in your hand to shove toward that debt will do.

Pay off Debt through Consolidation

Consolidation of everything you are paying off is much better than paying everything separately at different interest rates. Find a lower-interest rate consolidation loan and make one payment. This makes it much easier to pay off debt and allows you to push more money at the balance.

Pay off Debt by Prioritizing

This one is simple but often overlooked because it sounds so much like a budget. People cringe at the word budget. Probably because it means “allowance,” and takes us back to our childhood. However, when we prioritize our financial situation and what we purchase, we need to be able to put a value to what that purchase adds to our lives in order to determine if it is worth it. If the purchase is not “worth it” or adds no real value to our lives then the money would better be spent going to pay off debt.

Pay off Debt by Frugal Grocery Shopping

It really does not sound like such a big deal until you look at what you throw away. Try this for a month and I promise, you will look at this a little differently. Do your grocery shopping as you usually do for the month. If you go Daily, every few days, weekly, every two weeks, pick things up here and there, whatever. The only thing you are not allowed to do is throw anything away. If you do, you have to write down on a list how much it cost and place it in a central area where you can find it at month’s end. At the end of the month, clean out your refrigerator, freezer, and cupboards of anything that you opened and has gone bad and write down how much it cost. Add that together and multiply by 12 months. That is roughly what you waste a year in groceries. That could be going to pay off debt.

Pay off Debt by Selling Things

A job borne from some craft you like to do in your spare time to selling something you no longer use is a good place to start. You can sell college books online, too. A few places you can sell are eBay, Amazon, Etsy, and Craigslist. Tophatter is an auction site that will take multiples of an item for crafters. You would be surprised what kind of money your things could bring in to pay off debt.

Pay off debt by Snowballing Payments

Credit cards are the worst in paying off debt and the best to build credit. Many of us have dug ourselves a hole with credit cards alone. This isn’t the simplest way to pay off debt, but it is effective and builds credit, too. An example would be if you had three credit cards at different percentage rates. Card A at 7%, Card B at 12.5% and Card C at 26%. Each card has $1,000.00 on them. The minimum payment is $90.00 on each. You make a minimum payment on Cards A and B and double the payment on Card C ($180). You do this every month until Card C is paid off. Now take the money that you were using to pay off Card C and add it to Card B’s minimum payment ($90+$180). You are now paying Card A at $90 and Card B at $270 a month. When card B is paid off take the $270 and apply it to Card A ($90+$270). You are now paying $360 on Card A and should be about done making payments to pay off debt. It does take willpower when you think that you could use that extra money elsewhere or be tempted to use a credit card, but when you get a credit card paid off, it is a victory.

[Read: Knowing When to Pay off Debt]

Pay off Debt by Cashing out Savings

It is almost ingrained in everyone’s head whoever went to a financial seminar that you should have a savings account equal to six months or more of your income for emergencies. When you look at how much your savings account is drawing in interest against your debts interest, it should make it a little easier to let go of the savings account. Once you pay off debt, there is no reason why you cannot start saving again.

How to Pay Off Lingering Debt

December 9, 2015 by arizona

Sometimes it can seem that there’s no end to the payments and bills coming through your door. You might feel as if you’re amassing new debts all the time without knowing how to pay them all off. However, with a simple budget and a good plan for the future you’ll soon see that it is possible to pay off lingering debt.

[Read: 10 Financial Fees You Should Never Pay]

Planning for the present and the future

The first step towards managing your finances and paying off lingering debt is to draw up a budget based on your monthly income and expenses. Use a tool such as Mint or just a basic Excel spreadsheet to lay everything down in a layout that works for you. Keep it simple so that you can clearly see any areas where you can reduce your spending.

Control the money coming in

When you first draw up your budget there will probably only be one or two kinds of income. That is, your basic salary and the salary of anyone else in your household. Although it is best to keep this figure as a baseline there are plenty of other sources of income that you may not have considered, such as:

Work bonuses. A lot of us get yearly bonuses, often based on performance or time spent at the company. Avoid the temptation to splurge and use up all of your bonus on a luxury item or getaway and instead use it to contribute towards paying off lingering debt.
Sell unwanted items. Scour your house for old unwanted gifts and household items that you just don’t need any more. Not only will this make you feel good about your house, you’ll also be helping someone who wants to buy second-hand as well as adding those all-important dollars to the bank account.
Take on more work. No one should have to work themselves into the ground, but doing an extra shift every now and then can help boost your bank balance. Tell yourself exactly what you’ll be paying off with that extra money and it’ll all seem worth it. Also, there are jobs that you can do from home – ideal if you only work part time or if one person in the family stays at home instead of going out to work. These can be flexible enough to allow you to work around your existing commitments, and you might be able to learn some new skills at the same time.
Rent out a spare room. If you’ve got the space, renting out a room can provide a steady source of income. Depending on your own lifestyle and location, you might consider doing this for just a few weeks of the year for a quick cash injection.

Once you’ve seen the money rise in your account and you’ve started paying off lingering debt you can give yourself little rewards now and then. Set yourself a goal, such as paying off $5000 of your credit card debt, then treat yourself when you get there!

Control the money going out

There are certain tactics that you should consider when paying off lingering debt. Firstly, order your debts by interest rate and start off by paying off the one with the highest rate. This will stop it from spiralling into a more worrying figure. Also, make sure that you pay off more than just the bare minimum on your credit cards. This is the only way that you’ll make any dent in your debt. You will probably want to contribute more of your budget towards some debts than others.

When it comes to credit cards, it pays to be a savvy shopper. Firstly, try to halt all spending so that you can pay off your lingering debt without making it even bigger. Secondly, look at the cards that you currently have and shop around to see if you can switch to a card that offers a zero-interest balance transfer. Make sure that you check out the fine details, though – the zero-interest only lasts for a short period of time before reverting to a normal rate, so try to get everything paid off in this short time period. The last thing to do with regards to credit and store cards is to alter your own spending habits. Look through your bank statements and see where you’re spending the most money. You may find that there are lots of little amounts going out here and there, such as for coffees or snacks. Cut back on these small amounts and you’ll be surprised how much you save in the long run – every cent counts towards paying off lingering debt. Another handy tip is to delete your card details from online stores. It’s often the convenience of a quick check-out that lures us into parting with our cash.

[Read: Knowing When to Pay off Debt]

Small changes and a better understanding of our money contributes to us leading a better, more controlled financial life.

Knowing When to Pay off Debt

December 2, 2015 by arizona

Have you ever been in the position to ask yourself if you should pay off a debt like a credit card or save that bonus, you just got for a rainy day? Many people who live paycheck to paycheck are put in that position around the holidays and when they get a raise, get recognition for a job well done, or a better job. Nevertheless, just how much and when should you pay off debt instead of save that money? There has to be a secret formula somewhere. Most credit advisors will tell you to save at least three months worth of pay, but most would like to see you be frugal and have a years’ worth stashed away.

[Read: Should You Use 401(k) to Pay off Credit Cards]

Questions about Paying Off Debt That Only You Can Answer

Well, to help you determine what to do; you need to ask yourself some questions that you need to answer honestly.

Do you already have a savings account in place for emergencies?

If you don’t, then you need to seriously consider starting one. The reason should be obvious. You cannot rely on having credit or loans available if you already have debt. If you decide to go to savings:

a. Find a separate bank for your savings account.

b. Start small if you have to, but start.

c. Pay yourself first. (percentage of your paycheck, every paycheck)

d. Forget you have that money in savings.

When you have at least three months of income stashed in a savings account, then you can rethink the whole ‘pay off debt’ idea. Having cash at your disposal for emergencies is important.

Just how much is your debt hurting your wallet?

Now it is time to crunch some numbers. Don’t worry, it won’t take a math genius. Just list your debtors and the amounts owed.

a. Credit cards

b. Auto loans

c. House mortgage

d. Student loans, etc.

Now that you have all that on your list, put their interest rate beside each of them. If you are not sure, this would be a good time to look that up. You need to know these types of things to get control to pay off debt. When you multiply the amounts and the interest rates together, you will have how much interest you are paying each year for that debt. Now add all those interests together.

Example: Auto Loan: $8,793.64 x Interest 3% = 263.8092 or $263.81 a year

That is how much your debt is costing you over and above the actual debt itself.

It doesn’t look like much until you add it up with all the other interest. Now here is your next question:

How much would that savings account be earning you?

When you get to that golden number of three months worth of paychecks, you will have to decide what you want to do with it, if anything. By this time, you should already have a habit of putting money away in the account, so that shouldn’t stop, but there are other options that could give you a better return on your money if you choose to use them. You need to determine if it is worth keeping your money where it is at the low-interest rate that it is giving you back a return (usually less than 1%) or putting it in a CD or money market account. Check the rates. Multiply them out as you did for the credit and interest.

Now just simply compare the two. Would it make a difference to pay off debt, even if it were only a portion, but a decent portion, or keep saving? Now just keep that in mind as I pose the next question here:

What does your financial future look like?

This can be short-term or long-term. Are you looking for that tax return, a bonus check, or that gift from your parents? Maybe you are being considered for a promotion or you are about to start a better job with better pay.

Sure, you can celebrate, but don’t just let it go to your head. You will have some financial flexibility to maybe pay off debt and save, all at the same time. That would definitely put you in a much better position. Now the last question you will have to ask yourself and this one, I promise is the fun one:

What is that Big Financial Goal in the sky that you want?

I am talking about your dreams. What do you want to be able to do without worry of financial ruin? Maybe you want a dream car, your own business, a home, or the vacation you always wanted.

Whatever it is, you want it, and it would be so nice to be able to go and get what you want without worries of debt hanging over your head.

[Read: 10 Financial Fees You Should Never Pay]

Deciding When to Pay off Debt

Now, this is where you decide when, how, and how much you want to apply and use to pay off debt. If you have answered the above questions honestly, and went through the few steps, you have a good idea what needs to be done. You can either go one-step at a time or mix it up to fit your finances. Maybe mix up the questions a bit. That may get you going. I would start with “Just how much is your debt hurting your wallet?” That one is a revelation!

5 Must Have Habits That Will Pave the Way Towards Financial Success

November 21, 2015 by arizona

It takes 21 days to create a good habit. We have all experienced the struggle that comes with setting goals such as exercising consistently, eating well, or breaking a bad habit. Perhaps the biggest obstacle blocking your success was that you did not make it past those 21 days. Once you get past those initial 21 days, you will have succeeded in creating a new, healthy habit. That, along with determination, is all it takes to have financial success.

Here are habits you can begin practicing today to begin your journey towards financial success.

[Read: Top Financial Podcasts for Gaining Financial Freedom]

Habit 1: Finance Check-Ups

Just as we shouldn’t skip our annual check-up with our primary physicians, it is important to check in with your financial situation and be fully involved in your money management. You should be aware of:

Changes in spending habits
Income fluctuations
Actual spending versus budgeted spending to determine overspending, which leads to debt
Timely payment of bills
Whether or not accounts are correctly balanced
All fees (and making sure they are correct)

This habit is crucial to attaining financial success. Without this foundation, you will not be able to establish additional healthy money habits. Invest time in carefully reviewing your financial situation before proceeding on to the subsequent habits.

Habit 2: Spend Less Than You Make

This seems obvious, doesn’t it? If you spend more money each month than you are making, you will continually accrue more debt. Although it may seem harmless to overspend one month, this debt can easily become an insurmountable number and force you to dip into savings designated for the future until there is nothing left. Avoid this at all costs. For many people who already find themselves in that situation, there are two solutions: spend less or earn more. If you have carefully implemented Habit 1, then you can achieve financial success by banking additional cash from raises. If you get a raise, avoid the temptation to “keep up” with others around you. The easiest way to effortlessly spend less than you earn is by pretending that that raise never happened. If you don’t have it, you won’t spend it.

Habit 3: Pay Yourself First

Having financial success requires willpower and support systems for days when you want to let that willpower go.

Paying yourself first means that you put money into your savings account before anything else. This means you treat paying yourself like paying a bill, as if you were your cable bill or rent. Once you pay yourself, you cannot use that money to make random or unnecessary purchases. Establishing this habit will allow you to adapt to paying yourself first and your savings will snowball without any additional effort from you.

Habit 4: Avoid Buyer’s Remorse

Do you really need that newest gadget? The answer is probably no, but want versus need is an increasing struggle for people who take on consumer debt. Here are some purchases the cause the most buyers’ remorse. The good news is, once you learn how to determine if the purchase is out of habit or need, you will be able to make smarter choices in your quest towards financial success. Here are some questions to ask yourself before making a purchase:

Can I name a positive reason for making this purchase?
What will I need to give up in order to buy this?
If I wait and buy this later or at another store will I get a better price?

Asking these three questions before giving in to instant gratification will help you realize whether or not the purchase is truly necessary.

Habit 5: Plan for Your Debt

Creditors love people who simply pay the minimum amount on their debt each month, as this is in their best interest. If you only pay the minimum amount, you are allowing creditors to collect large amounts of interest and therefore paying double or triple what the purchase is really worth. Instead of following the repayment plan set for you, take charge of your debt and determine how much you can afford to pay each month, taking into consideration that you should pay more than the minimum due. This will allow you to set your timeline to become debt free and achieve financial success. Regularly check your debt payment progress, revisit and revise your strategy, and make sure you are in the driver’s seat when paying back your debt.

[Read: How To Make Your Get Out Of Debt Plan Easier]

Remember to be patient with yourself as you work towards financial success. Be persistent in those first 21 days while creating your healthy financial habits, but allow for setbacks, too. With perseverance, it is possible to achieve your financial goals.

Surprising Sources of Debt

November 2, 2015 by arizona

There are plenty of obvious reasons that people find themselves in debt – medical bills, redundancy and personal loans to name but a few – but there are also some sneaky sources that you may not have considered to be harmful to your finances. Watch out for these sources of debt next time you’re battling with your bank balance.

[Read: 14 Signs you’re headed For Big Trouble with Debt]

More money

Yes, you read that right – sometimes getting more money can actually increase the chances of your falling into debt. How can this happen? Well, if you’re lucky enough to be offered a large sum of money (from a lottery win for example) you’re much more likely to mishandle it. Firstly, there’s the shock factor of having much more money than you’re used to and secondly there’s that little voice in your head telling you to treat yourself to things you normally wouldn’t look twice at. It’s a lot more difficult to account for larger sums of money, especially if you don’t have any hard and fast rules to follow.

Oddly enough, the same can apply when you get a new job or a promotion. Of course, you should be proud of yourself for getting more money in your pay packet at the end of each month, and it’s great that you’re climbing the career ladder. But don’t fall into the trap of automatically assuming that more money in your wages means more money for treats. Also, you may decide that you need a new car or a new wardrobe for your new job, but make sure that you don’t overspend as these extra items in bulk are a surprising source of debt.

So, how should you avoid turning these positive events into sources of debt? One strategy is known as the ‘one-third rule’. That is, separate any additional money that you start to earn or that you’re given into each of these categories:

One-third set aside for taxes
One-third put into savings for the future, such as a retirement plan
One-third for fun!

Buying a house

You may think that a house is an obvious source of debt as it’s the most expensive thing that you’re likely to buy in your entire lifetime. But it isn’t just the mortgage which adds financial strain to your bank account. Many people compound their debt on buying new furnishings or redecorating the house, particularly when they first move in and they want to make it feel like home.

Of course, everyone wants to be happy in their own house. After all, it’s a big investment and it needs to be right for you and your family. But avoid creating additional sources of debt by carefully budgeting for any work that you want to do. And make sure that you stick to the budget too! Also, when you’re looking to buy a house don’t just work out whether or not you can afford the mortgage repayments – check that you can afford any necessary or upcoming maintenance. It’s sometimes best to spend a little more on the mortgage and get a house that’s ready to move into with minimum change than have the additional expense of maintenance work, which might not always go according to plan. Surf websites such as Rightmove to see what’s available in your area.

Restraining contracts

Many of us have fallen foul of a contract which sounds ideal in principle, until you work out the math and realize that you’ve been locked into paying for more than you bargained for. These sources of debt are not only frustrating, they can be misleading too.

One example of a contract that may not work in your favour is a car lease contract. You may think that it makes sense to lease a car, particularly if you can’t get a very good car on credit, but most lease contracts include expensive provisions and strict restrictions, meaning that you’ll probably owe a lot more than expected when to take the car back. Terms include mileage restrictions, acquisition fees and early termination fees. Make sure that you read the fine print and ask as many questions as you can so that you’re content that you’ve got all the information you need before signing on the dotted line.

Another type of contract which sounds ideal until you look a bit closer is those designed for cell phones. You may be desperate to get the latest model of smartphone, but when you’re tied into a two-year contract that shiny new phone doesn’t quite seem so good. Yes, you’ve technically got the phone itself for free, but you’re actually paying for it with your monthly contract payments which probably give you more free calls, texts and data than you actually need. How can you escape this? Look for providers who offer non-contract service options so that you only pay for what you need and so that you can switch at any time. Yes, you will have to buy the new handset up front, but there are refurbished models out there if you want to save a little extra cash.

[Read: Credit Score: Small Debt Forgiveness]

A little careful planning and budgeting and you’ll be able to avoid some surprising sources of debt and keep your finances in check.