All Financial Matters

When you’re deeply in debt, it’s only natural to want to be out of it as soon as possible. Interest charges can mount up and having too much debt can make it difficult or even impossible to borrow for the things you really need. When faced with what seems to be an overbearing amount of debt, it’s important to take the time to formulate an achievable plan.

If you can get out of debt on your own then you should do so. If you can’t then don’t make the common mistake of trying to clear off your debts too quickly. It’s very easy to set goals that are impossible to reach and all too easy to lose your momentum as you fail to reduce your debt. An all too common end to this path is bankruptcy because people feel there’s nowhere left to turn.

Rather than setting lofty goals, the best approach is to be as realistic as possible about what you can achieve and in what time frame you can achieve it. Having a budget is an essential step towards being debt-free. Just ensure you include everything you spend money on each month. Once you have a list of your regular expenses, take a critical view and ask yourself whether or not each expense is absolutely necessary. Obviously, things like rent and groceries are pretty hard to do without, but do you really need to eat out so often?

Here’s just a few of the non-essentials that can often be cut out:

1) Dining out. If you eat out a lot or buy ready made meals for lunch then you might be surprised at just how much money can be saved by eating at home and taking lunch into work.

2) Vices. Coffee house coffees, alcoholic drinks and cigarettes are just a few examples of modern day habits. These are the kinds of things we can definitely do without, at least reduce whilst we’re trying to be frugal.

3) Leisure. Whilst a life without entertainment might be a bit of a drag, there are ways to have fun without the expense. For example, rent a movie for you and your friends to watch at home together instead of going to the cinema and buying individual tickets. You can be sure the snacks will be cheaper!

4) Travel. As fuel prices continue to rise, reducing the amount of travel can bring a significant saving on your budget. Instead of commuting alone in your car, consider carpooling or even using public transport. As well as helping your wallet, you’ll also be helping the environment by doing so.

With proper planning, you could pay off your debt in years or even months, depending on how much money you can divert from your other expenses and the amount of debt you have to start with. As long as you can make your minimum repayments and whatever else you have left in your budget, you’ll be on the right track. As well as clearing your debt, another benefit of keeping up your payments is that you’ll also be building your credit history.

Whilst reducing your outgoings in any one area might not seem to offer much benefit, when you add all of the little savings up it can make a significant difference. Remember that the more you can save on your regular expenses, the more you can whittle away on your debt.

Even if you haven’t yet taken out a large loan, it’s likely that you will at some point in your life need to borrow a large sum of money; for example, when you need a mortgage to buy your first home. If you’ve been able to avoid using any form of credit up until that point then you may think you’re an ideal candidate for a loan because you don’t owe any money, but nothing could be further from the truth.

Money lenders are well versed in dealing with risk. After all, they have to accept that some of the people asking to borrow money may not be able or willing to pay it back. So, being able to gauge risk is a very important part of the lending process. In the eyes of money lenders, a loan applicant with no credit history is an unknown risk and it’s difficult to feel comfortable about lending large sums of money to someone with no recorded experience of borrowing money.

Although popular opinion might lead you to believe that borrowing through a credit card is bad, it can actually be very beneficial as they tend to be easier to be accepted for if you’ve little or no credit history. A good place to start looking for your first credit card is at your current bank. If you’ve held an account at the same bank for a long period then they should be in a good position to offer you a credit card even if you’ve no prior credit history. Another way to obtain a credit card is to apply with a company who cater for those with little or no credit history such as Credit Land.

As long as your spending is kept under control, you never miss a repayment and you pay at least your minimum repayment amount then making purchases using a credit card can be a great way to build up your credit history.

Today’s modern society is built on a dependence upon plastic. Not the plastic associated with cosmetic surgery, but the kind of plastic you keep in your purse. The kind of plastic you never leave home without. It’s a wonder how people paid for goods and services before credit cards were invented! Along with the convenience that credit cards have provided comes a slippery slope to uncontrollable debt. If this sounds all too familiar to you then you should seriously consider cutting up those cards.

Most people would balk at the idea of pay near 30 percent interest on a loan and yet there are plenty of people willing to use credit cards that charge just as much in interest. Considering you wouldn’t want such a high interest rate when borrowing to pay for your home or your car, why would you on your credit card purchases? Then there are some credit card companies that offer a low introductory rate only to raise their rates to such dizzying heights after a fixed term or after your first default. When you’re considering any such offer, it literally pays to scrutinise the small print and shop around for the best deal. Offering credit is a great money maker for lenders so there are always good deals to be had as they’ll want to attract your business.

Credit cards aren’t all bad especially if you’re trying to establish some sort of credit history. Almost everything you borrow on credit is recorded against your credit history. An established credit history can be very valuable because it shows potential lenders whether you’re a risk or not. When it comes to borrowing large sums, buying a house for example, a good credit history is essential if you want to secure the lowest possible rate of interest as higher risk loan applicants attract higher interest rates. Using credit cards to build up a credit history can be very beneficial as long as you stay on top of your spending and never miss a payment.

When you’re borrowing against a credit card, it’s especially important that you don’t stretch your finances to the point where you can’t afford to pay off your balance without incurring a large interest charge. A relatively small debit balance left for a few months can quickly grow into a significant amount of money.

When you’re spending with a credit card, be aware that the convenience factor can mask some of the triggers that help your brain register a financial transaction. For example, when buying goods for cash, you get to experience a real sense of loss (of the money) whilst experiencing the receiving of something (the goods). When you buy intangible goods or services you lose part of the buying experience. When you make your purchases with a credit card then you have even less triggers for your brain to register. This can make for very easy, guilt-free spending which is not a good thing when you’re trying to get out of debt.

Although we talk about cutting up your credit cards, it’s not absolutely necessary to do. As we’ve seen, there are some benefits to be had from having one and they can be genuinely useful in an emergency situation. You just need to be disciplined enough to only use it when absolutely necessary and then clear the balance as soon as possible.

Of course, that doesn’t mean you should keep all of your credit cards just in case the unexpected happens. The fewer active cards you have, the less credit limit you’ll have available to spend. Your plan should be to decide which credit cards to keep and then clear the balances from the other cards as quickly as possible.

When you’re going through the process of cancelling your credit card, don’t allow the lenders efforts to keep you onboard change your mind. Remember why you’re closing your account, all of the sacrifices you’ve had to make along the way and the financial mess you could end up in.

Once you’ve done away with your excess cards and have cleared your debt, start saving before you start spending again and only buy what you can afford at the time. If you don’t have enough money then wait until you do. Either what you want will still be available or you would have gone off the idea altogether meaning you’ve saved money. Discipline really is the key to keeping clear of debt once and for all.

It’s very easy to allow debt to become an overwhelming factor in our lives, especially when we’ve borrowed too much. It can loom over us, casting a shadow on every part of our daily existence. Whilst getting into debt has become far easier than it once was, getting out of debt can be much more of an uphill struggle.

At times, it may seem an impossible task to get out of debt, but if the problem is recognised early on, it can be fairly simple to do so. If you have problems with debt, here are five ways in which you can ease or even eliminate your debt and get your finances back in the black.

1. Make over-payments on your loans. This means paying more than the minimum amount required when your payments are due. In an ideal world, we would clear our credit card balances every month without fail, but sometimes it’s just not possible to do so. It’s essential to continue making at least minimum payments, but in order to get out of debt as quickly as possible you need to be paying more. Doing so has the potential to save us a lot of money, because the quicker we pay credit cards off, the less interest accrues against us.

This also holds true for mortgages, car loans, and any other type of loan. Some loans have over-payment penalties so watch out for them before you sign up. For any loan that doesn’t penalise you, making regular over paying is a great way reduce the term of your borrowing.

2. Reduce your outgoings and use any spare money towards paying off your debt. It may seem like an obvious thing to do, but if you look closely at your budget, you will most likely find many ways in which you could save money. For example, preparing your lunch at home the night before instead of eating out can save you a substantial amount over the course of months and years.

3. Sell things you don’t need. You might struggle to think of things to sell right now, but take a few minutes to walk around your home and look at the things you haven’t used in the last 6 months or just wouldn’t miss from your life. It’s highly likely that some of the things you might not consider to be worth much will be worth significantly more to the right person. Do you have an extra vehicle, or anything else of value that you don’t use or need? Even just gathering up some things and having a yard sale could help you raise money to put toward your monthly payments.

4. Find ways to make extra money. For some people, this might not seem a viable option, but almost anyone with spare time on their hands could be doing something that’s worth paying for. You could take on a second job, do some babysitting, or sign up with a telesales company and work from your home. If you divert all of your extra money toward paying off your debts then you shouldn’t need to do this for very long.

5. Consolidate your debts. Credit cards are one of the most expensive ways to borrow money so the best way to do this is to pay off all your existing credit card and other high-interest debt is with a single low-interest loan. That will usually result in lower minimum payments, but be sure keep on paying as much as you can to get the debt paid off. If possible, try to avoid home equity loans or other types of secured loan to consolidate because you will otherwise be putting your home at risk unnecessarily.

Getting out of debt can be easier than you think. Sometimes, all it takes is a few minor adjustments to get out of a debt problem, especially if it’s identified early on. Once you’re out of debt, it’s important to learn from your experiences and keep your borrowing manageable.