With the economy being down and people losing their jobs, we are all looking for ways to save money and to save money while shopping. Are you someone who tends to shop on impulse and goes to the store just for milk and then end up spending $100 on additional things? These tips will help you keep your spending under control.
1. Don’t go to the store on payday
Payday is the day you have the most money in the bank. You haven’t had time to put the money in your savings account or pay your bills. Therefore, we think we have more money than we actually do and tend to spend more. Once we do that, we might not be able to make the bill payments that we need to.
2. Don’t shop without a list
This is a fundamental rule when shopping. Write a list before you go to the store whether it is the grocery store or a convenient store. It’s more than writing your list though; you have to have the discipline to stick to your list. You should only buy the items that you need and that are on your list.
3. Don’t shop when you’re hungry
Another fundamental rule for shopping is not to shop for groceries when you are hungry. Eat a little something before you go to the grocery store, so you are less likely to purchase additional items. When you are hungry, you are more likely to buy food because it looks good and your stomach is doing the talking. On an empty stomach, you can be talked into buying more food easier. Also, if you are hungry, the chance that you will stop for fast food on the way home from the grocery store is higher.
4. Get a rain check
Sales are useful in saving money, but when a sale item is out of stock, you might be tempted to buy another item that is more expensive. Don’t do that until you see if you can get a rain check. A rain check allows you to get the item at the sale price once it’s back in stock. Therefore, you will still get your sale price and save money.
5. Shop around
Shopping around is essential when trying to save money. You need to look for the best deals at each store. This goes beyond shopping at the grocery store as you should also shop around for the best deal when it comes to services. If you need a plumber, call around and see what the competitive prices are. Don’t be afraid to tell them you are shopping around to try and get their best price.
6. Shop in bulk only when needed
Bulk prices are more expensive and sometimes these prices have a higher unit price than buying them individually. Take time to calculate the unit price of the bulk item and see if it’s cheaper than buying that item individually. If you are a family of two or three, and you don’t eat the entire bulk item, it’s not worth spending the money on it. If you do need to shop in bulk, consider joining a shopper’s club to get the discounts they offer.
7. Shop at consignment stores and thrift stores
If you have young kids or babies, shopping at consignment stores and thrift stores are a great way to get clothes that have been barely worn at a decent price. It doesn’t take much to look through the clothes and find almost new name brand clothing.
8. Shop for presents year round
Don’t wait until December to purchase all your Christmas gifts or don’t wait until the day before to buy a birthday present for your friends. If you shop throughout the year, you’ll be able to find gifts on sale, and you can put more thought into what to get them. Store all the gifts in one specific location so you know where to get them for these special occasions.
9. Don’t shop when you are upset
Many people use shopping as a retail therapy to help them feel better. But this feeling is only temporary, and those feelings that you are trying to suppress will only come rushing back. This time along with a feeling of guilt for spending extra money.
Saving money can be easy while following these simple tips. Frugal spending is important to save money. Once you implement these frugal spending tips, it will soon become like a second nature to you.
Related articles
- 6 Shopping Habits Hurting Your Budget (money.usnews.com)
Filed under budget, Credit Counseling, Finance by Jim Johnson
In order to plan for your financial future, it takes work and organization. You need to be smart in your day to day spending and saving. It’s important to create a financial plan and stick to it. There are very successful strategies for following your financial plan. Let’s take a look at these strategies in depth so you can save more and spend less.
- 1. Create a financial plan
First, you need to figure out what you want to achieve. Do you want to pay off your credit cards? Or are you saving money for a down payment on a house? Once you figure out where you want to go, you have to be specific about it. Saying “I’m going to save money to buy a house” isn’t enough. You need to determine how much money you are going to save to buy a house. Is it $10,000 or $100,000?
Then you need to decide how quickly you are going to need that money. Is it 3 years or 10 years? Now that you know you much you need to save, you have to create your plan on how you are going to save that money. Are you going to coupon more? Are you going to bring your lunch to work? Think of all the specific ways that you are going to save that money. Read further for more ideas.
- 2. Save while spending
This may sound funny, but you can save while spending. It just takes work. We all spend on a regular basis, whether it be going to the grocery store or buying gas. Therefore, look for ways that you can save money during these shopping trips. Couponing is a great way to save money while going to the grocery store. Take the time to cut coupons from the Sunday paper, find coupons online and look for manufacture’s coupons. You can also find store coupons and coupons on products in the store.
- 3. Resist spending
It’s hard but it is possible to resist spending money. Some people shop as a pick-me-up or as a way to feel better. Don’t shop when you are stressed, depressed, or sad. In these cases, you are just creating a recipe for disaster. Create a 30 day list if you need to. Write things on there that you want, and then look at it in 30 days to see if you still want those items. Think about the things that you already have and consider whether you need that item. For example, you are shopping for clothes and pick up a black shirt. Think about whether you have a black shirt in your closet already. If so, do you really need another black shirt?
- 4. Shop for a bargain
While couponing is one way to save money while shopping, there are other ways to shop for a bargain. If you really do need another black shirt, don’t pay full retail for it. Go to your local thrift store or consignment store. If you don’t have any thrift or consignment stores in your area, then consider looking online. Ebay.com is a great place to find clothes and many other items online. A lot of clothing stores have sales on their website, so check there for a good price.
- 5. Cut back expenses
Another way to save money is to cut back on your expenses. Write all of your monthly expenses down and see if there are areas where you can cut back. Do you eat out a lot? Then stop eating out as much and take lunch to work. Do you have Netflix? Cancel it for awhile until you have met your goal. Think about all these recurring expenses and see what you can live without.
- 6. Reward yourself for good behavior
It’s hard to save money and cut back on expenses. Therefore, when you meet your goal for the month, reward yourself with something that you’ve been wanting. Don’t spend too much money on it but just enough to remind yourself that you did a good job and to encourage yourself to meet the goal for next month.
A financial plan is the first step in saving money for a goal. These goals should be very specific and you should have it written down how much you need to save each month and how you are going to achieve that goal. You can save money with couponing, cut back on expenses, resist spending, and shop for a bargain. Once you meet your goal each month, reward yourself with a little prize.
Filed under budget, Credit Counseling, debt, Personal Finance by Johnson James
Dealing with Debt the Easy and Manageable Way. Debt is a four-letter word to many people. It’s a major source of stress for an ever-increasing number of consumers. But unless you’re independently wealthy, debt is usually a necessity if you want to make a major purchase such as a home or an automobile.
Consumer debt is on the rise, and so are delinquencies. More and more consumers are turning to credit counseling to get their debt under control. And even with the tighter restrictions on bankruptcy, people are still filing. These statistics paint a grim picture of debt, yet consumers are still using their credit cards and taking out loans.
The fact is that debt is not such a bad thing in and of itself. It can help us get the things we need and want. The problem lies in accumulating too much debt. If we’re not careful, we can get in over our heads. And once we do, it becomes harder and harder to get out of debt.
By educating ourselves about debt and determining what is a safe level of debt based upon our income, we can avoid falling into a debt trap in the first place. And if we’re already in too much debt, there are steps we can take to reduce it.
Good Debt vs. Bad Debt
Yes, there is such a thing as good debt. There are only a few types of debt that fall into this category, but it’s important to make the distinction. Some examples of good debt are:
- Debt incurred to buy a home – Owning your own home has numerous benefits. But the reason that this is considered a good debt is because a home is an investment. It gains value instead of losing it, so you’re putting yourself at an advantage by going into debt as long as you keep your payments current.
- Student loans – Getting a college education is a good investment as well. By earning a degree, you put yourself in a position to earn more money over your lifetime.
- Debt associated with starting a business – Starting your own business can be a risky proposition, but it’s done with the intention of earning money. However, some of the assets you purchase will depreciate rather than appreciating. But for practical purposes, you can consider this a good debt.
There are lots of examples of bad debt. Here are a few:
- Auto loans – Having a car is a necessity for many, but a car loan is still considered bad debt. An automobile loses value over time rather than gaining it, so when it’s time to sell or trade you will not recover your investment.
- Credit card debt – Although credit cards can feasibly be used to purchase things that appreciate, they are in general considered bad debt because of the types of things that are usually bought with them. The overwhelming majority of credit card purchases are things that lose value.
- Most personal loans – Personal loans are often taken out to finance purchases of things such as appliances, furniture, and vacations. These are often things we need, and a vacation can even help us become more productive, allowing us to potentially earn more. But none of these things appreciate in value, so they are considered bad debt.
Just because a debt is a so-called good debt, that doesn’t mean it can’t get us into trouble. It’s important to keep our good debt at a manageable level. Lenders take our income into consideration when lending us money for this reason. But it’s also crucial that we look at our individual situations and not borrow more than we can comfortably pay back.
On the other side of the coin, bad debt is not necessarily taboo. There’s no harm in taking on some bad debt to get the things we need and want. But the smart thing to do is keep it to a minimum, only using it for things we really need.
How Much Debt Is Too Much?
The amount of debt that is manageable is different for different people. It depends on our income, our bills, and how much money we need to save each month. But in general, it’s best to keep our total debts under 35% of our income.
Bad debt is the most important part of the equation. Ideally, we should keep it under 10% of our income. Anything higher is a sign that you may need to reevaluate your finances.
Calculating your bad debt is easy to do. Simply add up your monthly credit card payments, auto loan payments, and any personal loan payments, then divide that number by your monthly income and multiply by 100 for your debt to income ratio. If you want to figure your total debt ratio, add in your student loan payments, mortgage or rent, and any other monthly obligations you have, divide by monthly income, and multiply by 100.
An Ounce of Prevention Is Worth a Pound of Cure
The best thing we can do to avoid ending up in a vicious cycle of debt is borrow wisely in the first place. By remembering three simple things before we borrow, we can keep our debt manageable from the start.
- Shop around for the best possible rates. When buying a car or a home, we almost always compare several options before settling on one. We should always do the same when obtaining credit. Whether it is a mortgage, a car loan, or a credit card, getting the best rate you can get will end up saving you a lot of money in the long run.
- Use credit wisely. If you can do without it, you’re usually better off paying cash for it. Many people keep credit cards for emergencies, only to end up declaring a state of emergency when those expensive shoes they’ve been eyeing go on sale. While one impulse purchase probably won’t hurt anything by itself, it can easily become a habit. And that spells trouble.
- Pay your debt off as quickly as possible. If it’s a mortgage or loan, add a little extra to the payment each month if you can, or better yet make an extra payment every now and then. For credit cards, pay off the balance in full each month. If that’s not possible, pay as much as you can afford. Paying only the minimum payment each month will keep you out of trouble with the credit card company, but it will also allow interest charges to build up.
These steps sound easy, and they are. But it’s also easy to slip up a time or two. When we do and it doesn’t cause any major problems, we often tend to become more lax on watching our credit habits. That leads to more mistakes, and those mistakes lead to more debt. If it continues, we can end up in too much debt.
Signs That You’re in Too Much Debt
Figuring out your debt ratio can give you a good indication of where you stand. But sometimes you don’t need to crunch the numbers to know that you’re in trouble. And even if your debt ratios are at what is considered a safe level, your individual circumstances could still put you at risk. Here are some of the early warning signs that you may be getting in too deep:
- You’re only making the minimum payments on your credit cards each month. If you only make the minimum payment each month, it can take years to pay off even a small balance. And you’ll end up paying for your purchases many times over because of the compound interest.
- You use your credit cards for basic necessities on a regular basis. If you’re buying groceries or clothes with your credit card and not paying the balance in full every month, you could be headed for disaster.
- You charge more than you’re paying each month. Maybe you’re paying more than your minimum payment each month, but then you charge more than what you paid the next month. Even though you’re paying a little extra each month, things are still going in the wrong direction.
- You aren’t putting anything into savings. Having all of your money tied up in debt doesn’t leave anything in case of an emergency. You might think you can live off of your credit cards in a pinch, but that will lead to nothing but a financial disaster.
The above signs are cause for concern, but they signify the early stages of a problem. If you take action quickly, you still have a chance of turning things around before it’s too late. The following scenarios signify a need for immediate, drastic action:
- You’re not sure just how much you owe. If you have accumulated so much debt that you can’t even estimate how much you owe, that is a bad sign. Add it up, and you will likely find that it is much more than you thought.
- You borrow from one source to pay another. Getting cash advances from one credit card to pay the payment on another doesn’t get you ahead. It simply transfers your debt from one place to another. You usually end up paying extra fees or higher interest for the cash advance as well.
- You’re approaching your credit limit. Ideally, we should keep our credit card balances at a fraction of our credit limits. Getting too close to your limit, or going over, is usually a sign that things are out of hand.
- You get turned down for credit. If you’re in over your head already, the last thing you need to do is apply for more credit. But if you do and are turned down, that’s usually a good indication that you’re in too much debt.
- You’re making your payments late, or missing them altogether. If things have gotten to this point, you’ve probably already figured out that you are in too much debt. It’s time to start looking at your options for getting out.
How to Get Your Debt Under Control
In order to get debt under control, it is essential to have a plan. If we catch the problem early, we can often get things under control without any outside help. It takes lots of discipline, but with some planning it’s not difficult. Here’s how to do it.
- Stop incurring new debt. Put the credit cards away. Have your spouse or someone else you trust hide them if necessary. And don’t get new cards or take out new loans.
- Find ways to cut back on your spending. Just brainstorm at first. Do you eat a lot of fast food instead of taking your lunch to work? Do you buy a latte every day? Do you make unnecessary trips? Write these things down to work with in the next step.
- Make a monthly budget. Be sure to include all of the necessities, as well as entertainment expenses and the like. But leave out anything that you can live without from the list you made. And save the loan and credit card payments for last, because you’ll need to put as much toward them as possible.
- Figure out how much you’ll have left over. This should be split between credit card and loan payments and savings. See the next section for how to determine how much should go to which creditor.
- Stick to that budget! The only exceptions are in the case of a true emergency or when you can find unexpected ways to cut back. When you do find ways to cut back, put the money you save toward paying down your debt.
Prioritizing Your Debts
A frequent stumbling block for those who are trying to get their finances in order is figuring out what to pay off first. We know that we need to make the minimum monthly payment on each bill, but what do we do with the rest of the money we’ve budgeted toward paying down our debt? We prioritize and pay the most important off first, then go down the list until it’s all paid.
The most important debt to pay off, or at least keep current, is secured debt. This is debt that is backed by our assets, such as a home or car loan. If we don’t make our payments for these on time and in full, the lender can repossess or foreclose. That’s bad for us because we lose things that are very important to us, and bad for our credit.
If we owe a substantial amount of money on our homes, it may not make sense to try to pay them off before we pay off other loans and credit cards. Home loans have lower interest rates anyway, so it’s okay to postpone paying them off until we get rid of debt with higher interest rates. Just be sure to pay at least the minimum payment each month.
Paying off your auto loan is a good place to start. It will help you get rid of a secured debt, and the interest is often substantial, although probably not as high as your credit cards. You could put all of your extra money toward your car loan until it’s paid off, or you could put a portion of it toward the credit card or personal loan with the highest interest rate. If you have other secured debts, attend to them before moving on to the unsecured ones.
Once your secured debts are paid off, go through your unsecured debts in the order of highest interest rate to lowest. Pay the minimum payments on everything except the one with the highest interest until it’s paid off, then move on to the one with the next highest interest rate. Repeat until they’re all paid off.
When you’re done with the credit cards and loans, pay off any accounts you have outstanding with service providers and such. This includes doctor and dentist bills, and anything else you have a balance on. If you owe doctors or others whose services you need on an ongoing basis, you may need to move this up on your priority list.
And last but not least, pay any family and friends who you owe money. They are usually more patient than regular creditors, and they won’t report you to the credit bureaus. Throw in a little interest for their trouble. You should be able to afford it now that you’ve paid off all of your other debts.
If you have a mortgage payment, now is a good time to pay extra on it. Doubling up on your payments can get it paid off many years sooner than it would be otherwise.
What to Do with the Credit Cards When They’re Paid Off
Once your cards are paid off, it can be tempting to start charging again. But that’s the worst possible thing you could do. There is some disagreement as to the best course of action. Here are the things you could do, along with their pros and cons.
- Keep your cards and don’t use them. Some experts recommend that you keep accounts open in order to improve your credit rating. This can help, but if you’re not using the cards it won’t help much. And by keeping the cards, you open up the door for temptation. This could also backfire if an identity thief gets his hands on your card number, because you might not detect fraud until it’s too late if you’re not inspecting your bills as closely as you did when you used the cards.
- Keep your cards and use them occasionally. This will build up your credit rating, as long as you pay the balances in full each month. But still, by keeping the cards you could be tempted to run up the balances again, putting yourself right back where you started.
- Close all accounts except for the one with the lowest interest rate, and use it sparingly. This is a popular option. It allows you to have a card to use in case you really need it and to improve your credit rating, yet you don’t have multiple cards tempting you. But even when you only have access to one credit card, it’s possible to get into more debt than you can handle. If you’re offered a credit limit increase, turn it down.
- Close all of your accounts and don’t look back. The only sure way to stay out of credit card debt is to not have access to any credit cards. If you are concerned that you might not be able to help yourself, this may be the best thing. Keep in mind, however, that using credit cards responsibly can build up your credit rating, making it easier to get good rates on loans for necessities in the future.
What to Do if You’re In Over Your Head
What if you’ve tried to make a budget to pay off your cards, but the money to pay them off just isn’t there? Well, you have a few options.
- Start bringing in more money. You might need to get a second job, or search for a better paying one. There are also some ways you can make extra money from home, such as babysitting or doing direct sales. If it comes to this, putting as much of the additional funds as possible toward paying down your debt will help you get it down to a manageable level quickly.
- Attempt to negotiate with your creditors. If you talk to your creditors, some of them may be willing to give you more time to pay, drop late fees, or reduce your interest and your minimum payment. It’s possible that they might even settle for a lower amount than you actually owe, although it’s rare to achieve this without a lawyer.
- Consolidate your debt. Home equity loans, or second mortgages, are often used by people who are in an unmanageable amount of debt to consolidate the debt and reduce interest charges and monthly payments. The trouble is that by doing this, you put your house on the line. You may also pay more in interest than you realize, because even though the interest rate is lower, you will be paying for a longer time. If you choose this route, paying more than the minimum payment each month will save you money.
It’s also possible to get a credit card with a high credit limit and lower interest to transfer existing balances to. Your minimum monthly payment should also be lower. This is less risky than putting your house on the line, but you will pay more interest. If you choose either of these methods, don’t fall into the trap of using your cards again. That would defeat the purpose of consolidating and get you in even more trouble.
- Talk to a credit counselor. Credit counseling can sometimes help those who have taken on too much debt. A good credit counselor will negotiate with your creditors, getting you lower interest rates and lower monthly payments. Then you will make one payment each month to the credit counseling agency, which sends the lower monthly payment to each creditor, keeping a specified amount as a fee.
It is important to make sure you understand all terms of the agreement when you obtain the services of a credit counseling agency. They should tell you how soon your debt will be paid off and how much you will save in interest. It’s also a good idea to check the agency out with the Better Business Bureau to find out if there have been complaints against them.
- File for Bankruptcy. This should be your last resort. Chapter 7 bankruptcy wipes all of your debts clean, but you may lose some of your property depending on your individual circumstances. Chapter 13, which is now more common because of changes in the law, sets up a court-ordered payment plan to pay off your debt. Either type will stay on your credit report for 7 years, and on public record permanently.
Debt Isn’t Always a Bad Thing
When managed properly, debt can be a good thing. It can help us get the things we need and want in life. It’s when we start living beyond our means that it becomes a bad thing.
By borrowing wisely and paying debts off promptly, we can keep our debt under control. We can keep our credit reports in good shape, allowing us to get low interest rates when we need to borrow in the future. And we can life a much less stressful life.
If you see your finances taking a turn for the worse, taking on more debt will only add to the problem. Stop using the credit cards, and take steps to reduce your debt as quickly as possible. Averting disaster is often easier than we think if we’re willing to tackle the problem head-on instead of letting it spiral out of control.
Related articles
- Understanding Your Debt-to-Income Ratio (ally.com)
Filed under Credit Counseling, debt, Debt Management by JamesJ
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A Guide to Dealing With Your Loans… The economic crisis brought about a recession that may last for several years. With unemployment rising, major companies declaring bankruptcy, banks still unwilling to lend to other banks, the credit crunch affecting millions of people, and the market’s consistent volatility has everyone very concerned about their individual finances.
Not since the Great Depression have more households been affected by this recession. Concerns about job loss, home foreclosures, and the inability to pay down debts and loans have become the primary focus for many people here and abroad.
In this report, we will discuss how to obtain lower rates on loans, how to appropriately budget, counseling services, different types of loans, and how to choose loans wisely.
One can use the Boston Marathon as an analogy to describe how one feels when debt is mounting and there seems to be no way out. It is mile 13 of the Marathon, infamously called the “wall.” As runners approach mile 13, their legs feel light dead weight and they find it difficult to go on.
Take heart! Just as those runners find whatever inner strength they have to persevere to go on and finish the race, you too have to find that part of you that will not give up.
You will have to make whatever sacrifices are necessary to go beyond the wall, and bring stability not only to your personal life, but your financial one as well.
This report will offer many websites on the Resource Page that can help you make it to the finish line, as well as our tips and suggestions for better budgeting.
How to Obtain Lower Interest Rates on Loans
Car Loans
If the interest rate on your car loan is too high, you can always switch to another lender. But before you do make the switch, call the lender with whom you have the loan and ask if there is a lower interest rate available to you.
In addition, call your own bank to determine if they are offering a lower interest rate. Or, if you are a member of a credit union, you may be able to obtain a lower rate through them.
Keep in mind that if you have an excellent credit rating, you are in a better position to obtain a lower interest rate. If your FICO score is under 700, chances are the banks will not offer a better rate. Currently, you need a score of 720 or higher to acquire the best rate available.
Two other alternatives may be to (1) contact your lender and discuss extending the loan term or (2) converting your current loan into a lease. This requires you to find a lese company who will buy your car and pay off the loan. Then they can lese the car back to you. The payments will be substantially lower. When the lease expires, you can then determine whether to buy the car or return it.
Student Loans
There are three types of repayment loans available with Sallie Mae. They are: Extended Repayment, Graduated Repayment, and Income-Sensitive Repayment designed to lower your monthly payments.
Extended Repayment
The following loans fall under this type of repayment: Stafford, Parent and Graduate PLUS, federal consolidation loans for balances that exceed $30,000. To qualify, you must:
* Be a new Federal Family Education Loan Program (FFELP) borrower with one or more eligible loans first disbursed on or after Oct. 7, 1998.
* Have obtained a federal consolidation loan on or after Oct. 7, 1998 with no other outstanding FFELP loans when the consolidation loan was made.
Graduated Repayment
According to Sallie Mae, “Graduated repayment allows Stafford, PLUS, and many of private student loan borrowers to make reduced payments that may be as low as interest only for up to four years followed by standard payments of principal and interest for the remaining repayment term.
Keep in mind that reduced payments may increase the total cost since the loan principal is repaid more slowly. Terms and conditions apply. Partial or full prepayment is allowed at any time without penalty.”
Income-Sensitive Repayment
Your payment must cover at least monthly accruing interest. You determine the percentage of your monthly payment: between 4% and 25% of your monthly gross income.
* You have to apply annually for an income-sensitive repayment plan.
* You can prepay at any time without penalty.
* Because the loan is repaid more slowly, your total interest costs may be higher over the life of your loan.
TIP: The following information was obtained from MSN money: “As of July 2009, borrowers “will have the assurance that their loan payments won’t cripple them,” says Robert Shireman of the Project on Student Debt. Rather than pay a fixed amount over 10 years — the standard repayment schedule — struggling grads can opt for a program that bases payments on up to 15% of their annual discretionary income, defined as gross income above 150% of the federal poverty level.”
Home Mortgage Loans
This may be the one area where most of your money is tied up on a monthly basis. If you have a problem pay your mortgage, consider refinancing.
The rule of thumb is to refinance if the interest has been lowered by 2%. Regardless of whether you have an adjustable rate mortgage or a fixed mortgage plan, refinancing can alleviate many of the current worries you have about paying off debts.
This will require researching the refinancing rates online. After finding the best rate (use the online calculators to assist you), then you can determine how much you will save and apply the savings to pay off other debts.
TIP: With the current economic crisis, you may want to change your ARM loan to a Fixed Loan in order to prevent higher interest rates from increasing on your existing loan.
Loan Consolidation
A debt consolidation loan may be another alternative you can use to take all those high-interest rate credit cards and other loans and combine them into one monthly payment.
There are two types of consolidation loans: secured and unsecured. A secured loan requires collateral, whereas an unsecured loan does not.
A secured loan should not be taken lightly. Remember, collateral will be needed to obtain the loan – and if you default on said loan, you can lose whatever was put up for collateral.
Conversely, an example of an unsecured loan may be a home equity loan or mortgage refinancing.
The benefits of a debt consolidation loan include:
* Lower interest rate than the rate(s) you are paying on your existing debts
* Significant savings during the life of the loan
* The ability to pay off all credit cards and other loans
* Cutting up all credit cards except one
Seeking the Advice of a Financial Counselor
This is another important step you may need to take. If all else fails, contact an accredited professional financial counselor you can help you pay down your debt by utilizing either a debt settlement or management plan.
Debt Settlement Plan. The counselor will contact the creditors and settle your accounts by sending a portion of the debt. If this agreeable with the creditors, the payments can be lowered so they can be repaid over time. Individuals who have chosen this particular route have reduced their payments up to 65% and have become debt-free within five years.
Management Plan. The counselor will work with the creditors to negotiate benefits that will help you manage your debt in an easier manner. They will either help to reduce your interest rates and waive any fees applicable so as to reduce your monthly payments.
How to Choose Loans Wisely
Finding the best loan for you requires a great deal of research. As mentioned earlier, your best bet is to find an unsecured loan that has the lowest possible interest rate.
In order to secure the lowest interest rate, your credit rating today has to be excellent, that is, with a FICO score of 750 or above.
This may seem like a daunting task, but it is nonetheless necessary in order for you to reduce interest rates or obtain a new loan with a low rate.
Banks are being particularly cautious in lending money because of the sub-prime mortgage crisis. For applicants with a so-so credit, rating banks will not be willing to take the risk that payments will not be forthcoming.
Here are steps you can take to increase your FICO score and improve your credit rating.
* First, contact the three credit reporting agencies and obtain copies of your credit standing as well as FICO scores. Question any item in each report that you deem suspicious.
* Call each credit card company and/or bank where you have a loan, and ask if the interest rates can be lowered. This should save you a few dollars in the short term. If at all possible, double up on payments for the first two or three months.
* Ask family members to loan you the money if necessary. This is an important step before securing a consolidation loan.
* Once you have made a list of the banks or lenders who are offering low interest rate loans, call to make an important with each one.
* Determine who is offering the best loan package and then make the decision.
TIP: You can opt for a loan consolidation or a home equity loan. Ascertain the difference between the two and make your decision based on your particular financial circumstances.
Home Equity Loan
A home equity loan allows you obtain a loan by using the equity in your home as collateral. This may or may not be a good idea since the value of homes has dropped considerably since the economic crisis. However, it doesn’t hurt to look into this alternative.
TIP: A home equity loan is a “secured” loan, which means that if you default on payments – you can lose your home.
Budgeting
Do you have a household budget? If so, is it working for you? If not, here are some tips and suggestions that you can utilize to overhaul your budget and save additional money to pay off those loans.
First, scan your budget and get rid of unnecessary expenditures such as: manicures and pedicures, weekly visits to the hair salon, magazine subscriptions, newspaper deliveries, buying a cup of coffee daily, going out to lunch or dinner, vending machines, parking meters, lotto tickets, and other incidentals that can cost you dearly every month.
Determine where you can make additional cuts, such as:
* Groceries. Buy in bulk when items are on sale. Buy store brand items instead of premium items. Use online coupons, Sunday circulars, and in-store circulars to save money. Prepare meals for a month by setting aside one day to cook soups, stews, and other meals for the family.
* Energy savings. Unplug appliances when not in use. Turn down thermostat at night. Keep refrigerator thermostat to recommended temperature. Use microwave more often. Use energy efficient light bulbs and ceiling fans. Clean air condition filter often. Winterize your home. Take shorter showers. Do not leave water running when shaving. Wash a full load of laundry in cold water. Shut down computer; do not leave it in sleep mode. Make sure your water heater is adequately insulated.
* Entertainment. If you normally eat out once or twice a month, eliminate this from your budget. Try not to order take-out; you can prepare delicious meals in no time. Utilize Food TV.com for 30-minute meal recipes. Instead of going to the movies or renting DVDs, there are several online websites that you can join wherein you can swap movies on DVD, CDs, and books. Or you can visit your local library.
* If you have cable and paying a fortune for premium channels, consider eliminating them as well. Look into the many bundle packages available today. If it is cost-effective, sign up.
* Call your telephone company and, line by line, eliminate the unnecessary features. If you use a cell phone to make all your calls, eliminate your home phone. For long distance calls, you can use the online company Skype and make calls for free.
* Clothing. Use several of the online rebate and coupon sites to save money on clothes. Consider shopping at consignment shops or thrift stores.
* Save money on gas. While the cost of a gallon of gas is quite low now, it may go up again anytime soon. Walk whenever you can. Make one trip to complete your errands. Maintain your car by making sure the tires are properly inflated; you are not carrying excess weight in your trunk; you change the oil and filter accordingly. Do not exceed the speed limit while driving, and do not sit in the car with the AC on.
* Prescription drugs/doctors. You can save quite a bit of money by keeping your family healthy. If you are required to take prescription drugs, check the many pharmacies that are offering lower prices. Look into changing your health insurance to accommodate your family’s needs. By generic over-the-counter medications whenever possible.
* Parking Meters. These can eat up quarters faster than a slot machine. If you shop in your local neighborhood, park on side streets or further away from the center of town. You can save a lot of money by not using parking meters.
Keep contributing money to:
* 401K Plans. If your company is offering a 401K plan and you have been contributing to it, don’t stop. Even thought it may have lost money during the market downturn, this money is necessary for your retirement. Eventually the market will return back to normal and the stocks, bonds, and mutual funds will continue to yield earnings.
* IRA/Investments. If you have an IRA, continue to contribute. As for any stocks you may have, do not sell them as yet. When the market rebounds, so will your stocks.
Finally, and this is very important, set aside – if you can – enough money to cover expenses for six months. Since we do not know how long this recession will last, there is always the possibility that in addition to the loans you have, an emergency may occur requiring you to pay for whatever services are needed.
When it comes to budgeting, it is necessary that you adhere to it. Yes, it will be difficult; and yes, there will be occasions when you need to take from Peter to accommodate Paul. But these are difficult times that call for difficult measures.
Owing money can be a heavy burden to bear. It can cause stress and other health conditions.
The content of this report is a means by which you can contemplate the choices you have, choose the best possible scenario for you and your family, and act upon it as soon as possible.
Telling you that there are hundreds of thousands of people with similar financial problems may not ease the pain, but it may alleviate it to some degree.
Here is how one woman talked about her financial situation:
“I am very worried. I have many credit card debts. I live on a meager pension, and supplement it with at-home work. I am also taking care of my parents as well. Together, we are just getting by. I watch how I spend every penny. My budget is small and doesn’t allow for any emergencies or illness, even though I have healthcare coverage from my former employer.
I worry that my savings, such as they are, will dry up. I do not know what I will do then since I do not make enough to apply for a consolidation loan. I have several debts that need to be paid every month. It’s hard, but the alternatives are few. All I can do is work hard every day and pray I will not become a statistic.”
Does this sound familiar? People across the globe are experiencing some type of financial failure. Many lost their entire savings during the economic crisis; still others lost a substantial amount of money in their retirement funds.
Every day, you read about people who invested with one firm or another only to find out the crooked CEOs spent their client’s money and there is nothing left. People, like you, who worked hard all their lives just to be able to enjoy retirement comfortably.
But, there is a light at the end of that long dark tunnel. All you have to do is find the path to it.
Finally, don’t panic. When you do so, you make decisions that are not in your best interest. Sit down with your family and devise a new budget; make the necessary changes to it; enlist the aid of your children (age appropriate), and ensure them that everything will be okay.
And it will be………….
Resources
CNN.Money Budget Calculator: http://cgi.money.cnn.com/tools/budget101/budget_101.jsp
Student Loans: http://www.salliemae.com/
FinAid: http://www.finaid.org/loans/consolidation.phtml
Loan Calculator: http://www.finaid.org/calculators/loanpayments.phtml
Loan Interest Rates Comparison: http://www.bankrate.com/brm/rate/brm_loansearch.asp?product=51
Auto Loan Calculator: http://www.bankrate.com/brm/auto-loan-calculator.asp
Student Loans Interest Rates and Fees: http://www.salliemae.com/get_student_loan/apply_student_loan/interest_rates_fees/
Credit Reports: http://www.ftc.gov/freereports
A Consumers Guide to Health Insurance: http://www.ahrq.gov/consumer/insuranceqa/
About 401K Plans: http://www.401k.org/
Sample Letters to Lenders: http://www.cclcnsw.org.au/content/view/50/61/
Financial Counseling Services: http://www.moneymanagement.org/
Consumer Credit Counseling Services: http://www.creditcounseling.org/
National Credit Union Administration: http://www.ncua.gov/index.html
Credit Union Locator: http://www.creditunion.coop/cu_locator/index.html
Rebates: http://www.ebates.com/index.htm;jsessionid=abc0nCW5q3msfcIKYBIxr
Online Coupons: http://www.anycoupons.com/
http://www.couponcabin.com/
http://www.currentcodes.com/
http://www.wow-coupons.com/index.php
http://www.couponfetch.com/
Filed under budget, Credit Cards, Credit Counseling, Credit Tips by JamesJ
Money money money…There’s no denying the importance of money and the stress it causes. In fact, one of the main reasons people feel worthless and have low self esteem is due to money-related issues. In these touch economical times, it’s more important than ever to gain control of your financial situation in order to gain control of your self-improvement.
1. Keep a financial spreadsheet- a financial spreadsheet is easy to make and is a perfect way to keep track of what’s going out and what’s coming in. Make sure you include everything from credit card purchases, memberships, insurance, groceries, cab rides and shopping trips. If you are spending more than you make, then you have a problem and need to re-adjust your spending habits.
2. Sweat the small stuff- the small stuff adds up. Those daily coffees, those weekly magazines and those monthly gym memberships all need to be accounted for when you look at your finances. Every penny counts.
3. Get help if you need it- there’s nothing wrong with asking for financial advice. In fact, this is one of the best ways to gain financial freedom and work towards financial and self-improvement. Find a financial advisor who can help you set goals and meet them.
4. Remain grounded- debt can be overwhelming. Really overwhelming. Furthermore, too much financial success can cause arrogance and rash financial planning. It’s important that whether you are in the red or profiting in the green, that you keep your head about it. Make smart financial decisions regardless of where you are. Don’t let the wealth goes to your head and don’t let the debt get you down. Debt is part of life- you just need to take it one payment at a time.
5. ‘Sale’ does not mean ‘buy’- just because something is on sale does not mean you need to buy it. Resisting the bright lights of ‘half off’, ‘buy one get one free’ and ‘discounted item!’ is a big step to self-improvement.
6. Always Pay the Credit Card- try, with all your might, to get that credit card payment down. Credit card interest rate is one of the highest out there and it’s really easy to rack up a huge bill and forget about it. However, you will end up paying hundreds, if not thousands in interest, which can lead to more stress, more debt and more insecurity about your financial success. Try to limit your credit card spending for emergency only uses.
7. Discuss mortgage rates with your bank- your mortgage and interest rate is not set in stone. It’s a good idea to negotiate a better deal every once and a while. See what’s out there; talk to your bank manager; and make the most out of your options. Doing a little research can go a long way in the end.
8. Ditch the impulsive (and compulsive) buying- buy only what you need, not what you want. Impulse and compulsive buying can lead to buyer’s remorse (especially when the credit card bill arrives) which can negatively impact your self-esteem and self worth. We all love a good shopping trip; but during these tough economical times, it’s important to rise above the urge to shop and prove that you can do it.
9. Do the research- better deals on insurance, electricity rates and phone plans do exist! You just need to do the research and see if you can bag a better bargain. Because of the intense competition in our economy, many companies are constantly lowering the prices on their services that you need. Take advantage of this by shopping around, comparing rates and using a quote wizard online.
10. Use Savings Accounts wisely- they don’t call them ‘savings’ accounts for nothing! Set up a savings and a spending account. What you do with your savings account is up to you- perhaps you are saving for a holiday; perhaps you are putting money towards the kid’s education. Watching your savings account grow month after month, regardless of if you are contributing $10 or $1000 is an important step in gaining financial freedom and improving your money issues.
11. Consolidate; if you have to- consolidating your debts is a really smart move, especially when debt is starting to consume your life and impact negatively on your self-confidence. Debt consolidation can stop those annoying phone calls and overdue bills. Instead you pay one payment each month for all your different debts combined. It is much easier to manage and you can rest easy knowing that you are getting out of the red.
12. Concentrate on what you have and want, not what others have- this can be a really hard thing to do, especially when your neighbor is flaunting his brand new swimming pool and your co-worker just received a $3000 bonus but you didn’t. Take a deep breath and push past those jealous and frustrated feelings. Concentrate on your own goals for the financial future and prove that you are better than those petty feelings of resentment.
13. Swap High Interest for No Interest- one of the great things about the competition of credit cards is that it is possible to get no interest on bank transfers. This means you can swap your credit card debt to another financial institution and receive their low introductory rate. You can stand to save thousands of dollars in interest and pay off that looming credit card debt faster. This crafty financial move can leave you feeling proud and smart.
14. Think to the future- We all want to live for right now but it’s important to secure your financial future by investing in your retirement. Contributing to a 401 (k) plan or the equivalent can help you grow up, gain responsibility and improve your general financial understanding.
15. Work hard and work smart- although everyone wants to benefit from the get rich quick scheme, in most instances, the fastest way to the top of your financial success if through hard work. Hard work also helps to build character and demonstrates your ability to focus on a job and commit to something. All of these attributes are essential to improving your overall quality of life. Work is part of life- a big part, so why not be the best you can at it?
16. Understand your own financial journey- when it comes to our finances, not everyone is treated equal. While some may have to work full time from the moment they leave school, and still are scrapping by, others are handed a wad of cash, a house and a car from their parents or grandparents. Wealth is not distributed equally but it’s important to make the most of what you’ve been given. Everyone’s financial journey is different. You need to find your own path and follow it as best as you can.
17. Commit to your financial goals- if you want something, go for it!
This can be easier said than done, but there is nothing more rewarding than saving up for something special and then buying it outright. Learning to budget, save and spend wisely are all critical steps for self-improvement.
Filed under budget, Credit Counseling, Debt Management by Johnson James
Do you need to budget your finances better? Quite a few folks fight to budget effectively and it’s easy to see why. But with using the debt snowball you completely disregard interest rates and just list your debts moving from smallest to largest. Pay the minimum on all debts except for the smallest. Use the money you were using to pay the smallest debt and start adding it to the payment of the second smallest debt.
Filed under Bankruptcy Personal, budget, Credit Counseling, debt by Johnson James
