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 Every time You use Your credit card, You express Your confidence in your future ability to pay that debt. Forty years ago, most people may have paid cash for their homes and their cars – this is completely unheard of today. Even borrowing cash is virtually gone. When was the last time You asked someone to lend You some cash for a sandwich in a bar?
Nowadays debt and instant credit are part of our everyday lives, causing the convenience credit cards to take their tolls on people and their habits. Many spend more than they earn, creating situations they eventually do not know how to get out from. Using credit establishes a history of financial responsibility. So do not be afraid to use it at Your advantage but use it wisely. Until you establish a positive credit history, your chances of qualifying for an important loan, such as a mortgage, are significantly reduced.
Debts come typically in a number of forms. Most people cannot buy a home without some financial help, and many cannot buy a car without some sort of financing. The installment debt thus incurred is paid over extended period of time at regular intervals, where each installment has some predefine value. At the end of that time period, the loan with interest is paid off. Remember that the initial installments consist mostly of interest and little amortization of the loaded fund. The situation improves as the time progresses. Installment debt is easily budgeted and the debt is eliminated on a predetermined date. Some people actually with cash to purchase the given object select this particular financial plan, saving the liquid financial resources for some other purposes.
Another form of credit i.e. open-ended credit, is made available to be used at any time, including the commonly recognized credit card lines like Visa, Mastercard, Amex etc. The credit line You obtain when signing on depends on the your credit payment history and income. Remember to check the payment conditions, minimum monthly payment and utilization fees before signing any credit card contract. Some of the cards can come with the interest rates as high as 15%+ ! As dangerous as they are, credit cards eliminate the need to carry cash, which is attractive for most people. Detailed monthly statements help organize expenses and keep their track. Spending more than you earn in any given period is a dangerous practice at best, but doing it over an extended period of time can be financial suicide.
When applying for a credit card, be prepared to use it wisely. Keeping track of your cards, their rates, and your current balances will allow You to remain in control of Your spending. Credit card market competition lead to some very attractive offers, if used appropriately – some companies offer no maintenance fees, low interest rates and bonuses.
If You feel however that Your current credit card is running low on credit line, check Your current debt and evaluate your spending habits. Examine your existing expenses to analyze how your money is spent. Based on your current spending practices, create a realistic budget to pay off your credit card debt in the shortest time possible while not adding any more debt to it. It is also reasonable to ask a financial advisor for some help with merging Your credit cards and eliminating debt, if applicable.
Both debt in general and credit cards specifically play an increasingly important role in our contemporary lives. When observing Your spending potential, always try to observe the golden motto: never spend more than You earn. Once you have come to grips with this basic fact, managing your debt will become far easier and more rewarding.
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Yes, You CAN Get Out of Debt |
 In all the countries around the world today, having some debt is unavoidable. However, in between mortgages, car payments, and credit cards, many people find themselves concerned with the growing portion of their financial resources consumed by the debt.
Before trying to find any solution for Your particular case, it is necessary to assess the total value of Your debts. How much debt is too much? This value varies depending on the person, social situation, employment, country etc. It is generally assumed that if more than 20% of your net income goes for covering debts or if your rent or mortgage payments exceed 30% of your net income, you may as well be overextended and running in arrears. Other common signs of problems include t knowing how much you owe, constantly paying the minimum balance due on credit cards (or worse, being unable to make the minimum payments), and borrowing from one lender to pay another. If Your are in one of these situations, do not panic. There are some steps which can be taken to alleviate the problem.
First, figure out where your money goes. This will enable you to see where your debt is coming from and, perhaps, help you to free up some cash to put toward debt. Try to follow all Your expenses for at least 1 month, putting down what You spend the money on. Keep all the ATM withdrawal slips, put down even the tiniest expenses so that at the end of the month the figures add up. Hang on to receipts from credit card transactions and add them to the total. The numbers should match if You do this exercise right. At the end of the month, break down all Your expenses into two categories i.e. essential, including fixed expenses such as mortgage/rent, food, and utilities, and nonessential, including entertainment and meals out. See through the elements and check what can be cut down on. Try using public transport instead of Your own car. Dine at the local canteen instead of the fancy downtown restaurant. Even utility costs can be reduced by turning lights off, making fewer long-distance calls, or turning the thermostat down a few degrees in winter.
Once You have Your budget down, it is time to approach Your outstanding debts. Pay off high-rate debt first, since the high interest will make the debt hand around for longer. Pay off all high interest rate credit cards. Next, once that is done, transfer high-rate debt to lower-rate cards, taking advantage of credit card debt consolidation, Saving on interest rate, management costs etc. Contact your current credit card companies to inquire about consolidation and lower rates – local conditions may vary between regions. Competition in this industry is fierce so do not be scared to bargain a little bit if You think You can gain anything on that. Even 0.5% interest rate bargain on Your card is already a good start.
Consolidating credit card debts to a single, lower-rate card saves more than postage and paperwork. It also saves in interest costs over the life of the loan. Comparison shop for the best rates, and beware of "teaser" rates that start low, say, at 6%, then jump to much higher rates after the introductory period ends. If You do need to borrow, borrow but only for the long term, financing at best things which last longer than the crediting period. Avoid using your credit card for concert tickets, vacation expenses, or meals out – by the time the given entertainment finishes, You are left with bills to pay. By analyzing your spending, controlling expenses, and establishing a plan, you can reduce or even eliminate Your debts completely. This will leave You with more money to save everyday and a much better outlook for the financial future of Your home.
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Stop Singing Those Holiday Spending Blues |
 Holidays are always thought to be the happy period, when You do not need to worry about money, credits, payments etc. However, learning how to budget, plan ahead, and save for holiday expenses is vital if You really want to rest without having a huge head-ache later on. If you're not careful with the expenses, the holidays can easily become a serious financial strain, leaving bills to pay long after the photographs fade out. Before deciding therefore where to spend them and what to buy, plan ahead how to manage the expenses. Typically, people reach for credit cards when deciding to go for holidays – this adds only high interest rates to already exorbitant prices, delaying payments for several months, sometimes until the following holiday season.
It is much wiser to set aside a little money from each paycheck starting from January each year, reserving this amount exclusively for holiday expenses. Your local bank or credit union may offer special holiday savings accounts, with reasonable interest rates, providing You with a way to save the money without really feeling it. With the budget secured, it is also necessary to start planning for holiday expenses, taking advantage of any special offers, savings etc., which happen to be available at the given moment. Do not miss out regular expenses like meals out, decorations, and babysitting if You happen to have kids. Use the last holiday season’s receipt if You have them to help You plan the next holiday You take upon. Just remember to bring the holiday budget in line with Your financial potential – sometimes it is possible to save quite a lot of money if You opt out to cut down on the number of people You want to give gifts to or the maximum gift price You’re willing to offer. Selecting gifts more carefully is another way of reducing expenses without significant effort. Last-minute, unplanned shopping almost always ends up with unscheduled spending spree, causing the holiday budget to swell. Post-holiday sales typically offer large discounts on wrapping paper, cards, and decorations, allowing You to save some money for the next year’s holiday. Watch the prices for individual products and decide when it is the best time to purchase them.
Be aware of the online bargains, where Your can sometimes find a lot of attractive offers since the holiday online shopping has increased significantly in recent years. It is already well-known that online retailers offer lower prices than the regular representatives. Don't assume automatically that you'll always get a better deal on the Net – sometimes a good search among local resellers can also give off good results.
Buying after the holiday period tends also to be advantageous. Assuming You have people to offer gifts to and You will see them only after the holidays, do delay the purchase of the presents until the post holiday period. This way You can take advantage of the sales and discounts, which are bound to come after holiday rush is over. Original presents like coupons, baby-sitting offers, taking kids to school etc are also welcome and sometimes more valuable than anything purchased in the shop. Remember that it is the thought that matters and not the amount of money You invest.
Planning, budgeting, and creativity can help keep holiday bills in check, preventing You from reaching for Your trusty credit cards. Using credit cards to balance holiday shopping is common and fast, though always make sure You use the lowest interest rate card You have at Your disposal. Pay the bills immediately after the holidays – otherwise, the interest will keep on mounting and You will notice it is hard to pay it after a while.
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Bankruptcy was socially considered a stigma, indication that one could not manage their own funds though bear in mind that more than 1.5 million Americans filled for bank bankruptcy in 2005. The bankruptcy itself was after all created to protect the financial health of the unemployed and financially unstable people by protecting them from their debt for a limited period of time. The one thing one ought to be aware when filing for bankruptcy is the fact that the filer must liquidate personal assets to pay at least part of the outstanding debts. Personal property is typically sold by a bankruptcy trustee and the obtained funds are used to satisfy the creditors. Certain assets are exempt from the proceedings if they are necessary to sustain the filer and any dependents. Exact conditions vary depending on the country and local legal regulations. Certain debts however cannot be erased under any bankruptcy filing. Such debts include alimony, child support, property settlements, criminal judgements and fines, student loans, and most taxes.
If You are wondering whether to file for bankruptcy, please bear in mind that this process should be avoided if possible. Remember that a bankruptcy filing leaves a very negative mark on Your credit record, making obtaining any loads, mortgages, and credit cards in the future significantly more complicated. Managing excessive debt can be also be effected by other means, including negotiation of the payment plan with a creditor, allowing to reduce the outstanding debt. Credit card companies faced with the rising number of bankruptcy filings typically prefer to regain at least part of the outstanding debt rather than lose everything. Professional credit counselors are available to provide You aid in this process, though You may conduct it personally. Payments for the negotiated debts can be deducted directly from your paycheck by the counseling service. Credit consolidation i.e. moving several separate debts and merging them into a single credit line may also lower Your monthly payments, helping manage the available funds. In case of doubts regarding the legal side of the bankruptcy, credit lines and consumer credit counseling, consult a local attorney for advice. Do not be afraid to ask questions as long as they lead You towards the right solution. Avoid with people who offer You loans and steer You toward bankruptcy without first exploring all other alternatives, including the aforementioned ones.
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Starting Out: Begin Funding for Your Financial Security |
When entering the workforce, always bear in mind the importance of saving – graduating the school is after all only the first step into the future life. The little money You can manage to save at the end of the month does not seem much but even so – what to do with it to make the most of it?
If you're spending more than you make, consider what You can cut back on, including getting a less expensive apartment, sharing a room or changing a car for a less expensive model. Trim down on dining out, entertainment, and vacations. Outstanding debt is one of the biggest obstacles to saving. If You use credit cards, check their conditions and consider transferring Your accounts to a less expensive bank and remember always to spend at most as much as You earn a month – otherwise the interest will start killing You slowly. If You're still a student and need cash urgently, there are student load programs available in most countries, with government guaranteed payment facilities – check whether You’re eligible and apply for one. The conditions are always better than obtaining a commercial credit – the interest rates are lower and the payment period is extended.
In the case of large-value purchases, always secure a way of paying the debt even if You happen to lose a job. Disability insurance is a major safeguard against financial trouble if you're out of work for an extended period. Health insurance is however the top priority since hospital care tends to be expensive if done privately under emergency conditions. Sometimes public hospital care is unavailable or simply takes too long. Life insurance usually follows, though check the conditions of any such policies offered by Your employer or local insurance company representative before signing anything. Reading fine print is essential in this case. For some companies, being your means You’re more prone to accidents, thus higher insurance fees are applicable.
It is also prudent to save at least three months' worth of living expenses in case income stops. This can be achieved in an easy manner through an automatic savings plan. Under such a plan, a designated amount of your salary is transferred automatically before you see your paycheck and gets deposited into Your saving account instantly. Other forms of short-term savings include higher-earning alternatives to bank savings accounts i.e. money-market funds like Treasury bills, short-term corporate loans, and other low-risk instruments that typically pay higher returns than savings accounts. You may lose some money on them though such a possibility is highly unlikely even under current unstable financial conditions.
Some long-term financial opportunities are also really worth considering, e.g. tax-advantaged retirement plans are a splendid way to help build long-term financial security. Apart from tax advantages, the retirement program is debited directly from Your paycheck at the end of the month, guaranteeing the payment is always met, Check out whether Your employer has any company wide retirement program set-up and if so, know its conditions. It is always advised also to have a look on the local market and see what other insurance companies offer – You may get pleasant surprises after all with low withdrawal taxes, increased interest rates, additional securities and insurances etc. All it takes is some time and research You need to do, as in any case involving Your money. Always be sure what You're investing in – never jump the bullet when Your money is involved. Taking control of Your own funds means that You may finally stop waiting for the end of the month and the paycheck just to balance Your credit cards. And remember, acting sooner rather than later means You have a better chance of saving more and getting the best of it sooner.
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