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Spending Habits That’ll Help You Build Extra Funds For Debt Payments

February 11, 2021 By editor

Do you have any idea how influential your spending habits can be? It can make or break your financial situation. That’s not an exaggeration!

Some people believe that if they can only earn enough money, they can improve their financial position. Without a doubt, earning more money can help. But ultimately, it’s the way you spend money that will make a difference – whether that’s good or bad, it’s up to you.

Like if you’re earning $4,000 a month and your expenses reach a total of $4,500, what do you think will happen? You’ll have a deficit of $500. Where will you get the money to pay for that? You’ll use debt! Most likely, you’ll be using your credit card to pay for it. If you keep living this way, spending beyond what you’re earning, you can quickly accumulate a lot of debt. Since credit cards have a high-interest rate, it’ll be harder to pay it all off. The finance charge of your card will keep making your balance grow.

That’s how your spending habits can ruin your finances.

But if you can make sure that your spending is under control, you won’t have to worry about your finances. No matter what happens, your good spending behavior will lead you to make the right choices. Even when you’re in the midst of a crisis, you‘ll find a way to make smarter choices like saving more. Just like how the savings rate increased to 33.5% in the midst of a pandemic. Your habits will shape how you make decisions about using your money.

3 spending habits that create extra money for debt payments

With the right spending habits, you can reach any financial goal that you set your mind to. Like if you want to pay off your debts, your spending behavior will help you achieve that.

How? If you use the right habits, you should be able to create extra money to help with your debt payments. The more you can add to your monthly payments, the faster you can achieve debt freedom. Not to mention the savings you’ll get when you pay it off faster. You won’t have to pay a lot of interest when your debt is paid off quickly.

So what are the habits that you need to develop to shape your spending behavior?

Stick to necessities

This is a great habit to have. When you train yourself to stick to the necessities, it will be easier for you to avoid overspending.

But before anything else, what does it mean to stick to necessities? Ideally, these are the expenses that you need to survive. So if it’s not necessary for your survival, you shouldn’t spend on it. Whatever you don’t spend can be added to your debt payment fund.

Of course, there are things that may not be necessary for your survival, but you still have to spend on. These are usually the expenses that will help you earn more. If that’s the case, then it’s acceptable. Because whatever you spend will be earned back. Think of it as an investment. Even if it means buying something that’ll make you productive and profitable, then consider that a necessity. Just make sure it’s real and not just an excuse in your head to make spending on a want acceptable. Be disciplined in this restriction so you can maximize the funds you’ll get for your debt payments.

Use coupons

In one survey, 88% of the respondents revealed that they used coupons for shopping in 2020. If you really want to get that extra funds to pay off your debts, get used to coupons. This is one of the spending habits that will help you save on the usual purchases that you make. So even if you just stick to the necessities, if you use coupons on top of that, you’ll end up saving more.

Admittedly, the use of coupons can be tedious. You have to be very organized. There are a lot of coupons to choose from and it can be confusing at times. But if you get used to this, it’ll be easier over time.

Live on a budget

Let’s be clear about this. Budgeting is not exactly one of the spending habits. But this is part of this list because it affects how you spend your money. Your budget plan can shape the decisions you make about spending. If your budget shows that you don’t have enough extra money, you’ll be more careful about your expenses. You’ll find it easier to say no to spending.

To make this work, you have to ensure that your budget plan is updated. That means it has to be aligned with your current lifestyle. That’s how you can be sure that it supports what you really need at the moment and shows what your true financial situation really is.

Spending habits that can keep you in debt

Without a doubt, good financial habits will help you improve your personal finances. It won’t just help you with your financial situation. It will also allow you to develop a certain level of resilience. Your habits will allow you to grab opportunities and steer your decisions to where you know will only benefit you.

That’s something that you should really work on. Your spending habits are just one part of it. But it’s not just about what you should be doing. There are also bad spending behavior that you need to correct if you really want to reach your goals – like building extra funds for your debt payments.

If you don’t want any of your goals to be compromised, make sure you avoid these spending habits.

Impulsive spending

This is probably the worst kind of spending. It’s reckless and out of control. When it comes to your finances, you never want to lose control. You always want to know where your money is going. You want to make sure that every time you spend, it’s for a purpose.

Impulsive spending doesn’t have any of that. It’s not planned and it’s mostly based on your emotions. That’s dangerous because it can quickly make you accumulate a lot of debts.

Spending before saving

The other habit that you need to change is spending before saving. Some people take a look at their income and remove everything they need for expenses. Whatever’s left is then set aside for savings. If there’s anything left at all. That’s the wrong way to do it. If this is how you deal with your income, you won’t save anything. You won’t be able to build the extra funds that you’ll need to pay off your debts.

What you should be doing is to treat your savings like a bill. That means you have to determine a saving goal each month, then fund that first. Whatever is left, that’s what you’ll use to spend each month. If that’s your attitude, you’ll soon strengthen your finances because of the amount of savings that you’ve put aside.

3 Tips To Build Additional Savings While Paying Off Debt

February 8, 2021 By editor

You can build additional savings while you’re in the middle of paying off your debts. It seems hard, but it can be done. You just have to be really determined to do it. Because paying off your debts is not an overnight thing. And you can bet that along the way, things will happen that’ll keep you from completing the task before you.

So if paying off your debt is hard, imagine having to save money while you’re doing it. As mentioned, it’s not impossible to do. But you have to be prepared to work hard for it. Because if you can get those extra savings, you can use them to improve your finances despite going through hard times.

Of course, the big question is, how? We know that it’s going to be challenging. But there are ways to ensure that you can build additional savings successfully even while you’re in the midst of paying off everything that you owe.

How to build additional savings

There are specific tasks that you can do to help you build enough savings that’ll secure your future. If you can follow these tips, it’ll be easier for you to meet both saving and debt payment goals.

There are 3 things that you can do to make this happen.

Increase monthly income

You need funds to be able to build additional savings and pay off every single debt at the same time. This is why you need to find a way to increase your monthly income. Otherwise, where do you think you’ll get the money to meet both requirements? You’ll have to cut back on your expenses. We all know that although it will help, cutting back on expenses will only result in limited funds.

This is why it’s more ideal to increase your income. Fortunately, there are several side hustles that you can do. A huge part of your options is found online. This is actually very ideal, considering the pandemic and the increasing unemployment rate in the country. In one survey, it’s revealed that there are 2 million more freelancers who started their online careers in the past 12 months. You can join them if you want to increase your income to save and pay off your debts at the same time.

If you think your skills are not applicable online, that’s okay. Take a look at your strengths. What are you really good at? Maybe you can capitalize on that. Use your skills and create something that you can sell. If you’re great in the kitchen, you can sell something you baked or cooked. Anything that you earn can be used to increase your savings and pay off your debts.

Live below your means

Another way you can save and pay your debts at the same time is to live below your means. Don’t just live within your means. You have to make sure that whatever you’re spending is way below your means. The less you spend, the more extra money you’ll get to build additional savings without compromising your monthly debt payments.

How can you do it? You just have to consider the expenses that are important to you. Focus on that. Pay only for the priority expenses that you have identified. Nothing more. You can even consider downsizing your lifestyle. Live in a smaller house or sell off some of your possessions. If anything makes you spend more, try to get rid of it so you can live below your means.

If anything, this will teach you to become a smart spender. You’ll have to think twice before you use your finances. Because you know that it’s more important for you to save money or pay off your debts.

Turn it into a habit

While you are trying to build additional savings, learn how to make it a habit. When it has become a habit, it’ll come naturally to you. That means you’ll always find a way to increase your savings. When you can save naturally, every time there’s a chance, you’ll save money. This is a good financial habit to have. It’ll make you cautious about how you use your money. Which is a good thing if you’re trying to reach a lot of financial goals.

Making a habit of saving will steer you to make the right decisions. Soon, this habit will lead you to develop other good habits that’ll help you reach your goals. Like if you really need to pay off your debts and save at the same time. It’ll be easier as long as you have the right habits to help you do it.

What 2020 taught us about additional savings

We all witnessed how incredibly challenging 2020 was. The pandemic shook us to the core and completely overturned everything that we thought was normal. Not to mention the fact that we’ve slipped into recession shortly after. While the recession was bound to happen anyway, our economy was able to hold out and delay it. But once the pandemic happened, it could no longer be avoided.

Without a doubt, the 2 catastrophic events brought a lot of us to our knees. Although it’s a year that most of us would like to forget, you have to admit. It also brought a lot of lessons. Specifically when it comes to our ability to build additional savings.

What are the realizations that you should take from 2020?

Having an emergency fund is a lifesaver

Let’s start with emergency funds. We all realized how important it is to have an emergency fund. When people started losing their jobs or accumulated a huge amount of debt, it was emergency funds that got some households through. The back-to-back events brought about by the pandemic and recession shredded the financial security of Americans. And this was for those who had an emergency fund. Imagine what happened to those who didn’t have this fund?

This is why you need to build additional savings so you can strengthen your emergency fund. Even if you are in the midst of paying off your debts, you have to find a way to increase your savings. You’ll never know when another disaster will strike. You should secure your finances through an emergency fund.

Preparation can beat debt and any crisis

When you understand the importance of having an emergency fund, you’ll realize just how true this is. Preparation can really beat any debt and crisis. While 46 million Americans said they’ve depleted their emergency savings, they’re probably thankful that they have the emergency funds, to begin with.

But having emergency funds is not the only way you can prepare your finances. You can also find a way to make your income more secure. How? By setting up multiple sources of income. The more you have, the less you have to worry in case you lose your primary job. And if you can set up a passive source of income, it’ll make things better. You won’t have to worry about working too hard to increase your monthly cash flow.

3 Conditions That Will Make A New Credit Card Application Okay

January 24, 2021 By editor

Do you need to open a new credit card? The average American owns 4 credit cards. There’s no limit to the number of credit cards that you can own. But you have to remember, the more cards you own, the more danger you’re in. It’s very tempting to keep using it to pay for the things you need. It really feels like it’s an extension of your wallet. If you can’t control yourself, you might end up using it too much – until you reach the credit limit. By then, it would be very hard to pay off your debts. The high-interest rate of the credit card and the fees and charges associated with maxing out your limit will all work against you.

This is the reason why you shouldn’t be careless about opening a new credit card. You have to make sure that there’s a real need for it. And if you are in the midst of a crisis, it’s all the more reason for you to avoid opening new credit accounts. The temptation to use them will be very high and it might just ruin your financial future.

If you want to preserve your future self from the burden of paying off all your debts, you have to be smart every time you have to open a new credit account.

3 conditions before you apply for a new credit card

While opening a new account is not exactly a crime, make sure you understand certain conditions first. These conditions should be met if you don’t want the additional credit card to compromise your personal finances.

Good credit score

When the pandemic happened, there was a noticeable decline in new credit card applications. And people with super prime scores had the biggest decline in applications. Even with inquiries.

What does it mean to have a good credit score?

This is an indication that you are a responsible credit user. When you borrow money, you know how to pay it back. You understand your responsibilities and you never borrow more than what you can afford to pay. This type of borrowing makes creditors and lenders feel confident in your ability to repay your debts. They won’t have to give you a high-interest rate to protect themselves from the possibility that you won’t stick to your payments.

That means if you open a new credit card account with a good credit score, you’ll be given a low-interest rate. It won’t cost you a lot in terms of finance charges. So make sure that before you file your application, you have a good credit score first.

Manageable credit card balance

Another condition before you open a new credit card is to check your existing cards. Do you have an existing balance? If you do, you need to find out when you can completely pay it off. Because if you will get a new card, you’ll probably use it too. This will just add to the existing balance that you have. You’ll be in danger of burying yourself under a huge amount of debt.

If you want to avoid that, you have to make sure your current credit card balance is manageable. If not, then you have to postpone opening a new account. It’s also a great time to really think about the necessity of having a new card. If you find that you don’t really need it, then maybe you shouldn’t open another account. But if you know that your financial situation will benefit from it, then go ahead. Just make sure to pay off your existing cards first until your balance is manageable before you send a new application.

Sufficient emergency fund

The final condition that you have to meet before sending in your new credit card application is to make sure you have enough emergency funds. As mentioned, opening another credit account will put you in danger of burying yourself further in debt. You’ll feel more secure if you have enough emergency savings.

But how much is enough? The best scenario is to have your emergency savings bigger than your credit card debt. That way you are secure despite the new credit account that you’ll open. If you happen to land in an unexpected situation, you won’t be forced to use debt to get out of it. Or you won’t have to sacrifice the funds you’ve set aside for your debt payments. You can use your savings to get yourself out of a tight spot.

Apart from that, having an emergency fund will make you feel secure with your finances. You’ll feel more confident about your ability to pay off your debts. It’ll give you the courage to be more aggressive in paying everything off.

Benefits of having a new credit card

Unless you’ve met all three conditions, it’s not advisable to open a new credit card. But why would you want to open a new account anyway? This is especially true if you still have existing credit cards that you can use?

The truth is, owning multiple credit cards is not bad. The key to owning more than one card and still keep debt troubles at bay is to learn how to use credit wisely. Since we live in a society that encourages the use of debt, you need to stop avoiding it and just learn how to keep it under control.

You see, opening a new credit card can be instrumental to certain benefits that will improve your financial situation.

Extended credit limit

The first is having an extended credit limit. Opening another card will make your credit limit higher. If you don’t use that card immediately, you can improve your credit utilization ratio. When that happens, you’ll end up with a higher credit score.

How does that work?

For instance, your balance now is $3,000 and your credit limit is $7,000. Your credit utilization rate is around 42%. The ideal rate to maintain a good credit score is 30%. If you open a new credit card that has a limit of $3,000, your new limit will now be $10,000. This will bring your credit utilization rate down to 30%.

Rewards and perks

Another benefit of opening a new credit account is the rewards and perks. The truth is, a lot of people open a new card because of the rewards. If you can use your card and get back points, freebies, or cash-back rewards, then using debt becomes worth it. As long as you use this card with a purpose, you’ll enjoy these rewards – and it might even help you save money in the process.

So if you find a credit card that can meet your spending needs, you might want to consider having that card. But here’s a word of caution. Make sure that this card is really something that you’ll use. If not, you’ll just waste your time and money paying off the fees and charges associated with the card.

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