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Money Management Tips To Get Your Debts Under Control

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It is very timely to receive money management tips at this time of the year. Starting a new year feels like you can reset your life. If you committed mistakes in the past, this is the perfect time to correct those.

Money Management Tips To Get Your Debts Under Control

According to one survey, more than 8 out of 10 respondents said that they would rather save $5,000 than 5 pounds off their weight. Considering how much we have become obsessed with our health, this is a big thing. It shows that consumers understand how important it is to get their finances in order. Either that or their financial situation had become so dire that money has become more important than their health or physical appearance.

The truth is, your finances is very important. This is especially true if you include debt in the picture. When you let debt get worse without trying to solve it, this can compromise your financial future. It can keep you from reaching the goals that would have improved your finances. Instead of being able to enjoy your life, you have to split your limited income to pay for your debts.

This is why it is a good idea to start working on your debts as a way to improve your financial position.

Money management tips that will make debt relief easier

Admittedly, getting rid of debts is hard. It will take a long time to complete. Not only that, you will find yourself trying to suppress urges that can compromise your monthly payments. There are also causes of debt that are oftentimes beyond our control. Medical debt and a failing economy are among the causes that can lead you to debt.

What can you do to pay off your debts with these scenarios making it more difficult?

This is when money management tips can really help. Here are some of the tips that can help you get your debts under control.

Analyze your current budget plan

Start with a budget plan. This will allow you to see the current status of your finances. It shows your income and where the money goes every month. Make sure this is updated. Sometimes, people end up in debt because their budget plan was not updated. For instance, they should have added extra medical expenses in there. But since this was not included in the budget, there were no funds allocated for it. When the time comes for the medications to be paid off, you have no more cash. Since this is an important expense, you will resort to using debt. This is how some debts grow.

Make sure your budget plan is updated and aligned with your current lifestyle and expenses. That way, you can decide on what you should cut back on in case your income is no longer enough to cover your monthly financial obligations.

Reevaluate your debt payment plan

If you are in debt, make sure you check your debt payment plan. In case you do not have one, it is high time for you to choose a repayment plan. Make sure you consider your budget while you are making a choice. This is one of the important money management tips that you need to implement if you want to conquer your debts.

Even if your debt payment plan worked before, things can happen to change that. If your budget plan changed, your current debt solution may no longer be enough to get you to complete debt freedom. You need to change that. Fortunately, there are a lot of options to get out of debt. So you can easily make a choice among them.

Hold off using more credit

The last of the money management tips is to hold off the use of credit. At least, until you have paid off your current balance. You need to stay away especially from credit card debts. These have high-interest rates that can quickly make your balance grow. According to a survey, credit card debt is the biggest regret of 24.1% of their respondents. Try not to make yourself a part of this statistic. Make sure you stay smart with your spending. Do not use credit if it is not a life or death situation. If you are uncertain about the future, give your emergency fund a boost. This will help you pay for unexpected expenses so you will not have to rely on debt.

How to use money management to improve your finances

Money management tips will not just help get your debts under control. It will also help you improve your finances. If you want to have a better financial situation by the end of this year, you might want to consider using these tips.

Know your priorities

Start by knowing what your priorities are. Define what will make you happy. What is financial success for you? Is it having more money? Or maybe less debt? What improvement can you make on your finances that will make you feel fulfilled? Focusing on this will make everything more motivating. Sometimes, it is just your mindset that is keeping you in debt. If you know that your efforts will help fulfill your priorities, then it is easier to find the motivation to implement proper financial management.

Determine your monthly income

While you are analyzing your finances, determine your current monthly income. This will help you understand your financial capabilities. It will also identify your spending potential. This is a piece of useful information when you are trying to implement the right money management tips to improve your finances. It will help you understand your limitations. You get to make better decisions especially when it comes to taking risks with your money.

Track your expenses

This is one of the money management tasks that people have a hard time following. Admittedly, it can be tedious. You need to list or take note of every expense that you make. It can be hard when you are making purchases in a hurry. But that is actually what this tip is trying to teach you. It teaches you to pause and take note of what you are spending on. By practicing the pause, you are keeping yourself from impulsive purchases. But once you get used to it, you will notice that you will do it unconsciously. The chances of overspending will be less likely to happen.

Always have a goal

Another money management tip is to always have a goal. When you have a goal, you make smarter financial choices. Your goal will always be at the back of your mind. It will influence how you spend your money. Instead of buying something, you will think twice because you know that money can help you reach your financial goal faster. Unless it is important, you will not spend on it. This will help you develop the habit of spending with a purpose. It is a good habit to have.

Avoid Credit Card Debt Problems By Choosing The Right One

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You need to avoid credit card debt problems if you really want to improve your financial position this year. The thing is, avoiding it is not just a matter of being smart with credit card use. Sometimes, it begins with the type of card that you use in the first place.

Avoid Credit Card Debt Problems By Choosing The Right One

Our society has come a long way when it comes to the use of credit. In the past, it was very hard to borrow money. You cannot just borrow from anyone. And if you do find someone who is willing to lend you money, it comes with a huge price. When the poor borrowed from the rich, they had to work hard to pay it back. Most of the time, it only made their situation a lot worse. This is why in the past, people will only borrow if they were really desperate. If they can avoid it, they will not put themselves in debt.

Now, our society embraces the use of credit like it is our God-given right. There is a certain air of prestige when someone can use their credit cards with abandon. They spend it like it is an extension of their wallets. And since credit helps people make purchases, it is encouraged by the government. After all, consumer spending is one of the things that keep the economy growing. The government and corporations would want consumers to keep spending – even if it means they are using debt to do it.

Of course, that is not really a great way to live. Sooner or later, the debt you use will catch up to you. And once you have credit card debt problems, you will be in a lot of trouble. So you need to stop being reckless about your debts.

The damage that credit card debt problems can bring

Most Americans own a credit card. A huge percent even owns more than one. However, 7 out of 10 admitted that they do not think they can pay off their debts within the year. This was done early in the year. With the way consumer debt increased as 2019 drew to a close, it can be assumed that these credit card owners were right. There is a possibility that a lot of them failed to pay off their debts.

But why are credit card debt problems very dangerous?

High-interest rate

The first reason, and maybe the only reason you need, is the high-interest rate. This can quickly make your balance increase. When you use your credit cards and you fail to pay everything off within the grace period, your balance will be carried over to the next billing cycle. This amount will be subjected to a finance charge. This is calculated based on the APR of the card and the current balance. So you can just imagine how quickly your balance will grow if the interest rate is high. If you keep carrying over a balance to the next month, this finance charge will always be added to your balance.

Very convenient

Credit cards were created to make credit access very easy. That means you can easily use credit again and again without the need for further approval. As long as you own the card and you have not reached the limit, you can keep on using it.

This is why it becomes dangerous. It makes credit card debt problems very hard to solve. You need to make sure that you can control your spending urges so you will not lose money anymore. If you have to use credit cards, you need to have a repayment plan to ensure that it will not get worse. Because if it does, it can be a very stressful problem to overcome. So try to avoid the problem in the first place.

How to choose the right credit card to avoid debt problems

Apart from controlling your spending urges, you need to choose the right credit card to begin with. According to a survey, 4 out fo 10 respondents admitted that they feel regret over their retail cards. They said they have paid interest rates on it and they knew it cost them an unnecessary expense.

The truth is, it is okay to own credit cards. But you have to make sure that these are cards that are useful to you. It is the only way that you can maximize it and any rewards that it offers.

Here are tips that you can use to find the right credit card.

Look at your credit score

This will give you an idea if you can negotiate for a credit card that offers the lowest interest rate. And it is not just the interest rate. You will also get a lot of perks. These include rewards, lower annual fees, etc. There are many options for you to look at your credit score for free. The AnnualCreditReport.com offers a free copy of your credit report. You get one free copy from each of the three major credit bureaus (Experian, TransUnion, and Equifax). Then you can use one of the many credit score calculators online.

Determine the purpose of the credit card

Most people get into huge credit card debt problems because they got it without any purpose. Before you apply for a credit card, ask yourself – what good will this card do for me? Can you use it to earn rewards points? Get a rewards credit card that suits your spending behavior. Like if you travel a lot, get a travel rewards card.

Will it help you improve your credit limit? This is usually for college students or new graduates. They can use the card to add more transactions in their credit reports. 

Or maybe you can use it to lower your interest rate? Without a purpose, it is easy for you to abuse the use of the credit card. So, identify the purpose of the card. It will also be easier to know the type of card that you can use.

Know the qualities you need in the card

If you know the purpose of the card, you will know what qualities you need to check. For instance, if you need the credit card to help you build your credit score, you need to make sure they will report it to the major credit bureaus. If you plan on getting rewards credit cards, make sure you understand how the rewards are accumulated. You should also know how to claim the rewards. If you will use the credit card to lower your interest rate, then you need to know if there is a chance that the rate will increase. You should also inquire how that change will happen.

Choose the right card

Now that you know your credit score, the purpose of the card and the qualities that it needs to have, it should be easier to choose the right credit card. When you have the right credit card, you will be able to use it properly. After all, it will be used with a purpose. It is easier to develop the right credit card habits. These are the habits that will help you avoid credit card debt problems.  

Of course, you still have to scrutinize the details of the card. Read the fine print of the terms and conditions. You need to know everything about the card so you will know what not to do so you can avoid penalty charges.

With the right card and habits, you should be able to avoid credit card debt problems. It will be easier to secure your financial future.

Important Tips When Downsizing To Increase Debt Payments

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Downsizing is one of the extreme strategies that you can use to increase debt payments. This means you will make drastic changes in your lifestyle so you will not spend as much money as you did. For some people, it is enough for them to simply cut back on some expenses like eating out or other shopping errands. However, some people would need more drastic measures.

Important Tips When Downsizing To Increase Debt Payments

Since your housing expenses eat up a huge part of your monthly budget, it can be assumed that this is an area where you can save a lot. Of course, people use it as a last resort because it is very hard to downsize a home. You have to really change a lot of things in your life.  You have to get rid of a huge part of your possessions, spend on the moving expenses, etc. But if you are successful, you will really see several positive changes in your finances.

According to one report, people who opted to live in tiny houses significantly cut on rent/mortgage expenses and were able to successfully double their savings. When you lower your expenses after downsizing, you get to open a lot of opportunities financially. One of these is your ability to increase debt payments. When you increase your monthly payments, you can get out of debt a lot faster. If you can shorten your repayment plan, you can save on the interest payments.

Two ways downsizing can increase debt payments

Most of the time, downsizing means you will be living in a smaller home. This smaller space will give your finances a lot of room to grow. Not only that, but it can also increase your debt payments in two ways.

It frees up extra money in your monthly budget

Since you have a smaller home, your monthly expenses will go down significantly. First of all, your rent or mortgage will go down. The value of properties is measured by how big it is. Naturally, that means a smaller house will cost less.

But that is not the only way it can decrease your expenses. A smaller dwelling place will also be cheaper to heat or cool. That means your energy consumption will go down. It is also easier to clean. There is no need to buy a lot of household products for the upkeep of your house.

Since you will be decreasing your monthly expenses, you get to free up more money from your budget. This freed amount can be used to give your monthly debt payments a boost.

It discourages you from overspending

The other way that downsizing that can increase debt payments is through your spending habits. You now live in a smaller house. Before you moved, you probably had to get rid of a lot of possessions. In the same way, your smaller home will require less furniture. Not only that, you will have limited space. You will think twice before you buy anything.

According to one couple who downsized into a tiny house, they developed a new mindset about unnecessary spending. They knew they had limited space so they thought more about what they will bring home. This made them more cautious of every expense.

The same will happen to you when you live in a smaller home. And it is a good habit to get used to. Even if you live in a bigger home, you will carry that with you. Since you got used to thinking twice before buying something, you will always do that before you buy anything.

Downsizing the right way to increase debt payments

Of course, there is an option to earn more money to increase debt payments. But if your credit situation was caused by your inability to control your spending habits, then downsizing makes a lot more sense. You will be teaching yourself to correct the habits that led you to debt in the first place.

However, you should not just downsize and expect results. You need to do it properly. This change will require a certain level of sacrifice. You need to be certain that this is what you really want. Otherwise, you might end up feeling miserable about downsizing.

Here are tips that will help you downsize correctly.

Be clear with your purpose

Start by being clear with your purpose. Why are downsizing? Obviously, your reason is to increase debt payments. But that may not be enough to motivate you. Think of another benefit for doing this. Are you trying to achieve financial freedom? When you downsize, you are effectively lowering your monthly expenses. Once you have paid off your debts, you will need less money to live on. You can probably leave your job if you feel too stressed already.

All of these are possible when you downsize. Just make sure that you open your eyes to all the possibilities so you can pick one purpose that will motivate you as you get used to this transition.

Consider long-term plans

When you downsize, it is also important to consider your long-term plans. As you know, downsizing means you will be living in a smaller home. If you are doing this with your spouse, consider your plans to have children someday. You need to make sure that you have enough room for your future kids.

Or maybe, you plan to work from home. Think about the space that you will need to make this happen. You have to remember that there is life after debt freedom. Although you are downsizing to increase debt payments, you should still consider what you want to happen after.

Create a new budget plan

Finally, you also need to create a new budget plan when you downsize. After all, there will be a lot of changes happening in your financial life. You have to make the necessary adjustments. You also have to observe the changes in your bills payments. Make sure your budget plan is updated if you will spend less on your utility bills and mortgage. This will ensure that you can adjust to the new life properly. You might end up using all the money you saved from downsizing on something else – instead of using it to increase debt payments.