November 18th, 2008 — Debt, Diversification, Financial Security, Income Streams, Leverage, Money, Personal Finance, Stocks, credit cards
Many of us have the wrong idea when it comes to debt. After years of being told that it is a bad thing and should be avoided, most of us never want to get into the problem of having to deal with debt. Millions more are in over their heads with bad debt and facing the consequences. However, there are ways that you can actually use debt to improve your credit.
The is a good kind of debt that everyone can use. This is the kind of debt that you use to secure your future, not the purchase of something you really don’t need. Instead of going into hock over the latest and greatest gadgets, you can go into debt as a way of leveraging it to create more money and thereby, improving your overall credit rating.
Let’s go back to when you first tried to get your credit cards. It was probably pretty frustrating, since you have to have a little debt if you’re going to get any new company to give you a chance. You’ve got to have a track record so that the company feels secure lending you more money. This is the best lesson you can have when it comes to debt. A little debt, properly managed, improves your credit rating. Bad debt, improperly managed will ruin it.
In order to make more money, you’re going to have to spend more. This doesn’t mean blowing your money on useless things. This means spending money on stocks or new opportunities that are going to pay off in the future. Since most of us don’t have a lot of excess cash buried in the back yard, this means that we’re going to have to go into debt to start making more money.
If there is one thing that most self starter stories have in common, it’s the fact that in order to get their big break, the entrepreneur had to get a loan from the bank or even a friend. They had to go into debt in order to be successful. Even if you’re dealing with your personal finances, you’ve got to look at them as though you are a business. You need to make those smart decisions that will create more income for you both now and in the future.
The proper use and leveraging of debt can turn you into a millionaire. It probably won’t happen overnight, unless you luck upon a stellar opportunity, but with time and patience, that leverage debt is going to return much more to you than any gadget ever could. It’s going to return your financial future and it will look a lot better than you ever though possible.
Debt doesn’t have to be bad, but it does need to be managed properly. Before you get involved in using debt for new opportunities, it is a good idea to make sure that you have at least a working knowledge of good financial practices.
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November 17th, 2008 — Money, Personal Finance, holiday shopping
It is looking like the upcoming holiday season will be gloomy for many families, given the current state of the economy and continued bad news on many financial fronts. While this may not be a time to go all out with gifts, there are holiday shopping techniques that you can use to save money without scrimping too much. Thankfully, stores are lowering prices, which will make it easier to get your gifts and still have money left over.
If you are someone that maxes out a credit card and goes whole hog for the holidays, this is the perfect year to rethink that strategy. Interest rates on credit cards are quite high and this type of spending will only hurt you over the long term. While it is wonderful to see the looks of joy on the faces of your recipients, this should not be enough to warrant loads of debt.
Look for the Best Deals
The first technique you can employ is simply smart shopping. Take a look at the different ads and develop a strategy for finding the lowest prices. As mentioned previously, stores are running numerous sales at the moment and this is a good time to stock up on holiday gifts. While many people prefer to wait for those last minute sales, this year, it may be smarter to take advantage of the low prices right now.
Try Shopping Online
This is also a good time to think about doing more of your shopping online. As gas prices go up, traveling to numerous stores has become prohibitive for many people. Having the ability to shop tax-free in many cases, and saving gas money, has given online stores quite a boost. It is also quite easy to find money saving coupons from online retailers and many are also running special shipping deals to help their customers save money.
Think About Handmade Gifts
If you are in a bad financial spot this year, you may want to think about making gifts instead of buying them. Whether you have the ability to sew, make toys, or do anything handy, these gifts will show just how much you care without breaking your bank account. While you may not be able to make the latest toy or Wii system, you can make heartfelt gifts that will be appreciated.
Putting it all Together
No one wants to think about being frugal during the holidays, but this year, it may not be a bad idea, especially if you are struggling financially. Try to think of new ways that your family can celebrate the holidays on a budget and use this as an opportunity to teach children about the real meaning of the holidays, instead of the commercial interpretation. They may be a little resistant at first, but this is a good lesson to learn and may help teach them more about the value of a dollar.
With a little creative thinking and planning ahead, you can make sure that this holiday season is even better than the last.
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November 10th, 2008 — Debt, Diversification, Financial Security, Income Streams, Leverage, Money, Personal Finance
If you’re currently living paycheck to paycheck, or you would just like to have a little more financial security, the key is creating alternative forms of income. While to many people this means getting a second job, there are actually easier ways that you can start bringing in more money every month without having to do all of that work. One of the best ways to get started immediately is by leveraging your debt to create multiple streams of alternative income.
Now wait just a second - isn’t debt a bad thing? Well, in the hands of those that don’t know how to manage it, yes, debt can be a bad thing. However, when used correctly and for the right purpose, debt is the key towards obtaining a strong financial future. We’re not saying run out and run up all of your credit cards on stuff you don’t need and hope you’re going to get rich. That’s never going to happen.
What we are saying is that by leveraging your debt properly you can easily start making more money right away. So, let’s look at it this way. You can use debt to get that stereo you always wanted, but other than providing you with some entertainment, it’s not really going to be directly responsible for bringing in any money. It’s a dead end purchase when you get down to the heart of the matter.
Now, instead of spending $5000 on a new stereo, let’s say you get a loan for that amount. You then take that money and invest it into a new stock or a business opportunity that has a high likelihood of great returns. In a few months, that loan you got for $5000 has produced more than $15,000 in alternative income. That’s three times the amount of your original investment, and it’s only going to keep bringing money in. That’s a whole lot better than your stereo could ever do for you.
By managing debt correctly and using it to purchase smart investments or opportunities, you’re leveraging it to help create more income for you. That is not to say that there are not some risks in using your debt this way. It’s never a good idea to go into debt for something that is not going to pay off. You’ll want to take your time and carefully invest that money so that it will provide you with alternative income.
In order to make more money, you’re going to have to get more money. Now, most of us just don’t have a lot of free cash lying around the house. You can spend years saving up money to start producing alternative income, but it’s a lot quicker to get a jumpstart by leveraging debt. You just need to make sure that you’re being careful and that the opportunities you’re interested in will pay off. There is always risk involved when you’re creating alternative income streams, but it can pay off in the future.
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November 10th, 2008 — Debt, Goal, Money, Personal Finance, credit cards, saving
Over the past decade, an insane amount of debt has been wracked up. Household debt has significantly eaten up a slice of personal income since around the mid 90s. Here are four clues that you are carrying too much debt:
Clue 1 - Your debt to income ratio is too high. Your debt to income ratio is calculated by dividing your debt on a monthly basis by your monthly income. If your debt to income ratio is 15 percent, 20 percent or worse, you are definitely in trouble according to most credit counselors.
Clue 2 - You have no savings to speak of. If you have no savings to speak of, then your money is stretched too thin. You need a savings account and you need to start meeting your debt obligations and your savings obligations.
Clue 3 - You are over the limit on your credit cards. Straying over isn’t bad unless you’re not paying it off right away. If you are carrying a significant balance from month to month, you have a problem that needs to be stopped now.
Clue 4 - You find yourself worrying about your debt. If you are stressing about your bills or your debt, then it is clear that you have a problem, plain and simple.
Here are four tips that will help you get out from under your debt.
Tip 1 - Prioritize your Bills and your Debts. Write down how much you owe to each of your monthly bills and prioritize this list. Give priority to health, food and shelter, because these are the bills that need to be paid first and foremost.
Tip 2 - Stop using your credit cards and pay with cash instead. Cut them up, freeze them in ice or feed them right into a wood chipper. Stop relying on credit to solve your problems because it is not going to help you, but rather will only make things worse. Limit yourself to cash if you want to control your spending.
Tip 3 - Set up a plan that will allow you to pare down your debt. Call creditors to find out if you can get lower rates, or to have fees waived. Try to set up a better payment plan if you can. Most creditors are more than willing to work with you but you absolutely have to work the courage up to ask if you want to get results. When you pay down your credit card debt, target the highest interest rates first and then work to the next highest, and so on and so forth.
Tip 4 - Get help as soon as you know you need it. There are credit counseling services out there that can sit down with you and counsel you on your spending habits, helping you create a repayment plan for your debt that is affordable and workable. Choose a service that is free or inexpensive if you need help, and formulate a plan that will make paying your debts down easy and affordable without bogging you down with more bills or more debt.
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November 6th, 2008 — Money, News, Personal Finance, credit, economy, loans
The credit crunch is a hot button issue right now, raising red flags in the eyes of consumers not only all over the United States, but also elsewhere in the world. When the economy in the United States begins to have difficulties, the rest of the world is going to feel the pain as well. Lending options are becoming tighter because many large scale lending institutions are tightening their belts during this credit crunch. What do these changes in the way loans are offered mean for consumers?
Some options relating to lending are becoming more difficult and more expensive to come by because of the credit crunch. Mortgage lenders, for example, are upping the stakes when it comes to lending mortgage loans to consumers in need, meaning that consumers who do not have good credit ratings or credit reports may find it nearly impossible to get the lending that they need. On the other hand, people who have decent credit should still be able to find the lending options that they need for mortgages, auto loans, student loans and credit cards.
The government is doing what it can to provide lending options to consumers that are in need, because no one should be kept from the lending options they require for things like home mortgages, automobiles, education and so on. So while many lending options are being restricted by banking and lending institutions tightening their belts to consumers with less than perfect credit, you are still not going to be completely left out in the cold, even if your credit is poor. If you are a student in need of financial assistance for school, for example, then the credit crunch is not going to prevent you from seeking the education that you want because the government is doing what it can to make sure that these loans are still provided to the students who are in need, even when during the credit crunch their personal credit may not be enough to impress most lenders.
The truth about the credit crunch is simple: Things are going to get a little tense and a little strict for a few months or a year or so while lenders deal with the credit crunch and the mortgage loans they granted that have defaulted on in recent months. Once these issues are dealt with and the economy begins to rebuild itself, lenders will loosen their belts again and will begin to offer a much wider variety of loans. The reason why loans are so affected by the credit crunch is because lenders are in the business of making money by lending money. If they do not believe they can make money on a loan, they will not offer it. Once the credit crunch subsides a bit, lending options will be back in great numbers once again. So the trick to surviving the credit crunch is simply to be patient and do what you can to improve your credit in the meantime.
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November 4th, 2008 — Financial Security, Money, News, Personal Finance, credit
A few years ago if you referenced the term “credit crunch”, most people would be puzzled. Today barely a single day can pass without the phrase seeing consistent if not constant use in the newspapers and on television. The credit crunch is a crisis that is affecting numerous financial institutions and banks, and has been wrecking havoc on the economy since the summer of 2007. This is when it had officially become apparent that millions of mortgage borrowers in the United States were not going to be able to pay their loans back.
For a number of years banks were offering mortgages to people even when they did not have the credit to support them. These loans were offered at low rates, but only initially, and when the rates went up over time, borrowers were no longer able to pay the mortgages back, which meant that banks were becoming less willing to lend money, clamping down on the newer, fresher loans to other customers, only offering higher interest options to customer needing loans.
All of the world’s money markets have been affected by these financial issues, including markets in the United Kingdom and elsewhere. Regardless which bank or building society you turn to, credit is much harder now to attempt to obtain than ever before, and also much more expensive, and this goes for personal loans, mortgage loans, credit cards and even overdraft fees. Here is what you need to understand in order to stay calm and avoid becoming affected by the credit crunch. If you want to resist panic by surviving the credit crunch, consider these things:
- The credit crunch is absolutely not going to affect everyone equally.
If your credit is good or even just reasonable, then it should not be difficult for you to find a mortgage or another loan or line of credit that you need, even if you have to pay more now than if you had applied a year or two ago.
- Many banks are now cutting their base rates in half.
They are pumping money into other investment options to make it easier for responsible borrowers to get the money they need, which is going to bring down the cost of credit over the span of the next year or so.
- While some lending options are going to be a bit harder or more expensive to get, such as automobile loans and mortgage loans, you can get money when you absolutely need to.
So if you need a student loan, for example, rest assured that there are still options out there because the government is working to provide lending options that are most easily obtainable for those who are in need.
This will work wonders for keeping your lending options open when you need them, which is the best way to make sure that you can get a loan when you absolutely need to.
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October 20th, 2008 — Debt, Goal, Long Term, Personal Finance, good debt
While no one can look into a crystal ball and determine where they will be financially in twenty, thirty or forty years, there are some early warning signs that may indicate that the future might be a bit gloomy. The key to successfully preparing for your future is to avoid known behaviors that can be disastrous to your finances. Here are some of the warning signs that you need to look out for if you want to make sure that your financial future is safe, secure and happy.
1. How willing to go into debt are you?
There are two answers to this question, and only one of them is correct. If you are willing to use your credit card for any old thing, or you have a problem keeping your balances down, this is a sign that you may be overly willing to go into bad debt. Bad debt can take many forms, from getting a house that is too expensive to maintain, to buying a car that is over priced. Anytime you are willing to go into debt for something that will never end up paying you back, you are running a financial risk.
On the flip side of this equation, if you are willing to go into good debt, then your financial future may look quite different. Put simply, good debt is the kind of investment that will produce a return for you, whether it is in monthly payments, such as with a rental property, or long term benefits such as a regular investment. Being willing to go into good debt, and taking the time to make sure you are making a solid investment with that debt can have a very big impact on your financial future.
2. You consistently overspend.
This is a major warning sign that may indicate severe trouble in the future. If you simply cannot hold back and find yourself spending more than you earn month after month, it will add up. Whether it’s overspending on credit cards, or simply failing to notice your cash flow problem, this is a problem that has lasting consequences.
3. You have no financial goals.
This is a sign that you may not be taking your financial future as serious as you could be. Having short term and long term financial goals can help you create a better mindset about your finances. When you are working towards that goal, it’s a lot more edifying to reach it. People that take the time to actively set financial goals and actively work towards achieving them will usually have a much brighter financial future than those that do not.
Your financial future doesn’t have to be gloomy, and it doesn’t have to be set in stone. By taking the time to review your spending habits, and how you view money, you can put into action the events that will change the course of your financial future and may even fix what went wrong in your financial past.
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October 7th, 2008 — Debt, Financial Security, Goal, Long Term, Money, Personal Finance, bad debt, credit cards, good debt
If you are swimming in a sea of bad debt, keeping your head above water can be incredibly difficult. Thanks to our consumer culture, the availability of credit cards and a general lack of concern for what debt means, many people find that their bad debt is out of control. Luckily, there are a few easy solutions that anyone can implement to get that debt to behave and start finding a way onto a safe island in the sea.
1. Consolidate if possible.
If you are paying on numerous credit cards or loans, chances are you are paying way too much interest. A consolidation loan can be very beneficial in many ways such as providing you with one monthly payment instead of several, and generally, you will be paying less interest.
There are a few cautionary notes about consolidation loans however. In order to experience real savings on interest, these are best kept to short term loans. While variable rates offer the ability to save money, they are not as safe as a fixed rate. Carefully weigh your options before consolidating and look at both the short term and long term picture before you make your decision.
2. Pay down your debt consistently.
Making only the monthly minimum payments on your debt can lead to treading water in your sea of debt. You won’t be making any real progress, and it’s all too easy to get tired and sink. Work on paying more than this minimum, even if it’s only five dollars to start with. Gradually increase the amount you are paying each month and you will be able to pay down that debt in a lot less time.
3. Control your spending.
Once you are adrift in the sea of debt, it is vital to end the behavior that put you there. Cut up your credit cards if necessary, but don’t close the accounts. Keep up your payments and you’ll make progress a lot faster. If you have difficulty controlling your spending, you may need to find ways to make more money so that you have more to work with, but this can end up leading to a vicious cycle. It is best to learn self restraint in order to undo the damage that bad debt causes.
Not all debt is bad, and in fact, good debt has the power to help you stay secure and handle your bad debt more effectively. Put simply, bad debt works against you, draining your finances. Good debt works for you, increasing your monthly income.
As an example, a good debt could be something like a rental property, that brings you income every month. A bad debt is something that has not value beyond its sticker price that will only end up costing you interest every month.
By implementing these techniques, you can start swimming to safety and get out of that sea of debt permanently. Don’t forget the lessons you learn along the way since the last place you want to end up is right back in that sea.
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October 6th, 2008 — Budget, Personal Finance, bad debt, credit cards, saving
Whether economics is your idea of a great way to fight insomnia, or you just didn’t get the benefit of learning about money management early on, it is never to late to learn the basic skills of proper money management. We highly recommend taking a brief course on finance if possible, but there are other ways that you can develop a strong financial foundation that will get through your life and help you retire with less worries.
Basic money management can be broken down into three main principles – Spending Less, Avoiding Bad Debt and Saving More. Let’s take a look at each one and determine how you can start including these principles into your own life.
Spending Less –
This is a vital lesson that everyone must learn, and unfortunately, it is a hard one. While most of us get the point that you have to spend less than you earn if you want to stay in the black, that concept tends to fly right out the window when faced with every day life. The prevalence of credit cards, easy payment plans and a lack of knowledge about bad debt has led many into spending much more than they make.
One of the best ways to start spending less is simply to monitor exactly what you spend, keep a log and determine where you can cut expenses. A budget is a vital tool that will help you learn more about the money that goes out the door each month and how much comes in. By working with a budget, you can start to tip the scales in favor of how much is coming in.
Avoiding Bad Debt –
This is a major problem for millions of Americans and it is only getting worse. It is vital to recognize that there are two main forms of debt – good and bad. If you have gotten into a bad debt trap, getting out is extremely difficult. Remember, bad debt is something that drains your finances, good debt is something that adds to it. Reduce your amount of bad debt, increase your amount of good debt and watch your finances turn around.
Saving More –
No matter how much money you make, saving part of it is very important. Whether it is a simple emergency fund that can help you get through bad times, or a fund for retirement, saving is essential. If you find it difficult to have any extra money each month for savings, it is time to investigate how you can change that.
Whether you need to find a better job that pays more, manage your finances better, or find ways to create more than one stream of income, there are many ways that you can start saving more money.
These three principles will help you learn more about how your own personal finances work and how to start managing your money more effectively. Everyone makes mistakes, but the difference is whether or not you rise about them, recognize the problem and implement the solution.
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October 1st, 2008 — Financial Security, Goal, Long Term, Money, Personal Finance, retirement
For many people, the first steps towards getting your finances under control are the hardest. Whether you didn’t spend enough time learning about basic personal finance principles when you were younger, or life happened and you’re now at the bottom of a very large problem, it can be difficult to get motivated to make that change and get your finances under control.
Waiting will only make things spiral out of control faster, so it is vital to find that motivation to take that first step in controlling your finances. Here are some great tips to help you on your journey.
First, it is best to create some financial goals for yourself.
Whether you want to have X amount saved over the next five years, or you would like to have your credit cards paid down in two years, write these goals down. Take a look ahead in your life if you are having difficulty coming up with goals and see where you would like to be. Then, write down how you plan to get there.
Once you have your goals in place, it’s time to determine what is keeping you from achieving them.
Take a good, hard look at your spending habits, how much you are making and what is keeping you from reaching those goals. Figure out what needs to be done to change this and write down your personal plan.
Now that you have these two things in order, it’s time to figure out what motivates you.
If you are under 30, planning for retirement seems so far in the future that it is easy to put it off. Look at your short term goals to find that motivation to keep you going. If you don’t have short term goals, try developing some ideas of where you would like to be financially in the next five years. By focusing not only on the future, but right here and now, it is easier to find that motivation to get your finances under control.
The next step is to begin implementing the changes necessary to meet your goals.
If you want to start spending less money, work up a budget and start sticking to it. If you want to make more money to reduce your reliance on your paycheck, work on either getting a second job, opening a business or finding ways to create more than one stream of income.
The first steps may be the hardest, but if you can stick with the process, it will get easier. Once you reach that first financial goal, the rest will seem like they are much more in reach. That is the main reason that short terms goals are just as important as long term financial goals. When you see the results in a quicker amount of time, you’ll be much more likely to keep forging ahead.
Take the time to start managing your finances now and the rest will fall into place if you work up a plan and stick with it.
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