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July 24, 2017, 10:37 am

The Most Effective Ways to Manage Your Credit Cards

by: The Financial Blogger    Category: Pay off your Debts

Credit card management is just as important as managing your credit score. In fact, the two go hand-in-hand. Fortunately, there are effective ways to manage your credit card so that you don’t end up in a pickle. Among others, financial experts advise that you always keep all your credit cards safe and secure. If you have multiple credit cards, don’t keep them all on your person at all times – keep some of them locked away in your closet, or in a safe. Additionally, it is imperative to keep your personal identification number (PIN) secure and separate from your credit cards. While most people don’t use PIN numbers with credit cards, they are commonly used with debit cards.

Expert advice when it comes to storing PIN numbers is as follows: keep your PIN separate from your credit card and your wallet at all times. Remember that the bank will always pay you back for fraudulent transactions that are conducted without a PIN, but if somebody has access to that PIN, you will not be paid back. It is advisable to change your personal identification number to something that is memorable to you. This can be done at ATM machines. Identity thieves are more likely to guess birth dates, anniversary dates, and other easy to remember numbers, so use something that is difficult for other people to figure out.

Remember, like many things in life, maintaining good credit is far more important than acquiring it. Many people are unaware that the interest repayments on credit card bills are based on the full amount that was used, and not on the outstanding balance. If you ran up $2,000 in bills and paid back $1,700 by the end of the month, your interest repayments will likely be on the full amount. To verify your interest repayment, it’s important to contact your credit card provider. Everyone is given a credit limit on the cards they hold. It is imperative to stay within that limit, and not to exceed it. If you do, you will be charged an additional fee. Careful credit card management entails knowing your limits.

Pay back in full to avoid late fees and interest -related credit card payments

On the topic of credit card repayments, it’s important to make regular and timely payments. The last thing you want as a credit card borrower is a less preferable interest rate on your outstanding balance. This can happen if you are a ‘repeat offender’ with multiple late payments. Clients who routinely missed their payment deadlines will face the consequences in terms of their credit rating, and their ability to apply for lines of credit.

Clients who repay the bare minimum every month run the risk of racking up substantial interest-related repayments on the cards. This is a no-no. Avoid making minimum repayments since this costs you more overall. For example, a credit card debt of $1,000 at 16.9% APR will incur interest-related payments of $1,530 over 22 years and 11 months if you’re simply making the minimum payment. It is far more beneficial to make full payments before the end of the month to reap the rewards of cashback, bonus miles, and other perks available with the credit card company. It behooves clients to pay back the credit card in full at the end of the month.

The Big No-No with Credit Cards

There are several things that should never be done with credit cards, or done as rarely as possible. These include using a credit card for gambling purposes, purchasing foreign currency with your credit card, using checks issued by your credit card company, and withdrawing cash from an ATM. These are some of the ways that lenders maximize their profits with unsuspecting clients. It is possible to safeguard your credit card by taking out insurance, but the costs thereof may be prohibitive.

 

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October 26, 2016, 7:51 am

3 Powerful Ways to Manage Business Debts

by: The Financial Blogger    Category: Pay off your Debts

 

Managing business debts is a major obstacle for all entrepreneurs from across the globe. When you need to secure business loans, you have to guarantee that you can repay it, taking after every one of the terms applied. In fact, it is not wrong to owe somebody or a loan company cash, as long as you can settle it on time. If not, you will be in a bad position when you are not ready to do as such.

 

For the most part, maintaining a small business is frustrating and stressful. However, if you love what you do and you are concerned about your business, then you can survive anything to make it thrive. Business loans can actually make or break you. This is the reason why you need to choose deliberately what sort of loan you will apply for.

 

Good thing there are various business finance solutions available out there, which you can swing to whenever you need business finance assistance. Sites like https://www.kikka.com.au offers financial help to business owners. Banks and Non-government agencies can also assist you in setting your business. Remember to pick your fights carefully and you will get through any business troubles along the way.

 

So, here are some ways to deal with business debts effectively:

 

Cut back unnecessary expenses

Decide the sections of your business where you can reduce costs, so you will have the ability to pay your debts. There are different ways on how you can lessen costs, for example, subleasing unutilized space, auctioning off unused gear, or disposing costly telephone frameworks. With this, you can free up money to settle your business obligations and keep your company running smoothly.

 

Combine loans

Business debt consolidation is one of the speediest solution to settle your debt quickly and lessen interest rates. As opposed to paying different credits with various financing fees, you can just wire them into a solitary low-interest loan. Also, this procedure gives you a chance to simply deal with only one lender. The loan can either be secured or unsecured with business assets. In order to help you out on this matter, you can inquire to finance experts whether this will be a good fit for your business or not.

 

Revisit your financial plan

When your debts keep heaping up, then it means that your company’s present budget plan is not generally working out. Make a financial plan in light of the business’ present monetary circumstance. Ensure your business’ income can take care of your monthly costs, such as lease and service bills. At that point, designate a part of the financial plan for variable costs, like fabricating materials.

 

It is your obligation as a business owner to deal with your company’s debts. Be sure to take into consideration these useful tips mentioned above to know what to do when dealing with your own business debts. Simply keep your eye on your goals and be flexible to whatever changes that will come your way. Definitely, it won’t be that easy and simple at first, but you will understand all things and get used to it eventually.

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June 14, 2016, 9:32 pm

Stuck in a Payday Loan Trap? Here Are Some Ways Out 

by: The Financial Blogger    Category: Pay off your Debts

 

paydayPayday loans can lead to cyclical dependence on a particular amount of money if you aren’t careful. This is the case with any loan product out there. Unfortunately, many lenders like banks, credit unions and payday loan companies restrict giving loans to individuals who have had credit issues in the past. However, whether or not a person has a good credit report or a bad credit report, it does not change the fact that they need an amount of money to fix the cash crunch problem. Companies like Cashco Financial understand this important point. That is why they choose to work with you to find a way to get you the money you need instead of making you jump through hoops and try anything not to lend you money. Visit www.cashcofinancial.com to see how they can get you cash today. Cashco Financial preaches that payday loans or short-term loans are not a solution to a long-term financial problem. Payday loans should only be used on occasions when absolutely needed.

Once you have the money you need, you should take steps to discover the root of the problem. When you have a shortfall of money at a particular time, it is important to first understand why. Without knowing what caused the cash shortage, it is more likely to occur again in the future.

Budgeting

Budgeting appropriately is the first step in practicing responsible personal finances. With a clearly defined budget that takes into account all your revenues and expenses, you can overcome any payday loan trap you may have found yourself in before. You will be shocked at how much money that can be saved with a few small lifestyle changes. For example, I used to smoke until I realized that it was costing me $240 every month, and it seemed that every third month when my bills would all pile up at once, I would have a shortage of about $200. After I set up a budget, I never had a cash shortage again. If you are worried about how to get started with creating your own budget, I found that Cashco Financial offers a Budget Buddy program for free online that helps you set up a budget. Check it out here and see how it can help you https://cashcofinancial.com/p/budget-buddy-signup/

Debt Consolidation

Debt consolidation is only necessary if designing and following a budget is not enough to escape a debt cycle within a couple months. There are numerous options available if you are considering debt consolidation.  Unfortunately, most of those options will involve destroying your credit score. Luckily, companies like Cashco Financial offer a product called a flex term loan to all of their clients. You can apply in minutes at https://cashcofinancial.com/term-loans/#apply and get up to $5000 to pay off your debts. Cashco flex loans give you the flexibility to have one affordable payment to manage instead of a dozen. The best part is that with every successful installment payment, your credit score will actually improve. If you have ever had bad credit or no credit, you know how important good credit can be. Get out of the payday loan trap and start building your credit score today with Cashco Financial.

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March 25, 2014, 7:31 am

Extra Money – Should I Pay my Debts or Start Saving?

by: The Financial Blogger    Category: Pay off your Debts

 

 

Last week, I started an interesting discussion with my post about making more money instead of cutting from my budget. After debating the point of cutting my expenses or making more money, I chose the latter and started to make some real progress on my balance sheet. But I’m not using all my extra money to pay off debts. I also use my extra money to save more money.

 

I STILL HAVE DEBTS, AND I SAVE MONEY ON THE SIDE, SAY WHAT?

 

For some people, being debt free is their main goal and they will reach it at all costs. They actually think it’s the best way to save money and become financially free. I definitely don’t agree with this. The choice of saving money or paying off your debts should be more mathematical than psychological.

 

Two years ago, I made a personal commitment to take care of my debts. While I didn’t achieve my aggressive repayment goal, I’m still in a better position today than I was two years ago. During the same period, I also manage to save up $7,362 for my children’s education and added $10,000 to my RRSP account.

 

It is true that I could have used this $17K to pay off my debts and I would have been able to complete my debt repayment plan. But I feel a lot better about my current balance sheet. Here’s why.

 

THE TAX IMPLICATION OF SAVING VS PAYING OF DEBTS

 

As I live in the beautiful country of Canada, I’m blessed with one of the highest marginal tax rates in the world. But this also comes with generous tax advantages for retirement savings and subsidies for education investment plans.

 

The first reason why I decided to save money instead of paying off my debt was the immediate tax impact on my investment vs the low interest rate paid on my debt. For example, I saved 45% in tax (my marginal tax rate) on my $10,000 RRSP contribution. This equals $4,500 in taxes saved. Then, I received a 30% subsidy on my RESP contribution. This subsidy is directly invested along with my money and will be taxed in my children’s hands upon withdrawal.

 

INVESTMENT RETURNS VS INTEREST RATE DEBT

 

The second reason why I decided to invest part of my extra cash instead of increasing my debt repayment was the fact that my potential investment return is higher than the interest rate paid. Last year alone, my dividend stocks made 22% (including dividends received) while my highest interest rate is 6.5% on the loan for my pool (I know, what a shame to have a pool loan!).

 

If you are unsure about whether you should pay off your debts or save more money, a good trick is to list how much you make in investment return vs how much you pay in interest. If you are a conservative investor and yield 2-3% per year, there is no point for you to keep this money invested if you have consumer debts. But if you are invested more than 50% in the stock market and pay a low interest rate, you should keep investing.

 

The power of compounding interest will work its magic on my investments while it doesn’t apply on a loan. Take $10,000 invested at 5% vs a $10,000 debt at 5%. During the first year, the $10,000 invested will generate $500 (5%). But the second year, you are now at $10,500 invested at 5%. Therefore, you will earn $525 (5% of $10500), not $500. The extra $25 on your gain will continue to grow year after year. This is the magic of a compounding interest rate.

 

On the other hand, if you have a $10,000 debt and pay $500 of interest during year 1, you will still have to pay $500 in interest in year two. The interest doesn’t compound on a debt. This is why it’s almost always better to invest than pay off your debts even if the interest rate / investment yield are the same (assuming there are no taxes on your investment).

 

WHAT WILL I DO WITH MY NEXT PAY RAISE?

 

In June, I should get a small pay raise. Since I’m already making a good income, my pay raise should just about match inflation. This should be around 2% this year. But 2% of 80K is better than a slap in the face, right? This will result in about $60 gross on my pay check. Technically, I should get about $25 net in my pocket. Not the end of the world, but this will help my goal of increasing my TFSA contribution to $150 bi-weekly. Regardless the amount of my pay check raise, it will go directly in my TFSA.

 

I still believe I will be making more money with my TFSA that what it cost me in interest. And if it’s not the case, I will always be able to cash in my investments and pay off my debts at anytime. This gives me more flexibility than being debt free and borrowing in the future to fund my kids’ private college.

 

HOW WILL I PAY OFF MY DEBTS THEN?

 

If I use my extra cash to fund my children’s education and retirement plan, this doesn’t leave much room for debt repayment, right? This is where the budget comes into place! I already put a monthly payment down on my debts. Then, I will cash my employer stocks (which are already at $5,000 right now), use my tax return (another $2,000 or so), some dividends from my company (we started to pay ourselves again!) and year-end bonus (calculated based on what I already earned, very conservative).

 

I do some calculations on a monthly basis to make sure I’m still on track for this aggressive plan and so far, I’m right on track! This will be an amazing year: vacations + debts pay off!

 

How about you, do you focus on yours debt or your savings?

 

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March 20, 2014, 5:00 am

The Only Secret to Paying off Your Debts is Really to Make More Money

by: The Financial Blogger    Category: Pay off your Debts

 

You know that already, I started a fight with my consumer debt back in… 2012. We will all agree that I lost the first round (2012) when I failed to go drop under 300K of debt. In 2013, I used a similar technique… and got similar results.

 

Einstein defined madness by doing the same thing over and over and expecting different results. I guess that there is always a little bit of madness in each of us!

 

But towards the end of 2013, I started to get very sick of seeing so many debts on my balance sheet and began to look around to find a solution. I sat down for hours looking at both columns; revenues vs expenses, and found out the solution wasn’t in the latter.

SETUP A SOUND BUDGET

 

When I decided to pay off my debts back in 2012, I did what made sense: I created a sound budget. I thought by looking carefully at how cash was flying out of my wallet, I would control my personal finances and my debt would drop. It didn’t happen in 2012 and the same result happened in 2013. I was very good at finding excuses:

#1 The addition of central A/C

#2 The addition of a pool

#3 Car repair$

#4 Vacation

#5 etc, etc, etc,

 

But I ignored the most important part of my budget during this exercise: my sources of income. I’ll go back to this point later on in this post but I want to finish about how to do create an effective budget first.

 

Making a good budget doesn’t require a fancy online app where you get 3D graphs in multiple colors. All you need is a pen and a piece of paper (or an excel spreadsheet if you don’t feel like using an old fashioned calculator!). I’ve made a list of all monthly expenses and classify them into three simple categories:

 

What I can’t do anything about: mortgage, taxes, electricity bill (you can’t cut that forever), healthcare (mainly products for kids), savings (pay yourself first!), gasoline.

 

What I can reduce: food, restaurant, wine, car payment, insurance, etc.

 

What I can waive: car expenses.

 

At that time, there was only one expense I could completely waive without affecting my lifestyle too much: sell my second car. I didn’t have a car payment on my RX-8 but it was costing insurance, gas and car maintenance bills on a monthly basis. By selling my old car, I was getting rid of a few hundred each month.

 

Then, I attacked what I can reduce. I actually sold my two cars to replace them with a new one back in September 2013. It has increased my total debt but my monthly payments were greatly reduced. Since my car value drops as fast as my new car loan, it had no effect on my net worth; only on my budget. I’ve slowed down on wine and cut out restaurants. I went to my own limit of my lifestyle.

 

After cleaning up my budget and reducing expenses, the numbers still didn’t work perfectly yet. I faced a dilemma: I had to either cut back on lifestyle or find another solution. I consider that I’ve worked too hard when I was younger to give away on my current lifestyle. I love the way I live and don’t want to sell my house, miss going on vacation or reduce my children’s activities. This brings me back to finding another solution.

 

THE KEY IS THE MONEY YOU MAKE NOT THE MONEY YOU SPEND

 

For several years, I was able to both increase my lifestyle and not increase my debt level. It just happened recently when I’ve lost control over my personal finance temporarily. My first reflex was to cut down on my expenses and try to manage my budget tightly. This was a mistake.

 

In fact, a few years ago, I accepted a new position at work. It was a promotion but also a long term move where I could make more money… but only in the future. Since I had to start a new book of clients from scratch, in the beginning bonuses would be smaller than in my previous career. This is exactly what happened in 2012 and 2013. On top of making less from my day job, I also started to make less from my online company. Back in 2010 and 2011, I was withdrawing some good amounts to support my lifestyle and enjoy life. In 2012, Google slapped us big time and we had to reconsider our business model.

 

While the business is now back on its feet, it wasn’t the right time to withdraw company money for leisure. So back in 2012, the issue I ran into was not a spending problem, it was an income problem.

 

The key with your personal finance lies within your ability to make money, not to reduce expenses. I can appreciate my “new” strategy as we are now making more money since September 2013 with the opening of a daycare at home. On top of this, the company is now generating more income and we can also benefit from it.

 

I saw the positive impact instantly on our budget as months are easier to get by and I see my debts reducing each month now. I don’t have to wait for a bonus or a tax refund to apply a lump sum payment on my debts.

VACATION + PAY CONSUMER DEBTS?

 

That’s right! This year, I will get rid of 15K of consumer debts and go on two vacations! We will have a couple’s vacation and a family vacation! Both can be done because we are making more money than ever.

 

So I won’t have to sell my house or get rid of my new car and will continue to live the way I want. On top of this, my debts are going down and I’ll be ready for more investments no later than 2015!

 

The morale of my story is simple: focus on your ability to make more money and you will pay down your debts. You can spend hours to reduce your expenses, do things by yourself to save a few bucks and burn yourself out in a miserable frugal life. Or, you can live the life you want, enjoy all the good things while making the money to pay for it. I’m done fighting with my budget. It’s time to make some more money now!

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