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September 13, 2017, 9:30 am

So you’re in debt – now what?

by: The Financial Blogger    Category: Financial Planning,Pay off your Debts

The reasons people fall into the debt trap are varied and complex – from a simple lack of financial education or poor budgeting, unemployment, gambling problems or an unexpected illness that wipes out your savings, or just plain overspending! Cultural values also play their part, with some countries just seeming to instill a belief in the importance of saving and living within your means more than others.

Whatever the underlying reason, debt is a growing issue that more and more people find themselves facing, and sitting down and crunching the numbers can create an almost paralyzing sense that you just won’t be able to get out from under the beast. Because of this, many people try desperately to ignore the reality of their circumstances, ducking and diving and living in constant anxiety. In some cases, this type of lingering stress can even make you lose focus at work and become a threat to your career, which certainly isn’t going to help the situation!

The answer is obvious, but you have to be willing to accept it. If you ever want to get out of debt, you’re going to have to face some possibly awkward conversations, man up to your mistakes, and yes, your lifestyle may have to change, possibly drastically. But facing the problem is the only way it’s ever going to go away – and with a little bit of help and some discipline – it can.

Get help!

Contacting a professional firm to investigate your debt review or credit counseling options is a great place to start. One thing’s for sure, you certainly won’t be the first person to face this problem, and you’re sure to receive solid and nonjudgmental advice. Debt review firms and credit counselors can help you in a variety of ways, from helping consolidate all your debts into one manageable monthly payment, helping you come up with a realistic budget, negotiating better interest rates on repayments and even protecting your assets from repossession.

Many lenders will even offer a lower total repayment on your outstanding account when they see that you are serious about paying them back – it makes financial sense for them to recoup a smaller amount rather than run the risk of you not being able to pay anything at all. This will depend on your personal situation of course, so you will need to be completely upfront and honest about what your income and expenses are. Taking the first step is the hardest, but the relief you get from knowing the journey back to financial freedom is actually underway is more than worth it!

Getting out of debt for good

If you have several debts to pay off, it may make sense to harness the power of the snowball effect. This concept revolves around starting with your smallest debt, and paying that off first, which offers two benefits. The first, and perhaps most important if you’re at the beginning of your journey, is the psychological boost you get from ticking one debt off the list for good. And secondly, not only are you now used to getting by without that money each month, but your overall debt has shrunk too.

Really evaluate your spending habits. It’s so obvious that people underestimate just how important it is to have an accurate idea of where your money is actually going each month. This doesn’t mean scribbling down what you estimate you spend on groceries, fuel, fees and contracts – this means actually getting the real figures. Commit to either keeping your receipts (if you tend to draw cash) or only using your card so you can track payments on your monthly statement. Draw up a spreadsheet, use an online tool or whip out your calculator, whatever works for you. The important thing here is creating an accurate picture (maybe even a pie chart if you’re so inclined) of where your hard earned cash is going. Prepare for some shocking truths! Once you have the data in front of you, seeing where and how much you can cut back becomes simple.

Once you’ve committed to making payments each month, have them set to come off your bank account automatically via debit order or automatic deduction. If you have a good relationship with your employer, ask them to deduct the money from your salary each month on your behalf. This means you’re less likely to find an excuse not to make a payment because it would mean having to explain yourself to them too!

Getting out of debt entirely really is possible – and even better, once your debts are cleared, you’ve learned an even more valuable lesson. Don’t go back to your old habits and spend that money you were setting aside each month. Keep the trend going, and set the same amount each aside to save and invest each month. The lessons you’ve learned in getting out of debt can now serve you in saving up for retirement or a reward you’ve truly earned!

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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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