Build Wealth And Reduce Debt Today

We live in a world that differs from the ideal one we could imagine. While it’s simple enough to picture a utopia, most people would agree that this isn’t the world we live in. The same goes for our individual lives. It’s easy enough to imagine a set of goals (getting fit, learning a new language, getting your financial life in order), but it’s much harder to put those plans into motion, much less attain them. Today is the day to start turning those dreams into reality.  The best way to do this is to concentrate on two ideas: Build wealth and reduce debt.

Build Wealth

Building wealth isn’t easy, but there are a bunch of ways to do it. For one, you could simply save money. This is a great wealth building tool. Start with an emergency fund, one which is big enough to cover your expenses for six months or more, just in case you were to lose your job or get injured or sick. Making a habit of saving is an important financial discipline. It’s how you’ll build a better future for yourself.

You should also consider your options for building wealth in some basic ways. Start with the place you live. Renting is expensive, and you almost always end up paying more every month than you’d pay if you owned the house. You can get a mortgage loan to start building equity in your home, and in some cases can provide the liquidity for furniture and amenities or to make necessary improvements.

Eliminating Debt

On the flip side of the coin, there are a number of ways to eliminate debt, which can make your wealth building strategies much more lucrative. Start by focusing on your most expensive debt, typically stemming from spending you’ve done through credit cards and other credit accounts.  Look around for companies that can help you consolidate this debt into more affordable monthly payments, which can be organized in such a way that your debt can be gone in as little as 24 months.

Once your most expensive debt is eliminated, you should focus on your less expensive debt. This may also come from credit card spending, but may be the result of other sources of debt. Whatever it is, don’t worry about it. Just focus on paying it off. As you make a habit of killing off debt, your financial life will get stronger and stronger.  Do this and you won’t have nearly as much to worry about as when you started.

By focusing on both of these strategies simultaneously, you’ll be building your wealth far faster than if you haphazardly considered only one or the other. But that’s just the strategy that most people adopt. The unconsidered financial life is one built for failure.  So make sure that you understand the plan that will bring you success.  And most important, show that you are committed to carrying it out.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Budgetary Demands Should Conquer Other Considerations

Everyone enjoys spending money. Unfortunately not many are particularly good at following a budget to keep their finances in good order. The level of credit card debt in the USA suggests that there are plenty of people spending on a regular basis without actually paying off the bill in full. Once a balance is established it incurs a high level of interest. Interest is added at the end of each month so something that might be a bargain purchase bought on credit might ultimately end up being very costly indeed.

The recession resulted in an increase in consumer debt. The wise have paid off their debts as a matter of priority. Now it’s your turn. If you write down your regular income and expenditure it will put your financial position down in front of you.  Your credit card debt and any debt on store cards will be costing you a significant amount of interest each month.

Credit Card Discipline

Before anything else you should make a decision to stop using your credit card; you are obviously living beyond your means. If at a later date when you have reduced the balance to zero you should only use your card again for convenience and if you can pay the full bill when requested. In an absolute emergency you can use the card but you must understand the consequences of doing that.  Don’t even carry it with you perhaps?

The figures in front of you tell your story. The expensive debt should be cleared as a priority. There are online lenders who will look sympathetically at applicants who can prove they have a regular income and can afford the instalment payments each month until the borrowings are paid off completely. Certainly the interest applied to such realistic loans is at a much lower rate than that used by credit card companies.

The Cost of Debt

You need to understand your debt and what it is costing you. Some people psychologically address the smaller amounts first; instead of 6 creditors they are happy to reduce it to 5 and 4, in other words numerically rather than by interest rate. There is some validity in that approach if it increases satisfaction but also determination. If the consolidation loan described above can clear all debts other than mortgage which is in an altogether different category then all well and good.

There are occasions when you can negotiate rates. If a creditors feels you are liable to default he or she make accept some form of negotiation. If that is a means of reducing your core debt then that is certainly worth the approach.

Sacrifice

You may be thinking this has all the signs of major sacrifice. No one is claiming that there is np pain in clearing your debts but you must ask yourself a question. If you are earning a regular monthly income why is it that you are facing mb-2015-03-checkbookfinancial stress every day? The answer may be a combination of things ranging from misfortune to complacency and simple extravagance, living beyond your means. The reality is that unless you address the problem things will only get worse. Debt simply does not vanish and the day will come when you will be completely out of your depth with little or no escape route.

You show investigate whether you can spend less by getting more competitive insurance quotes and utility providers. It is easy just to continue with existing contracts but often there are cheaper options available. It seems a fairly common practice to produce special offers to attract new business without offering those deals to existing clients. If you are financial trouble you should not dismiss trying to get yourself better deals. The only cost is your time.

Perhaps you will need to make some economies in your day to day life; reducing your social budget may be a necessity? If your debts are growing there will be little choice. The days when you might recall how you enjoyed spending money can recede very quickly when the reality of your finances hit home. Discipline must replace any form of complacency. If you have a regular job, you can repair your financial situation but the longer you leave it the more difficult it will be.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

7 Ways To Improve Your Credit Score

Nobody knows the exact methods by which your credit score is calculated, but you should definitely understand the importance of having a good score, and some methods which will help you improve your credit score.

Here are 7 Ways To Improve Your Credit Score

Pay on time.  Every time .

The biggest knock on a credit score is late or missed payments.  While you can’t erase the sins of the past, you can make sure that moving forward you prove your credit worthiness by paying every bill on time.

Reduce the number of open debts.

It’s been thought that, all things equal, the number of debts you have can adversely affect your limit. For example, if you have $4,000 in credit card debt, you might have a lower score if you have this spread across eight cards versus consolidating the debt down to one or two cards.

Keep open available credit.

One thing that likely factors into your credit score is how much of your available credit you have in use.  Again, using the $4,000 credit card balance, mb-201402creditcard400you might find yourself with a lower score if your overall limit is $5,000 versus if it’s $10,000.  Not to say that you should open up new cards to increase your limit, but instead of closing cards and lowering your overall limit, you can just stop using them.

Understand different types of credit.

A $4,000 auto loan may have a different impact on your credit score than $4,000 in credit card debt.  A mix of different types of debts is likely more favorable than just having one type of debt.  Again, not advising that you run out and open more types of credit, but understanding the potential impact, especially before potentially taking on a new loan, is very important.

Keep aged credit.

Two people with identical credit situations can find themselves with vastly different credit scores simply depending on the age of their credit.  If your oldest credit card was taken out just a year ago, you will likely have a lower score someone else whose oldest card was issued ten years ago, all other things equal.  Before you start closing cards, again, take this into consideration.

Know that stability counts.

Many people open and close credit cards to take advantage of different reward programs.  A few years ago, it was common to have reward cards available that would give you 5% or more back on your purchases, but the catch was that this was just a teaser, and the rewards would decline after a few months.  People would simply move on once the premium rewards disappeared in order to continue to maximize their overall rewards.  This can add up to big bucks in rewards but this will have a negative impact on your score.  If you already have a top score, this will likely be negligible. For someone with an average score, this could actually do more harm than good.  Weigh not just the reward benefits, but also the long term potential costs.

Keep working hard.

If you have a 600 credit score, it’s not going to jump up to 800 overnight.  But, it can be done as long as you work hard and understand that time is on your side.  While there are many offers out there that claim to improve your credit score overnight, the best and most stable method is to make solid choices as noted above and do so over time.  That will outlast any gimmick!

Readers, what have you done that’s improved your credit score? Have you found any methods to work against you?  I’d love to hear your thoughts in the comments below.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Set Your Debt Free Date And Stick To It!

When I started catching up on e-mails that piled up over the holidays last month, one of the first ones I opened was from Jackie at The Debt Myth, a fantastic personal blog that tackles debt in real and sensible ways.  She had a great idea to get as many bloggers as possible to write a blog post centered around the theme “Debt Is Not Forever”.

The Debt Is Not Forever Idea

The idea behind her theme is so simple that the words really speak for themselves.  It’s basically to acknowledge that debt is something that is temporary, even though many people have made it a permanent part of their lives.

Think about it.  We have car loans, mortgages, credit card bills, home improvement loans, student loans, and the list can go on and on and on.  Looking at the list as well as the figures that many people have attached to them, it can seem like debt is constant.

Although it may seem like that, it really isn’t.

How To Think of Debt As Temporary

mb-201402creditcard400For the last couple of years, I’ve had Jackie’s principle of ‘Debt Is Not Forever’ in my head, but in a more abstract way.  Reading her e-mail which asked me to write this post, gave me the a-ha moment, and put some framework around my approach.  So, what is my approach, you ask?  It’s pretty simple.

  1. Gather a list of all of your debts
  2. Find the debt that is set to be paid off last
  3. Set that date as your debt free date.
  4. Manage your debts within that time frame.
  5. Stick to it!

Sounds pretty simple, right?  It is!  A little too simple?  No, not if you plan and work.

Applying Our Plan To Get Debt Free

So, let me put our plan in action.

Gather a list of our debts
Right now, we only have two debts.

  • Student Loan
  • Mortgage

List created.  See, this is easy.

Find the debt that is set to be paid off last
The mortgage is the debt that is scheduled to be around the longest out of all of our debts, in October 2026.  The student loan will be paid off in 2018 with normal payments.

Second item, done.

Set that date as your debt free date

I just said that October 2026 is the date that the last payment on our current debt is scheduled, so I guess October 2026 it is.

Third item, done!  We’re flying right now.

Manage your debts within that time frame

OK, here’s where it probably gets a bit tricky.  Here it is just January 2015, and we have to figure out our debt situation for the next eleven and a half years?   I knew this would get tough.

Or is it?

Not really.  Actually, planning your debt is pretty basic if you give yourself only two options.

  • Take on no new debt during that time – This is the ideal situation, and if you can pull this off, you’ll be assured to hit your mark on or before the current date of your final payment.  That’s simple, cool, and will work 100% of the time.  Unforunately, it isn’t always practical, which leads to the second option….
  • Manage any new debt within your schedule – Let’s face it, you may have to take on debt between now and the time your last debt is scheduled to be paid off.  Ideally, you wouldn’t have to take out a loan for a car, but you might.  In a perfect world, all home improvements and such can be paid for up front, but maybe that can’t happen.  The winning strategy here is to make your debt payment date a priority.  If you willingly take on any new debt, make sure it’s done so in a fashion where all new debts will be paid off within the date you just set above.  Period.  So, if you have to get a car loan (or multiple car loans within the time), fine, or you want to take out a home equity loan to pay for some upgrades, no problem, just so long as you can commit to having that new debt paid off before your debt is scheduled to end.  If you’re unable to commit to that, then the solution is simple: Don’t take on the new debt!

Stick To It!

Again, this part will get tricky, and you may have to go back a few times, especially depending on how long it is before your debt is scheduled to be gone.  But, if you establish that date, write it down, remind yourself of it, get a calendar popup on a regular basis.

Start Thinking Of Debt As Temporary Today!

Whatever it takes, ingrain that date in your head.  Whether your debt free date is a month from now or thirty years from now, it really doesn’t matter.  Just so long as you establish it and stick to it, you’ll get there.  And, once you do, you’ll realize that debt is not forever!

Readers, please share your strategy on ending debt, or your story of how you did it if you’ve already hit this goal.  In addition, please visit Jackie’s page on this important topic over at The Debt Myth.  

Many thanks to Jackie for organizing this topic and including Money Beagle.  I’m proud to share!

 

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.