If you’re stuck in a financial rut, here’s a bit of good news for you: You can get out of it sooner than you think. But wait, here comes the bad news: You can get stuck there forever if you’re not doing the right things.

To get yourself on track, the first thing you need to do is to debunk the personal finance myths that are bringing you down. Here are three of the most common:

1. “I’m in deep debt. I can’t afford to have any savings.”

If you have a lot of debts to pay, it’s advisable to work hard towards paying them off as soon as possible – but you shouldn’t do this at the expense of your own savings. If an emergency comes up and you have no money to cover it, you’ll end up taking out more loans, which will bring you to deeper debt.

Start with small amounts. To make it easier, work your savings around your debt payments. A little is always better than nothing when it comes to saving up for a rainy day. It’s not enough that you’re paying your debts – you have to safeguard yourself from taking out more loans in the future too, especially ones that are avoidable.

2. “I must buy my own house, especially when interest rates are low.”

Many people buy things just because they’re discounted. That holds true for anything, from little kitschy stuff to really big-ticket items like houses. Sure, it’s great to have your own home, but if you’re going to end up burdening yourself with mortgage you can’t really afford in the several years to come, it’s better to pay rent. Renting can give you freedom that paying mortgage can’t, like you can always move to another city or country if you lose your job, or you can move to a cheaper place if your income becomes smaller. In this unpredictable economy, you have to be flexible.

Once your finances have stabilized, you can start thinking about buying your own home. But don’t buy a house just because the interest rates are low. It’s not the price that you have to consider but your capacity to pay.

3. “I have money problems. I can’t afford a financial adviser.”

If it were easy to go on a diet and lose extra pounds, then nobody would be struggling with weight problems. Although some people can get into shape on their own, many can’t. This is why nutritionists and personal trainers get hired all the time.

The same goes for money problems. If you can’t fix them on your own, you should strongly consider getting debt management advice. Getting professional help lets you save – and maybe even grow – your money in the long run; not having professional advice can mean you continue to freely slide towards financial ruin.

Bad Credit Debt Plan from Payday Effect

The holiday season has now passed, and most people have substituted their pre-holiday-shopping-excitement with a post-holiday-debt-depression. Before debt threatens your New Year’s happiness, here are five techniques for cutting down consumer debt, and getting you moving towards better finances in 2012.

1. Refrain from racking up additional unsecured debt.

You do not have to dump your credit and charge cards, but you do need to give them a rest. Additionally, don’t think of your card(s) as a resource in case of emergencies. Instead, arrange for unexpected emergency expenditures in a way that does not require reliance on credit (see item #5, below). Remember, giving up the credit cards will not be easy, but you must bring in more money than you spend each month, and halting all credit use is a great first step.

2. Examine your debt.

Consumer debt experts recommend that you take a look at your financial debt. For starters, you ought to take inventory of all debt, including student loans, mortgage(s), personal loans, credit card debt, payday loans, and so forth. Examining your debt, while pretty stressful, serves an important purpose. It allows you to view how much you owe, realistically. After that you should group your debt, isolating the beneficial debt from the unsecured debt that is so damaging. This will allow you to discern the kind of debt that does not serve you, from the kind that does. For instance, a mortgage loan, while a significant expenditure, isn’t necessarily bad because you’re building home equity in the process. How great! And school loans, while burdensome, are necessary in order for you to get the skills required for higher-paying jobs. What good news! Once you observe you financial obligations in this manner, it may help to lower your emotional anxiety with regards to them.

3. Draw up a repayment plan.

The most direct way to repay financial debt is just to start. Yet, prior to putting one cent towards that debt, you need to develop a preferred plan. The following are a couple of the most common techniques:

The “Debt Snowball” - This technique surmises that it’s best to manage your debt by focusing on credit card balances. You start by arranging your accounts according to how much is owed on each, with the largest account at the top, and the lowest on the bottom. Every month you will pay the minimum amount due to each one listed, but give special attention to the very last balance (“Account A”, the one that has the smallest balance owed). To “Account A” you will pay the required minimum, plus an extra amount. You can pay off “Account A” pretty fast because it’s got the smallest balance, and move on to the next lowest balance on your list (“Account B”). Now, to “Account B” you will pay the minimum amount, plus the minimum amount you were paying on “Account A”, plus an extra amount. When “Account B” is repaid you’ll keep with this system for all remaining accounts. The good thing about this method is that it provides a bit of success along the way, to help you stay motivated to move up your list and pay off that debt.

The “Debt Avalanche” - This method is comparable to the “debt snowball”, but focuses on interest rates instead of account balances. Thus, you’ll arrange your current balances with the top being the low-interest account, and the bottom being the high-interest account. Monthly, you will pay the minimum amounts due on all accounts. But you will focus on the balance with the highest interest, and pay off this one first (“Account A”). To “Account A” you will pay the minimum, as well as any extra cash you have. Using this technique you will repay “Account A” relatively fast (the amount of time it takes is determined by the actual amount owed), but you will save a lot on interest charges. Once “Account A” is totally paid off, you’ll go to “Account B” and pay the minimum for that account, plus the minimum from “Account A”, plus any other cash you’ve got on hand. As soon as “Account B” is repaid you use the same process to resolve all remaining accounts. This technique will keep you from potentially spending thousands in cash on higher interest rates.

4. Adhere to your credit debt payment plan, even when things get tough.

No matter whether you prefer the “debt snowball” or “debt avalanche”, a couple of things should be included in your approach:

-Set up automatic payments. Select the date that works best for you, for example, you might prefer that auto-pay occurs a few days after you get paid. The most important thing is that the payment be submitted by the date it’s due.

-Pay in multiple installments. Rather than just paying via a single transaction per month, why not split your total payment in half and pay it twice a month? This has two advantages: First, it will reduce interest assessed because your balance will be lower by the end of the billing cycle. Second, it will make certain that, in the instance of a cash flow problem during the month, that at the least some of your balance will get paid that month. Again, the important thing is that all minimum payments are submitted before they’re due.

5. Create a “rainy day” account.

For some, this is a difficult assignment (didn’t I already encourage you to place “all extra cash” towards paying off you debt?). Nevertheless, creating a “rainy day” account is essential, and will prevent you from mounting credit card debt that often arises after an unexpected expense. While the assertion that all additional funds must go towards paying down debt seems sound, it becomes a lot less so when your car breaks down, or you get sick and have to miss work. Though distressing, you need to anticipate that emergencies occur, and that personal savings are an absolutely must. Besides, what is the purpose of repaying your credit balances just to have them rise again because you had to use your credit cards to pay for life’s necessities? Make this the year you get free of this vicious pattern.

The best way to start your rainy day account is to get a high interest CD, savings account, or money market account (rates for online banks are often better than rates you’ll find at brick and mortar banks). I recommend the high yield savings account because they require low/no minimum balances, and offer easy access to your money when you need it.

And how will you raise the fund necessary to open such an account? To begin with, start by cutting down on something small; get rid of one or two expenses a month. For instance, rather than eating dinner at restaurants two times a week, save the amount of money you’d have used for those meals. And if you have a lot of unnecessary expenses (like a hair dresser, nail person, gardener, and so on) cut these expenditures completely, for a few months, and save this money instead. You might have things in your home that you never use, for instance apparel, furnishings, or consumer electronics. Selling these items can generate some income as well. And of course, if you are anticipating a tax return, do not plan to spend it, but instead decide to have the whole sum direct deposited into a high yield savings, CD, or money market account.

Building up your savings will not feel too beneficial, but you will be very glad to have such an umbrella when a rain storm appears.

Whether you are a “budgeter” or not, these five New Year’s resolutions will assist you in decreasing your personal debt this year. Like most plans, you need to start by modifying your behavior. As time passes, each little change you’re making (that is, not using those credit cards, eating more meals at home, etc.) will lead to considerable results over the course of a year. Then next season, rather than experiencing the crunch of holiday debt, you can enjoy the holidays and be debt and worry-free.

For more useful advice on using credit cards wisely, or to get resources about bank rates and establishing high yield savings accounts, visit our website.

Financial planning is something we all know we need to do, but always put off for the future. Financial Planning requires Financial Discipline, which is so difficult to practice in the current era of consumerism. However, financial planning is very important because you want to retire one day, be financially stable in the event of an accident, or unexpected loss of a job.

Money plays an important role in your life. Yet, when you have it, it is seldom given the importance it deserves. You look forward to earning more money rather than managing the money that you already have. You have plans for your time and your jobs – you carry PDAs, smart phones and organisers to keep track of your life. However, when it comes to keeping track of your money the performance is more often than not dis-satisfactory even by your own standards. It is a mistake as prudent financial planning can help you make the most of your money and ensures your prosperous future.

Getting your financial planning started is a difficult thing, but once you have made financial planning part of your routine, it won’t seem that difficult. Financial planning means sitting down and creating a plan of action that will help to save you money. It involves

1. Identifying your financial goals (say retirement, child education etc),
2. Identifying your current position (net worth and cash flow position), and finally
3. Charting out a plan to achieve the above goals.

 

The following tips will help get you in gear to start your financial planning and motivate you to make financial planning one of your main goals.

Spend less than you earn - If you spend everything you make – regardless of how much you make – you will never be wealthy. The greater the gap between earning and spending, the faster you build (or lose) wealth. Spending less than you earn is the only way to achieve long-term financial security. It is easier to spend less than it is to earn more. It doesn’t always involve making big sacrifices and a fine-tuning on your spending pattern can result in big savings in the long-run.

Prepare and strictly follow budget - A budget or spending plan is necessary for successful financial planning. Common financial problems like overusing credit, lacking a regular savings program, and failing to ensure future financial security can be minimized through budgeting. Budgets aren’t meant to control you, and they shouldn’t prevent you from enjoying life. In fact, when done properly, budgeting doesn’t make you spend less on the stuff you want; it helps you spend more on the stuff that matters.

Savings must be a Priority - Before you pay your usual bills, buy groceries, or do anything else, you should set aside some part of your income. Remember the golden words ‘Pay yourself first’. Start small if you have to (even 5-10% of your income a month is good), and then increase your saving rate with time. One thing to note here is that merely savings are not enough unless they are channelized into productive investments.

Clear your credit card debt - Credit cards are something to be very, very careful with. Those little pieces of plastic are so easy to use, and it’s so easy to forget that its real money you’re dealing with when you whip them out to pay for a purchase, whether large or small. You can easily get into credit difficulties if you fail to understand how and when to use credit.

Start early - Make time your ally in pursuing your financial goals. Compounding is a remarkably powerful wealth-building process that can turn relatively modest amounts of money into a fortune – provided you give the investment time to work. Action beats inaction. It’s easy to put things off, but the sooner you start moving toward your goals, the easier they’ll be to reach.

The perfect is the enemy of the good -Too many people are afraid to start getting their finances in order because they don’t know what the “best” first step is. Don’t worry about getting things exactly right-just choose a good option and do something to get started. The time to start planning for your financial future is NOW… at this very moment. Remember the old saying: Today is the first day of the rest of your life.

For successful financial planning, know where you are now, know where you want to be, and be persistent in your efforts to get there…

Naveen J Sirohi CFP is the founder of PRUDENT ADVICE ( http://www.prudent-advice.com ), a consultancy firm providing client-centric, knowledge-driven, fee-based advice for complete financial and realty solutions. A Certified Financial Planner and REALTOR® with more than a decade of experience in banking industry and academics, he is whole-heartedly devoted to financial consultancy and financial education. For access to other informative articles, tools and resources, kindly visit his webpage http://prudent-advice.com/articles/.

If you have ever had financial troubles or issues with your credit score, you may be looking to re-examine your personal finances. You can fix any issues or imperfections that you may have from your past so that you can be financially stable. There may be several different ways for you to repair any previous damage, but you should know the facts before you do anything. Learning how to save and spend your money reasonably is very important, so you need to know the truth about some myths about personal finances.

When it comes to your savings, people say you should always put a portion of it into stocks or mutual funds. Only do this if it is something that will fit in your financial plan. Everyone has different ways of saving or investing their money, but it normally fits their financial goals in the end. You can use your savings account in whatever way that you want, and depending on where the account is, you may be able to earn interest if you stay above a certain amount.

Some people think that they will be better off buying than renting a home. Yes, there are cases when buying is better than renting, but it is different from person to person. If you have bad credit, it may be better for you to rent so you can repair and establish new credit instead of buying a house. Buying a home with bad credit may mean that your monthly interest will be higher than someone with a good score. Your credit score shows lenders how big of a risk you are, so if you hold off on buying so you can improve your score, it is possible you will pay a lower monthly rate and save money in the long run.

Closing your credit cards will help your credit score and prevent you from acquiring debt. It is true that if you have no credit card, then you won’t be able to build up credit card debt. However, closing your account can actually hurt you in the long run. Instead, pay off your debt as you are supposed to, then simply don’t use the card anymore. Doing so will keep that card and card history on your credit report, but will also show that you have paid it off. After about seven years, the information will no longer show up in your credit history. Also, by keeping your credit card accounts open you can teach yourself how to properly use and pay off your card.

Another very popular myth is that you cannot get a loan if you either have bad credit or have debt. There are loans out there that are specifically for people who have bad scores. Getting a loan like a personal loan can help you pay off your debt, and even work to rebuild your score. A lot of people who have financial troubles may opt for a personal loan so they can use it to consolidate their debts. Doing this allows for the person to pay off multiple debts they may have with the personal loan, and then only have to make one payment instead of multiple.

Robin Wood
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Bad Credit Personal Loans

Taking care and keeping track of your personal finances can be difficult at times. Even though it may difficult, you still have to stay on top of it to prevent from falling into a bad financial situation. Of course with any issue about finances, you can always ask a trusted financial advisor to help you, but it is always good to know how to take care of your own money. Many people who have managed their own finances at one point or another have probable made a mistake in the process. There are several mistakes that are actually very common that many people make.

Credit cards are always kind of an iffy subject when it comes to finances since they can be helpful but way more harmful to you in the end. No one should ever rely on a credit card as their main way to pay for things. Doing this can lead to large credit card bills that you may not be able to pay off and of course it can lead to you falling into debt. When it comes to all of the different types of cards out there, make sure you know the difference and which one you are using. Some people are unsure of the differences between a debit card and a credit card. Credit cards are pretty much a loan. Banks lend you a certain amount of money, how you use it is up to you, as long as you pay it back. A debit card is attached to your personal checking account. When you use this card, the money is taken out right then and there with the money in your account.

Of course an easy way to mess things up is by spending more than you are making. If you do this, don’t be surprised when you end up in debt. Try to live within your means to help prevent falling into debt. What I mean is, if you only make $25,000; don’t buy a million dollar house or car. It is also advised for you not to live pay check to pay check. Doing so can create some sticky situations, but there are always those times when that’s the only option you have. Just, as stated before, live within your means by not spending more than you make.

Some people simply don’t try and save money. Saving money doesn’t just happen; you have to consciously work at it. Also, saving money isn’t just coupon cutting and finding good deals; you should have a savings account that you regularly deposit money into. Your savings account allows you to think about your future and hopefully give your safety and security for the future. Life has shown us many times that it can often be unexpected, so expect the unexpected. Cliché I know, but it is true. They say it takes a person an average of six months to find a new job, so they should keep at least six months worth of salary saved up just in case. Also, saving your money can set you up for the future, whether that future is college, a new house, or a new car.

Lisa Andrews