personal finance Archives - Free Debt Management Tips

Here’s Why to Have a Date With Your Money

May 24, 2017 debtmanagement

Do you think of your money as a friend or an enemy?

You really should think of it as a friend. After all, would an enemy pay your rent or mortgage? Would an enemy buy you a car or pay your utilities?

Money is not only a friend, it has superpowers. It can take you on vacations and even give you peace of mind.

Given the fact it’s such a good friend, why not ask it out on a date?

Have a recurring date

Get out your calendar and set a recurring date. This could be as frequently as once a month or just once a quarter. The idea here is to set aside time to brainstorm things you could do with your current cash flow to have more money. If you implant an idea about money in your subconscious, it will go to work in the background analyzing opportunities. It’s likely that you’ll notice and remember articles on investing. You might spot the opportunity for a business venture. You’ll find this happens almost automatically once you have that recurring date in place.

What to do pre-date

This may sound silly but you should dress up just as you would for any date. Put on your makeup or comb your hair and put on a nice shirt. The trick is to make this feel like a special occasion. Then, set your intentions for the next couple of hours. For example, you might say, “I am putting my finances in order, and I’m going to think creatively about money.”

Next, set aside a limited amount of time. It would be a mistake to spend many hours pouring over your bills and end up feeling lost and overwhelmed. Three hours could be a good place to start.

Turn off your phone and maybe play some soft music to get in the mood.

Finally, make a list of the tasks that you want to perform that day.

The date itself

The first thing you need to do for your money date is assemble all your personal monthly and household expenses. Take a look at the previous month. What was your largest expenses? Do you foresee a big expense coming up in the future like a dental bill or car repair?

Check your transactions – credit cards, PayPal, checking account, purchases on Amazon, direct debits, etc. Mistakes can happen so look for overcharging or purchases that weren’t yours.
Think about your financial goals. You say you don’t have any yet? Then, sit down and define some. Is your goal to pay off your mortgage, save for a big trip, or a sabbatical year? It’s critical to visualize these goals and then track your progress.

Do you have stuff that doesn’t bring you any joy? If there’s something you haven’t used for 6-plus months, think about getting rid of it. You could donate, sell, or trash it.

Are there services like that health club membership you no longer use? Either cancel them or call the providers to see if you can get a better deal.

Think about side hustles or what you could do to earn extra money. We understand that Uber and Lyft can be good ways to do this, and that driving for Jimmy John’s can mean big money.

Look for things you can automate. Do you have an expense tracking app? Two of the best of these are Mint and Toshi. How about your bank? Does it offer options you have not yet used like automatic bill paying?

Finally, check out your investments to see if they need rebalancing. If you have not yet started investing, get to it.

Why hav a long-term relationship with your money

You don’t want your money date to be a one-night stand. It’s important to create a long-term relationship by doing things like reading money books. Keep in mind that you need to both enjoy and appreciate your money. Choose an activity or an item that you want to spend your money on that will give you a lot of pleasure. You’ll have more money coming so treat yourself to something like new athletic shoes or an expensive dinner with a loved one. It won’t exhaust your checking account if you do it just once a month, and it will enhance your life.

Lastly, pick a money or success goal for the upcoming month. This could be something as small as packing healthy food for your lunch instead of eating out. Or it might be something as big as a new outfit.

In conclusion

Having a recurring date with your money can be a very good thing. It can help you focus on your finances now and set your brain to working on them subconsciously. Your life and your money will thank you.

6 Things You Don’t Know About Money That Could Be Keeping You From Getting Rich

May 10, 2017 debtmanagement

John D. Rockefeller once said, “If your only goal is to become rich, you will never achieve it.” The thing about getting rich is that it can’t be pursued directly – just like success and happiness. If all you think about is getting rich, the odds are that once you make the money you will be unhappy.

There are some things about money you probably don’t know. But if you learn them, you’ll have a much better chance at building wealth.

1. Smart money is slow money

The world’s best money managers think slow before taking action. This is because if you want to make better money decisions, you need to take pauses. You may have seen movies like Wall Street where decisions and trades are made in just a matter of minutes but that’s not investing, it’s speculation. It takes time for the best investments to play out. They are not based on a single event or a single product. Take a lesson from Warren Buffett. He is slow to get in and even slower to get out. One of his best quotes is, “Our favorite holding period is forever.”

2. Money by itself is worthless

Money should never be an end in itself. It’s only valuable when it gets you something you want. Money touches many hands. You need to invest it, give it, or save it for a rainy day — assuming you don’t yet have money put aside. Another good way to use your money is to support a company or organization that’s especially meaningful to you. Money was meant to be exchanged, and not kept in one place. Don’t hoard it.

3. Building weath is boring

What we see on the Internet and on television is where someone had some kind of instant financial success story. The reason you see these stories is that they’re unusual. Watching a person earn tons of money over their lifetime is a bit like watching paint dry. There’s nothing exciting about it. The money is earned by a thousand moves, all of which are directed towards a long-term goal. In other words, you save money a little at a time. You invest it. Then, you receive dividends or income. You reinvest your proceeds and your earnings increase – year after year. There’s no drama and no shortcuts.

4. You must study money

Unless you’re a highly unusual person you have a limited attention span. Plus, there are only 24 hours in a day, and they can go by in a flash. If you want to become truly rich, you need to dedicate energy and time to the task. If you’re not interested in learning deeply about money, or if you don’t have time to study it, then you’ll have to automate the steps you’ll need to get there as much as possible. You need to learn the basics of those processes. One of the worst mistakes you can make is to automate a process before you really understand it. Big accidents can happen this way. Don’t press “go” until you’ve read all the fine print.

5. You’ll need to learn to say no

Sometimes, the best thing you can do is nothing. You’ll find yourself tempted by a lot of bright, shiny objects begging for your money. One of the biggest keys to financial success is to say no to almost all those opportunities. The only exception to this is when the investment aligns with your core values like investing in a business you believe in. The critical thing is to understand your truest goals in life, and then align your financial actions with them.

6. Money requires an encouraging environment

You’ve learned the basics, changed your financial habits, and chosen the things you want to support with your money. That’s all well and good but you’ll fail if the people who surround you don’t support your new financial life. They may actually try to tear down what you build up. They’re not terrible people. It’s just that some people hate to see others succeed. If you find yourself surrounded by a bunch of naysayers, you may need to clear the decks. Look for new friends who live life frugally and blow their money sparingly.

In conclusion

The point of becoming wealthy isn’t to magnify you. It’s to provide opportunities – to help someone you love, to contribute more to your favorite charities, or to invest more in your future.

The Most Important Debt Management Of All — Just Say “No”

May 19, 2015 debtmanagement

You might remember that anti-drug campaign built around the slogan “just say no.” We have no idea how successful that campaign was but we do know one thing for certain. When it comes to buying stuff on credit the most important thing you can do is just say “no”.

The power of saying, “no”

If you’re struggling with debt this little two-letter word can be your best friend. For one thing, it can keep you from making impulse purchases that would just run up your debt. When you say “no” to eating out or getting take-out food you keep from adding to your debt. If you say “no” to going clubbing once a week, you keep your debt from growing. And if you say “no” to the idea of keeping up with your peers, you’ll both save money and keep your debt from turning into a greedy monster.

The most important “no” of all

Most importantly you need to say “no” to using your credit cards. No matter how tempting it might be to use them you need to use cash instead. Don’t close those cards because that could damage your credit score. But you need to either shred them or if you have enough self-control, tuck them away in a drawer somewhere.

The problem with credit cards

The problem with credit cards is that they’re just too darn easy to use. There you are browsing your favorite store and you see this amazing sweater at 50% off. You don’t have the cash in hand and your checking account is a little low so why not just whip out that credit card and buy it? You know this will just add to your debt but in the immortal words of Scarlett O’Hara, “I’ll worry about that tomorrow.”

Why cash is better

The reason why it’s better to pay for things with cash than a credit card is mostly psychological. There is just something that feels more difficult about pulling out the cash to buy that sweater versus swiping your credit card. If you don’t believe us, try this experiment. Take $50 out of your nearest ATM and tuck it in your billfold. Now, go shopping. Find something that costs, say, $40. Take a deep breath and reach for your billfold. Think about paying cash versus swiping a credit card. We can just about guarantee you’ll find it more difficult to pay cash for that item. In fact you might even decide to not buy it.

Psychologists call it coupling

According to an article that appeared recently on the website WiseBread the reason why it’s tougher to pay for things with cash is because of something that psychologists call coupling. This is a word that describes how the experience of buying something is tied to the experience of having to pay for it. When you pay cash for something the feeling your get is intimately tied to your experience of using it. As an example of this, if you use cash to have a few drinks with a friend then the action of enjoying those drinks and the act of paying for them would be directly coupled. In most cases the pleasure of the drinks would feel about the same as paying for them.

Decoupling usually means spending more

On the other hand if you were to pay for those drinks with a credit card you kick the payment down the road. You distance the act of having the drinks far enough away from the pain of payment that they do not feel closely associated. Another way to put this is that you decouple the pain from the pleasure. You focus on your enjoyment of the drinks – without feeling the pain of piling on more debt.

So how can you live on cash?

This is a bit simpler than you might think. You will need to make a list of all those expenses you know you’ll have every month such as your housing, food, utilities, transportation, insurance and debt repayment. Add up all those numbers and then subtract the total from your monthly earnings. This is what you will have to spend on discretionary items like eating out, take out, clothing and entertainment. Divide that amount in two and you’ll know how much cash you will need to get you through two weeks. Go to your bank Saturday morning or to your nearest ATM and take out the money. And there you have it. You can now put your credit cards away and learn to love cash.

Add the envelope method

When you take out cash to cover your discretionary expenses there is another benefit. You could divide the money into envelopes with labels like eating out, entertainment, clothes and so forth. When you need to pay for something in one of your categories take the money out of the appropriate envelope. When an envelope is empty, that’s it. You can’t spend any more money in that category. This is yet another “no” that can help you better manage your spending and keep you from piling on more debt.

Tips For Living A Debt Free Life

January 28, 2015 debtmanagement

Can you imagine how your life would be if you were debt free? Your savings account would be bulging at the seams from all the money you are able to add to it because you had no debts. When you owe nothing your biggest problem would be deciding what to do with your paycheck. That dream vacation to Tahiti wouldn’t be just a dream anymore. You would have extra money available to help your favorite charity. Have you ever wanted to start your own business? You’d have money available to do this. You might even be able to tuck away enough money to retire early and still leave your kids a nice inheritance.

The good news is that these dreams don’t have to be dreams. Whether you’re faced with the need to help your kids get a college education or you’re nearing retirement, you can actually become debt free.

Tip #1: Learn your habits

The first step in becoming debt free is to think about your debts. There are actually good debts and bad debts. Good debts include things like your mortgage and student loans as they will not depreciate in value over the years. Bad debts are, of course, credit card debts, auto loans and personal loans. What you want to do is keep the good debts but get rid of as many of the bad debts as possible.

You should also keep track of your spending for about a month. You can easily do this by saving all your receipts. Make a list of your spending using these receipts and then go through it looking for “non-essentials.” These could be anything from expensive premium coffee too pricey lotions and cosmetics. After you find these personal “weak spots,” try limiting those purchases to just once a month. You might be shocked at how much you can save to pay down your debts.

Tip #2: Avoid temptation like Ebola

This means physically separating yourself from those things that tempt you. Do you find it impossible to not stop into that electronics store you pass every day? Does that fashion boutique down the street from where you work pull you in like a powerful magnet? Do you go out for lunch every day at a cost of seven dollars per? You could avoid popping into that electronics store or fashion boutique by taking a different route to and from work. And you should definitely bring a lunch to work at least two or three times a week. This could save you as much as $200 a month. In other words, sit down and make a list of those things that tempt you to spend money and then do everything possible to avoid them.

Tip #3: Choose a strategy for paying off your debts

There are hundreds of books, articles and Internet sites with tips for getting out of debt. Some counsel you to first pay off the debt with the highest interest rate while others say you should first pay off the debt with the lowest balance. The idea behind first paying off the debt with the highest interest rate is that you will then have more money available to pay off the debt with the next highest interest rate and so on. This means your payments increase in size with each pay down and you will clear your debts faster. Those such as the financial guru Dave Ramsey that favor the strategy of first paying down the debt with the lowest balance say that it’s more motivating to see debts paid off quickly, plus this also frees up money to pay off bigger debts. But the important thing here is to choose whichever of these strategies appeals to you and get started on it. If it doesn’t work for you, switch to the other. Or consider another option such as a debt consolidation loan.

Tip #4: Hunt for values like a coon dog chasing a varmint

There are a number of different ways to save money. Some people insist that the best solution is to use coupons while for others the only answer is to buy everything in bulk at one of those warehouse club stores. And still others make frequent trips to their stores to see what’s available on sale at the moment. Whichever of these would make the most sense for you will depend on which “camp” you’re in. If you have a big family you’ll probably find the best values at a warehouse club store. On the other hand, if you love fresh food and enjoy hunting for bargains then coupons might be your best option. Many supermarkets now have aisles of bulk items where you could find good values and also save money with coupons on your non-bulk purchases.

Tip #5: Anticipate

If you work towards making a major purchase this can build anticipation towards owning
it and make things seem even better when you are able to actually buy it. Plus, this eliminates the dread of having to finance it and create more debt. One way to do this is to open savings accounts for specific goals. For example, you could have an account devoted to saving money for your dream vacation. This keeps the money from leaking away on other purchases. When you can watch the balance in a savings account go up and celebrate the steps you’re making towards your spending goal, this can help you avoid making other small purchases.

Tip #6: Treat yourself as if you were a bill

You might not ever think about skipping a bill from your local utility but are you saving regularly? If so you are the member of a minority. What you need to do is treat yourself as if you were that bill from your local utility by allocating $50 to $100 off the top of your earnings to pay yourself. Then see how much you miss it. If the $50 or $100 creates too much of a strain on your budget, try a smaller amount. If you don’t feel any kind of a pinch then you could think about adding more to your personal “bill”.