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Patience Can Teach You Two Things About Personal Finance

woman thinkingThere are many virtues that you need to implement to say that you have mastered personal finance. When we say mastered, we mean you know that you are on top of your financial situation and you are in complete control of where your money goes.

Of all the virtues that is applicable in your financial life, none of them is as important as patience. If you think about it, this particular virtue will lead to a lot of financial habits that will allow you to improve your personal finances.

The role of patience in our financial behavior

Among the things that you will be encouraged to do is planning for major financial decisions. If you think about it, every decision, big or small should be part of a greater plan in your life. This is the only way that you can align all your decisions and make sure that everything that goes on in your life is leading you to a future that you want to have. But when it comes to planning, that means you have to exercise some patience. You need to think about every little detail of what you want to happen in your life so you can plan them realistically.

If you are impatient, you will exhibit impulsiveness that is fueled by your need for instant gratification. That is never a good thing when it comes to personal finance. Nobody excels in their finances with these traits. You need to take make the necessary plans that will take you to your goals and implement it one step at a time. That is how you can achieve what you set out to do.

According to a survey done and published on Gallup.com, American consumers are noted to be more careful in their spending but there is still a huge percentage that leaves a lot of room for improvement.

The survey revealed that 38% of the participants still make impulse purchases and 27% admitted to spending a week’s worth of pay for a major expense. Not only that 16% of the respondents said that they agree to the notion that when they get money, they should spend it immediately. Almost 3 out of 10 also believed that their lifestyle convenience is more important than saving.

While we deserve to spend our money for our convenience, it should not be done at the expense of our future self. If we fail to be patient enough to save for tomorrow, what will happen to us if the economy collapses again?

Our impatience is the one trait that puts our future in danger. that is because it is impatience that leads us to think that using credit to finance our purchases is always okay. This is not always the case and it is one aspect of personal finance that we need to tread carefully.

2 lessons about finances that you will learn from being patient

When you are patient, that are two important lessons that you will learn. These will prove to be very useful in your attempt to improve your personal finances.

It is not possible to have it all immediately.

We all want the American Dream and we want it immediately. There is no such thing as a quick get rich scheme that lasted long. Think about the lottery winners. Most of them splurged their money and ended up poorer than when they started. Being handed everything a once will make you irresponsible. But if you are patient enough to accept that you can only take one step at a time, then that is something that will make you more cautious of whatever personal finance achievement you will make.

One of the best illustrations that we are suckers for that quick acquisition of wealth is our gambling statistics. According to data found on an article published on Mint.com, Americans spent $60 billion on lottery tickets back in 2010. Casinos in the country had revenues of over $125 billion. Although some of these gamblers won, you can bet that they quickly went through these winnings and lost them all again in gambling.

You have to accept that being financially successful requires hard work and most of all, patience. You want to be aggressive, that is true. But it has to be done under the right context and with the right plans in place.

Building up your savings will take time.

The other lesson that you will get from being patience is that savings will take time to grow. We cannot save a big amount at once because our limited income is bound by a lot of financial obligations. We are lucky to have anything to save at all. We need to keep ourselves from feeling frustrated when our savings seem to be slow going. Remember that a dollar a day will eventually grow. Just be consistent about it and it will grow. It will just take time so you need to be patient.

According to statistics from Mintel.com, only 10% of Americans save their extra money. The rest will spend it and will not think twice about saving. This percentage is for 2014 – it used to be double in 2013.

To say that we need to improve is not enough. There is a need to improve and that need has to be acted on immediately. We cannot wait any longer because opportunities that we are getting right now might not last.

Results of applying patience in your financial life

If you are unsure about how you can start, then begin by practicing the virtue of patience. You can start with another aspect of your life until you reach the personal finance side.

Do not be blinded into thinking that what you need to focus on right now is increasing your income. This will never be the right solution. You have to understand that you can be debt free on a $30,000 a year income. It is not the amount that comes in but your behavior when it comes to using that money. When it comes to behavior, you should know that patience is among the top virtues that you need to work on.

Here are three results that will emerge from your financial patience.

  • You will have no debt. This is a dream for a lot of us – having no debt that can compromise our limited financial resources. When you are patient, you will not feel the need to use credit for purchases that you want to make. You can find it in you to wait so you can save up for certain expenses that can be availed in the future.
  • You will always have well planned purchases. Since you are taking your time, you will have well planned purchases. You do not have to rush through your spending. You will feel at ease in finding the time to plan when you can afford to make payments for what you want to buy. That way, you can set up your personal finances so that you are working for future expenses, and not slaving away to pay for past expenses. If you did not know, that is the scenario when you are in debt.
  • You can achieve your financial goals faster. Managing financial goals is no easy feat. But if you are patient enough to manage your finances wisely to avoid debt and to make smart purchases, then you will have more extra money to invest and grow your wealth.

Patience may seem like a farfetched virtue to be effective in improving your personal finance. But it will help you develop a lot of habits that will be beneficial to your pursuit of wealth.

8 Signs That You Need To Implement Financial Management

checklistFinancial management is a critical part of growing up. It dictates how well you are able to handle income and dispense the same for payments on your expenses and other loans. It restricts your purchases and tells you what is important and what can wait. It tells you as well what you can do to increase your income to meet financial targets. Financial management can also be a potent tool against debt.

This is important to share when there are about 20 million college students on an average at any given year according to Asa.org. That is a lot of college seniors entering the workforce where they will be earning on their own and experiencing life in full blast. The walls of their colleges and universities has now grown bigger to accommodate a lot more responsibilities. On top of these is developing financial management in running their money.

It starts with a desire to get their finances in order. There are still  a good number of Americans who are not able to balance a checkbook. The 410 (k) retirement fund, investments and emergency funds are alien to them. These are some of the foundations of financial management and college graduates and even some seasoned professionals needs to understand this to survive financially.

8 signs that you should start working on money management skills

As you go through life, there are pit stops where you need to make decisions and add some financial tools in your arsenal. Some of these can start as early as when you get your first job and for others, it could be as late as a few years before retirement. Whenever it happens, you should be able to discern these signs and know that it is time to work on your financial management skills.

When you start earning your own money

As soon as you leave university, the first order of business is not a vacation with your friends or a cruise with your partner. It should be to look for a job because your expenses and loan payments will not wait for your to finish a good time. If you have student loans, six months is a short time for a grace period and you need to start making payments after. Getting a place to stay, applying for utilities and others will require you to have a steady income.

When you get a job, income will not be too far behind. And when you start earning your own money, it is a clear sign that you need to implement proper financial management. This will put order in your finances and ensure that your monthly salary will not only last you until the next paycheck but will actually provide financial security for you in the long run.

When you already have a bank account

Forbes.com shared that there are about 7.7% of American households who still do not have their own bank account. That is approximately 1 in every 13 American families. There are mixed sentiments on how the banking system helps consumers but it cannot be denied that it is one of the safer ways to keep money and allow it to grow. When you open your own bank account, it is another step up  that needs proper management of your finances.

When you are saving for a goal (e.g. retirement, etc)

Having financial targets is another clear sign that it is high time for financial management skills. These can be in the form of emergency funds or retirement funds. In fact, there is only about 18% of Americans who are confident that they have enough funds for retirement according to Statisticbrain.com. Having financial goals is also a clear sign of financial maturity as you are already planning ahead and not just for the moment.

Here is a video explaining how saving for retirement might need to be done until 68 years old:

When you are responsible for paying monthly bills

Being able to pay for utilities such as water, electricity, phone, internet, and cable is another benchmark on the need to implement financial management. You need to be able to juggle your income with your expenses to avoid coming out short at the end of the month.

When you have started taking on credit

Taking on credit is another sign of financial maturity. Adding expenses on your card or taking out a payday loan to fix some part of the house needs proper management of finances. Without it, you might just end up in a store sale using up the loan you took out for another unnecessary expense.

When you start monitoring your credit

Monitoring your credit comes from the need to understand where you are putting your hard earned money. What items are you buying and where you can cut down on expenses. Financial management will help immensely at this point because it can provide a clear direction on how you can proceed after monitoring your credit.

When you  have started investing

Investment is a by-product of forward thinking and once you start delving into the world of investments, you will need financial management to guide you through your options. In fact, investing is one key to financial independence. It can help you plan for your future and hopefully retire at the time when you want to, not when you need to.

When you start paying your taxes

Making tax payments is a sign that you are already earning your own money. This calls for the need for financial management not only to monitor your income but to check as well if you are remitting the right amount for your taxes. Tax refund is a great surprise at the end of the year but it actually stems from wrong tax calculation. That would have been money you could have used for investment at the early part of the year. Instead of just giving the government an interest-free money, it could have earned a few dollars somewhere else.

4 important concepts of financial management

Financial management has four key pillars that consumers need to understand. It is beneficial to know these points in order to practice proper management of your finances.

  • Budgeting. Income has to be treated as the output of your hard work. You should put importance on how you use it and this is where budgeting comes in. Understand the important expenses and forego those that you can live without.
  • Saving. At this day and age, not a lot of people has an excuse not to save. Even technology has made saving easier. This is an important aspect of financial management because it allows the consumer to have funds for future use.
  • Smart spending. Similar to budgeting, spending smartly allows you to weed out your needs from your wants. It helps you identify and prioritize the important spending items in your budget.
  • Credit monitoring. It is important to be on top of your finances and monitoring your usage of credit can give you a great overview of your habits. Where you spend too much and where you can make improvements are just some of the advantages of checking your credit spending.

Financial management is an important tool in putting sense in your finances. Some people say that it is not how much you earn but how well you use what you have. This is where proper management of your finance kicks in. As long as you see the signs along the way, financial management can guide and steer you in the right direction.

10 Signs That Your Financial Management Skills Suck!

man looking frustratedDo you want to know how to improve your finances? Well you and a millions of Americans are after the same goal. We all had our finances suffer when the Great Recession hit and it was devastating to watch everything that we have worked so hard to acquire go down the drain.

We all blamed debt for most of our financial suffering. We thought that if we did not have debts, none of us would have gone through so much stress the way we did. While this way of thinking is sound, you need to realize that it is incorrect. Despite the obvious destructive effects of debt, the obvious culprit in our suffering is our own financial management skills. Or at least, the lack of the right skills.

According to a study done by CreditDonkey.com, the average income of Americans is $4,000 a month. Most of that goes to groceries, transportation, insurance, and housing expenses. Only 3% of the disposable income goes to savings and not even everyone can afford that. Low and mid income families usually cannot meet all the expenses so they are forced to pay for any deficit through their cards. The average is usually $58 a day. If you compute that, it amount to $1,740 a month – which is already 40% of the average income of Americans.

The way we spend our money, pay off deficit in our expenses and the little amount that we save is like a ticking time bomb. One glance and you know that there is something wrong with how we manage our money. It does not matter if you can earn more – if your financial management skill suck, then you will always be on the brink of a financial crisis.

10 reasons your money management skills will fail you

There are certain signs that will tell you if your money management skills is leading you to a disaster. You want to go through this list so you can be certain if you need to improve the way you manage your money.

Here are 10 reasons why your financial management skills put you in a compromising position.

  1. You do not have an emergency fund. Let us start with your financial security. One of the indications that you are financially secure is when you have enough money in your emergency fund. If not, then you know that you are in trouble. According to the latest Financial Security Index from Bankrate.com, 26% of the respondents in their survey said that they do not have any emergency fund. 24% has less than 3 months covers, 17% has 3-5 months and 23% has an emergency fund that is worth 6 months and more. If you are not part of the 40% who has an emergency fund worth 3 months or more in expenses, then you need to save more to secure your finances.
  2. You fail to keep track where your money is spent. Another sign that your financial management skills are not ideal is when you do not know where your money is going. Some people blindly pay their bills and daily expenses without really checking if they are able to pay off the priority. Even if you do not end up with a deficit each month, you need to track where your money is being spent. That is how you ensure that it is funding the expenses that matter to you.
  3. You have no idea how much you owe. As scary as this may sound, there are people who have no idea how much debt they have. This is dangerous because in most cases, they realize too late that their debts have grown into an amount that they cannot afford to pay back. Do not let it reach this point and just start monitoring all your credit accounts.
  4. You have a problem differentiating a want from a need. An important skill that you need to learn in financial management, that is admittedly quite tricky, is to distinguish the want from the need. The problem is, we try to justify the wants as a need. But here’s the thing. We want a big house but all we really need is a safe and comfortable home. We want designer jeans and dresses but all we really need are decent clothes. Learn how to prefer the essentials.
  5. You cannot say no. We’ve written an article that discusses how saying no can save you from a financial crisis. There is so much truth to this that  you need to really learn how to say no. That means saying to to your friends, family and even yourself. Helping is good but make sure you are not giving them the easy way out. They have to learn from their mistakes and instead of giving them the quick relief, guide them as they go through the painful process of saying no. In the end, you are not only helping them, you are also protecting your finances from being compromised.
  6. Your expenses are bigger than your income. If your expenses are bigger than your income, then you know that your financial management skills need improvement. Try to lower your expenses by cutting back on those that are not necessary. Live within your means because any purchase in excess of your income is done through credit.
  7. You always spend using your credit cards. Now that we have mentioned credit, let us discuss credit cards. It is not bad to use them but you have to learn how to use them properly so you do not end up in debt. Make sure that when you use it, you have the cash on hand to allow you to pay for it in full at the end of the month.
  8. You only pay the minimum requirement. In connection with the last, if your credit card payments are only based on the minimum requirement, you should know that it is also a sign of bad financial management skills. This payment method will keep you in debt for a very long time. So pay more than the minimum and if you cannot do that, then stop using your credit cards for the meantime until you have paid off your balance.
  9. You compare what you have with others. Another bad habit that could lead to your financial disaster is always comparing what you have with others. Their life is not the same as yours. It may be true that you have the same position and earn the same amount of money but you financial obligations might be different. You see them sporting new cars but that may be because they already have investments in place to help them afford it. Just focus on what you need and not what your neighbors have.
  10. You are not paying attention to your credit report. Lastly, not checking on your credit report is a big mistake for a lot of people. Some have gone through life with no debt or have made wise financial decisions but since they failed to check their credit report, they did not see that they were victims of identity theft. Unknowingly, someone got your details and borrowed huge sums of money under your name. If you fail to spot that in time, you could end up paying for all of that yourself.

5 steps to improve how you manage your finances

If you are guilty of any of these signs, then it is a must that you work on your financial management skills. In case there is a need to improve your habits, here are 5 things that you can do.

  • Improve your financial literacy. First of all, you have to be able to identify the mistakes before you make them. This can only be done if you are aware of what is right and wrong. Improve your financial literacy by reading about personal finances. You can start by visiting Consumer.gov – especially the part about managing your money.
  • Set up financial goals. Once you have educated yourself, set financial goals that will lead you towards a more prosperous financial standing. It can be as simple as growing your money up to $X amount or buying your own home.
  • Create a budget. When you have your goals, you can work on a budget that you will follow each month. This budget plan will not only help you practice financial management, it will also help you setup your finances so you can reach your financial goals.
  • Identify the habits that are sinking your finances. Obviously, you need to stop those bad spending habits in order for you to keep a tight lid on debt. Other habits that you may want to correct includes failing to check your credit report, not saving enough for retirement, etc.
  • Stop acquiring debt and pay off existing credit. Lastly, you want to make sure that any debt that you have will be paid off and you will also stop acquiring unnecessary debt. This will help maximize what limited resources you have each month.

Here is a video from HowCast that teaches how you can avoid credit card debt.

Are You Smarter About Personal Finance Than 16-Year Olds?

woman thinkingOne company recently tested 16-year olds on their knowledge of personal finance with some everyday questions about savings, tax, currency exchange and utilities. Almost a third of those tested scored 43% or less in this test.

Test yourself

Here are the seven questions that were asked. See how many you can answer correctly (answers at the end of this article).

1. Kat paid $5,000 for a car in April 2009. In the first year, the value of the car depreciated by 10%. In the second year, the value of the car depreciated by 15%. How much can Kat sell the car for in 2011?

2. Bob is paid $37,465 a year. His personal tax exemption is $6,000 for the year. If Bob’s income is taxed at 22%, how much income tax does he pay in a year?

3. Leonie has $2500 to invest for four years and can choose between two different savings accounts. Account One pays 3.7% simple interest paid out at the end of each year. Account Two pays 3.4% compound interest paid at the end of each period (year). Which account would give Leonie more interest over the four-year period?

4. Jenny wants to buy a new TV but is $300 short. She sees an advertisement for a loan offering $300 for eight months with a monthly repayment of $50. If she takes the loan, how much extra will she have to pay?

5. Andrew pays his electricity bill monthly. His current charge is $0.046040 per kWh. Last month he consumed 1201 kWh. If next month he reduces his electricity usage to 1100 kWh, how much money will he save?

6. Rachel is going on vacation in Spain and needs to change $300 into euros. The change kiosk in the airport charges 0.6% or $6.73 to change money whichever is the greater. How much will changing her money at the airport cost Rachel?

7. Sophie was left $6,000 by her grandfather and decides to invest the money for two years. Her bank offers her a choice of two savings accounts. Account One pays 3.1% on a monthly basis. Account Two pays 3.25% annually. Which account will give a higher closing balance with no withdrawals?

Understanding personal finance is critical

You’ll see in a few moments as to whether you’re smarter than a 16-year old about personal finance. I certainly didn’t know much about personal finance when I graduated from college and got married. I had worked fairly constantly since I turned 16 and about all I knew was that you should spend less than you earned. Of course, when I was in college I didn’t always follow that dictate. There were many times when I ran out of money before I ran out of month. I did finally learn the importance of spending less than I earned but it took several years for me to learn some of the important basics of personal finance.

1. Learn your spending patterns

The first step in becoming good at personal finance is to determine how you spend your money. I learned that the only effective way to do this was to track our spending for at least four weeks. This meant keeping track of not just the big stuff like rent and groceries but also the very small stuff right down to a candy bar I had at work. I did this the old school way with a notebook and a pencil. Today, thanks to all of the smart phone apps available, this is much easier. For example, if you were to choose Mint.com it would not only track your spending for you but also categorize it so that you would be able to see exactly what you spent in areas such as groceries, dining out, utilities, clothing, hobbies, transportation, healthcare and so forth.

2. Compare this with your income

Once you see what you spent in the past month you need to compare this with how much you earned. When you do this you might be in for either a shock or pleasant surprise. The pleasant surprise would be if you spent less than you earned and had extra money to save or invest. The shock would be if you find that you spent more than you earned. If this is the case, you will need to review all of your spending categories with an eye towards determining where you could make cuts. As a rule, most people find the easiest places to reduce their spending are groceries, clothing, entertainment and dining out.

3. Save more by creating goals

Most people find that it’s tough to save money just for the sake of saving money. What’s better is to create one short- and several long-term goals. As an example of this, your short-term goal might be to take a nice vacation to Florida next spring while your long-term goals might be to buy a new car or to save enough for a down payment on a house. Whatever goals you create, you might spreadsheet them so that you will be able to see the progress you’re making towards realizing them. This can be a great incentive to stay on track in your saving.

4. Read books about personal finance

Assuming that you don’t have a financial mentor, the best way to get a better understanding of personal finance is to read some books. We like The Money
Book For The Young, Fabulous And Broke by Suzy Orman; the classic Think and Grow Rich, by Napolean Hill; Get Rich Carefully, by Jim Cramer; Rich Dad, Poor Dad, by Robert Kiyosaki; and today’s best-selling book on personal finance (according to Amazon), The Total Money Makeover, by Dave Ramsey.

5. Get a mentorcouple talking to a professional

The best way to learn about personal finance is to get a mentor – someone who has been there and has learned how to manage, save and invest money. If you’re fortunate, this person could be your father, an uncle or a cousin. Barring this, you’ll just need to be on the lookout for someone who is a successful money manager, who is well to do and would be willing to mentor you. Just make sure that you don’t come off as too “needy.” In other words, don’t pester that person with several financial questions every day. When you have a question about personal finance, write it down and start a list. Once you have a half dozen or more questions, you could then ask that person to sit with you for a half an hour or an hour to answer them. But try to not do that more than maybe once a month.

The answers to our seven questions

If you’ve been chomping at the bit to see whether or not you’re smarter about personal finance than a 16-year-old, here are the answers to the seven questions we posed at the beginning of this article.

1. $3825
2. $6,922
3. Account #2
4. $100
5. $4.65
6. $18
7. Account #1

So how did you do?

If you were able to answer all seven of these questions correctly, give yourself a big gold star. And congratulations! You’re officially smarter about personal finance than the 16-year-olds who were tested on these questions. On the other hand, if you were able to correctly answer only two or three of them, you need to get to work and read some of the books about personal finance that we listed above. Think of it this way. It might take you several weeks to read one of those books but it could make the rest of your life a lot better. If your personal finances are not currently under control, this would help you better manage them. You would be saving money each month towards your important goals. And it’s likely that this would take much of the stress out of your life.

5 Tips When Your Income Is Not Enough

man looking stressedHave you ever felt that your income is not enough to supply for all of your needs? With the rising cost of living and the low wages, you must be feeling a lot of frustration as you face bills every month. You think that this is a sentiment that most people living in poverty have right?

That is where you are wrong. If you are looking to ways to increase your income to get out of the rut, then you might want to rethink this solution first. Believe it or not, sometimes, even earning more money is not the right way to solve the discrepancies in your budget.

Truth is, regardless of the income that you are taking home, there are instances when you still feel like your salary is really not enough. Even those who have 6 figure incomes sometimes admit that they feel like their paycheck falls short of their real needs. When payday comes, you hardly feel the money stay in the palm of your hand. In most cases, you have divided it into different expenses even before you have withdrawn. That can be quite discouraging if it happen month after month.

Increasing your income is not always the solution

If both low and high earners feel like their income is not enough, then you know that no matter how much you earn, it will not solve the problem that you face.

In a study done published on the site of the National Center for Biotechnology Information (NCBI.NLM.NIH.gov), it is revealed that it is true that as income increases, the hardship decreases. However, it has to be noted that the decrease is not as significant compared to those in the highest income bracket. For those who come from low income households and sought to increase their income, the study observed that the amount of parent stress also increased.

While you may feel like adding more money in your monthly cash inflow will help, there are sacrifices along the way that you have to accept. Let us enumerate some of them.

  • You sacrifice your time. Unless you are able to effectively set up a passive income business, you need to take into consideration the time that you need to invest in that additional work. You will be sacrificing what limited time you have with your family and even yourself if you work longer hours.
  • You sacrifice your physical body. Work, regardless of what type it is will take its toll in your body. You may be solving the problem about your budget but it could increase your health expenses in the future.
  • You sacrifice your relationships. When you increase your income, another sacrifice that you have to make is on your relationships. Even if you provide for your family, your presence is needed in their lives. Failure to make that happen can lead to the destruction of your relationship with the ones you love.

These sacrifices can all lead to the stress that can ruin your life in other areas. You may be saving your financial life but end up losing in others.

When the income is not enough, there is evidently a problem with the current financial situation. It is not right that you go right ahead and increase the income. It is like pumping air in a flat tire that keeps on losing it. You need to find the hole and patch it up before you add more air into it.

We are not implying that increasing your monthly cash is not good. It is still good in a lot of ways because you are being proactive about building your wealth. However, we just want to point out that doing so is usually not enough. While there may be cases wherein earning more is the solution, it is oftentimes partnered with something else.

5 ways to change your mindset about your paycheck falling short

In most cases, the problems lies in the financial habits that you are implementing in your life. If you know that the problem is in the habit, then you should check certain mindsets that might be influencing you to act the way you do.

If you don’t believe in the power of the mind, you have to at least try it before you turn your back to it. There are scientific experiments that prove that your thoughts will manifest itself into the physical world. In an article published on TheMindUnleashed.org, Dr. Masaru Emoto showed evidence that our thoughts can influence what is tangible around us. In a rice experiment, he placed cooked rice in two containers and had school children read out the labels on each of the containers every day. After a month, the rice in the container labeled with “you fool” became rotten. The one in the container labeled “thank you” barely changed after 30 days.

Having said that, you need to understand that if your income is not enough, you should focus on changing your mindset about money. That may be the reason why your financial situation is all rotten.

Here are 5 of the common mindsets that you need to change in order to improve your financial situation.

  1. Focusing on what you do not have. We are all consumed with the need to acquire something new. This is why retail therapy is real – albeit quite a dangerous stress buster. Although it feels good to know that we can buy anything that we want, it always makes us focus on what we do not have. That mentality will really impress on you that your income is not enough. So to change that, make sure that you keep your eyes on what you already have. That will make you more appreciative of what you have.
  2. Upgrading your lifestyle after a paycheck raise. Another mindset that you have to change is immediately upgrading your lifestyle once your income increases. The typical American spending habit is not just overspending. It is also the habit of raising the standard of living according to the income bracket. While there is nothing wrong with that, it removes the breathing space that should have been there to keep you from thinking that your income is not enough. In some cases, we even exceed the upgrade to go beyond the actual increase in income. That puts us in situation that can lead to debt accumulation.
  3. Failing to search for alternatives. When you go out shopping, do you keep your eyes on what is on your eye level or do you look below the racks to search for the low price items? If you are the former then you most likely fail to search for the cheaper alternative to your needs. There is always a cheaper way to do things. In some cases, it involves learning new skills. Think about it before you start increasing your income.
  4. Keeping our eyes onto our neighbors. In an article published on LearnVest.com, they discussed that there is proof that your friends can hurt your finances. At least, if you constantly look at your neighbors and compare your life to them, you will never be satisfied with what you have. You will always look at what is new to them and it will keep you feeling like you are always lacking. Stop this mentality and just focus on what you need – not what your neighbors have.
  5. Cutting off the wrong expenses. Cutting back on your expenses can help but only if you cut back on the right ones. Some people think that completely removing entertainment expenses will help them but that only brings forth a feeling of deprivation. And when you are feeling deprived, you feel like your income is not enough. Be wise about what you will cut back on so that you will not feel miserable about your financial situation.

Obviously, it all boils down to how you will budget your money. You can actually live debt free on a $30,000 a year income but you have to make sure that you are implementing the right habits. That will keep you from doing wrong – regardless of how much money you are taking home every month.

When your income is not enough, you have to take a look at your budget to see where your expenses are going. This is how you begin to determine what you are doing wrong. Here is a video from National Debt Relief that will teach you how to create a budget.

4 Ways To Reach Financial Maturity At A Young Age

money raining on womanWhen you stop and analyze American spending habits today, you will realize just how important financial maturity really is. Looking at our current debt situation, you would never really think that we just went through an economic crash. Despite the devastating effects of the recession, it seems that we are back to where we were before. In some financial areas, you can see that the situation is much worse. Student loans have gone up drastically despite the tough job market. Auto loans are soaring higher than credit card debt.

While the increasing consumer spending is good news for some economists, it does not bode well of individual households. What is alarming about it is how the events of recent years are shaping the financial behavior of Millennials.

According to a recent study by the FINRA Investor Education Foundation, it is revealed that the youngest generation to enter into the workforce have low levels of literacy. Sure they are the most educated, but when it comes to money, a lot of them will fail. The study discussed on FINRA.org also mentioned that this generation worries about their debts but still display bad financial behaviors like borrowing from payday lenders.

Obviously, we need to strive for financial maturity because financial literacy is not getting us anywhere. Sometimes, we may know what to do but the implementation fails to follow through. If you cannot achieve maturity in your finances, then it will be very easy for you to go back to your old and destructive behaviors.

4 traits of financially mature individuals

Before you can hope to be financially mature, you need to understand what it is first. It is oftentimes confused with financial independence wherein you are in a financial state that you do not have to work anymore to support yourself. You either have set up one or several passive income sources that can pay for your monthly needs. That is financial independence.

Financial maturity is also confused with financial security. This is the feeling of confidence in your money situation  - especially concerning your future. While this is part of being mature with your money, it is incomplete.

If you want to become financially mature, you want to have the following traits.

You are financially literate.

We have mentioned that this is not enough for any individual but it is an important part of being mature financially. You need to be educated, first and foremost, before you can hope to improve the condition of your finances. Planning for major financial decisions requires you to be educated so you can be wise about your choices. You want to know your options and how each of them will relate to your particular financial situation. This is the necessary first step for you to achieve financial maturity. And we are not just talking about knowing where your personal finances stand in terms of your statements, debts, savings, budget and expenses. You also have to know how it plays a role in the overall economic situation in the country. You should understand how the current economic conditions should influence your money decisions because it will eventually affect the economy in general.

You are financially prepared.

This involves two distinct preparations. One involves wealth building – both for your personal assets and your savings. The other involves your lifestyle and the expenses needed to support it. The first one, is quite obvious. Being mature means you are prepared to spend your money on things that will make your life comfortable. However, the expenses part can be quite confusing. Let us explain. You need to understand your finances because it will help you decide how you should spend your money. Even if you have acquired a lot of assets and your savings have grown, irresponsible spending can quickly eat up that fund. So to be completely prepared financially, you have to know how your accumulated wealth should be used. Which brings us to the next trait of financially mature individuals.

You have financial discipline.

Discipline is what will help you implement your financial education and whatever you have prepared. Even if you are financially literate and your savings and expenses are set up well, not having the discipline to follow through will render them useless. Any plans that you have set up to be financially prepared will have to be accompanied by discipline and self control. That way, you can help yourself follow them until you have reached your goals. This will allow you to shape the right behaviors when it comes to your finances.

You have the right financial mindset.

Lastly, to have financial maturity, you need to have the right mindset when it comes to money. Understand that money is just a tool that will help you reach your goals. It is not that end all and be all of your life. A lot of money will never define who you are. What is important is how you will use that money in your life. It should not be something that you will allow to rule over your life choices. The same is true with your perception of debt. You have to understand that debt, while it has the potential to be destructive, can also help you gain wealth. Some people got out of the recession being afraid of debt. This is one of the financial fears that you have to get rid of. When you have the right mindset about your finances, you can easily filter out the influences of society that usually lead to your financial demise. You get to make smarter decisions.

Early maturity with money will guarantee a secure retirement

Finding financial maturity is important because it will allow you to establish a good life for your future. Of course, we are referring to your retirement.

In an article published on USNews.com, it is revealed that the majority of seniors (84%) get their Social Security Benefits and use it to fund their retirement needs. It is an important foundation for their retirement fund. However, with the average benefit of less than $2,000 a month, it is not enough for any person to live comfortably. With the high cost of healthcare, it can hardly pay for the medical needs of the elderly. Only 30% of seniors have retirement savings and you can assume that those who does not have enough in their funds are forced to work during retirement.

If you do not want to end up like them, you should consider finding financial maturity at a young age. It is one of the strategies for a good retirement. You will get the following benefits for being financially mature.

  • It encourages you to always keep an eye on the future. That means your retirement will always be a part of your priority list – regardless of your age. You will set up a plan that will allow you to monitor what you intended for the future. Every decision will consult these plans so you will always be aligned.

  • It motivates you to reach your goals. As you keep your eye on the future, you get to use that as a motivation to succeed in reaching your goals. This success will help fuel the need to aim higher and improve your life even further.

  • It teaches you how to set realistic goals. Having goals are great but you also have to make sure they are realistic. It will keep you from having to deal with disappointment. Financial maturity will allow you to set realistic goals because of financial literacy. Remember that this is an important step to be considered mature with your money.

  • It gives you the right perspective with money. Lastly, the benefit of having this maturity is it will tell you just where your finances start and end in your life. It allows you to reach your goals without being too obsessive about it. That way, you get to enjoy your life without being too engrossed with your goals.

Money Concerns In Your 50s: Spring Cleaning Your Finances

happy manEntering your 50s may not be as exciting as it would be in your younger years but you know that you still have a lot to offer into this world. It is a time when you finally feel the years on your physical body yet you have never felt more alive with the memories and experiences that life have given you over the years.

When you reach this decade, you know that your retirement is fast approaching. That means you need to be aware of what to do during your pre-retirement years. You still have a lot of money concerns to deal with and now is the time to make sure that they will not ruin your retirement.

Financial issues you need to clean up in your 50s

By the time you are in your 50s, a lot of things have already happened in your life. If your age is right along this decade, you are most likely a part of the Baby Boomer generation. You have a lot of financial successes and mishaps under your belt. You should have gone through a couple of debts, loans, profits and investments. All of these should have given you a lot of insight about your personal finances. And along with that, are some financial clutter that you need to clean up.

One of the strategies for a good retirement is to make sure that you deal with the money concerns that you will encounter in your 50s. Time is running out for you to deal with them so you have to start acting on them now.

Given that, we have compiled 5 financial issues that you need to clean up before your 50s are up. That way, your road towards retirement will not be as bad as it could have been.

  • Give your kids their financial independence. Believe it or not, some Baby Boomers are still caught up with the financial problems of their kids. In most cases, they are doing this even when their kids already have a family of their own. As soon as your kids are working you need to let them go. It is not just to keep your money for retirement. It is also to teach them financial independence. That way, they can learn to rely on themselves when a financial crisis strikes. Even if your child is still in college, you need to start allowing them to make their own financial decisions. If they need money, you can help them out if you wish – but not at the expense of your retirement. That way, you can be sure that you will not be a financial burden to them after retirement.

  • Pay off your debt obligations. If you plan on retiring when you are 65 years old, that leaves you with 15 years or less to pay off your debts. This is one of the serious money concerns that you need to take care of. Otherwise, your debt payments can weigh heavily on your retirement fund. Do not let this happen. There are debt relief programs like debt consolidation or debt settlement that can get your out of debt in 5 years or less. If you still have that lengthy mortgage obligation, make sure you can meet the payments every month. In case you have more room in your budget, you can try to arrange with the lender a higher monthly contribution and a shorter payment term.

  • Improve your credit score. At this point in time, you should have a long list of credit history already. For some, you may even have a bankruptcy entry in there. Your 50s is a great time for you to improve your credit score. You want to make sure that you can erase the mistakes that you made in the past.

  • Downsize your expenses. Given that most of the kids have moved out by now, it may be a great time to think about downsizing. We love to buy things in the past and that should have accumulated into a significant amount of clutter. Get rid of these and see if you can opt to move into a smaller home. Sell your bigger home and buy a smaller one. That can help decrease your monthly utility bills. You can also consider where you can save on your monthly payments.

  • Think about your financial goals. The last of your money concerns that may need spring cleaning is your financial goals. See the progress of your goals and see if your financial strategies need tweaking. Or maybe there are goals that you need to give up on at this point. Review all of them and see how you can revise them to suit your current financial situation and aspirations.

Redefining your source of income

Another thing that you may want to look into is your source of income. This is an important part of your life because of the preparation that you need to make in your retirement. But while there is still a need to have a career, it may not be as pressing as when you were in your younger years.

Now that the big expenses are over, with the exception of your retirement, it may be time to slow down or take a risk to pursue your own business. According to an article published on USAToday.com, 76% of the people who left the workforce last year are over the age of 55. This is a statistic coming from the Labor Department. There are probably a lot of reasons why this is so. If could be because they want an early retirement or something negative like being forced to retire by their employers. Making way for a younger workforce is sometimes a necessary move for some companies.

For other pre-retirees, the decision is made so that they can pursue their own business. USNews.com revealed that Baby Boomers have all the potential to be great entrepreneurs. According to the statistics they got from the Ewing Marion Kauffman Foundation, 23.4% of entrepreneurs back in 2012 are between the age of 55 to 64 years. The article admits that this growth in entrepreneurship for those in their 50s and 60s is caused by the recent economic collapse. But it seems to be working just fine for everyone. The article provided some reasons why this age group can be great entrepreneurs and here are two of the important ones.

  • You can afford to be risky. At least, this is true if your retirement fund is already secure and you are right on track with your plans. Now that the kids are out of the house, you only have to fend for yourself and your spouse. You can take on a few more risks now.

  • You have years of expertise and experience behind you. With age comes wisdom and that is because of what you have gained with the years of work you have gone through. It is impossible that you did not pick up anything useful that will make you a great entrepreneur. It is time to put that to good use so that anything that you can earn will go only to your pocket.

While it may be scary to venture out on your own, the potential to earn a lot when you have your own business is there. Include this as one of your money concerns. You can opt to work on a hobby or something similar. Try it because you may never get another chance to do it. Besides, you want to improve your earning potential so you do not have to work in your retirement.

Important questions to ask in when you are in your 50s

MoneyNews.com provided some interesting statistics about people who are working beyond their retirement. From 11.5% in the 1990s, 18.5% of 65 years old and above are still part of the work force. That is a huge increase in the past 20 years. You do not want to be a part of this statistic so you should try to make sure that everything is in order while you are still in your 50s. Take care of your money concerns before it is too late.

As you go through your last decade before retirement, you may want to ask yourself a couple of questions that will set you up for a good future when you retire.

  • What is the status of my retirement plans? If you do not have enough money, you need to work double time to make sure that you will have sufficient funds.

  • Are any of my financial goals still realistic? Smart money management begins with setting goals but there are instances when these goals have to be reviewed and revised. As you enter your 50s, make sure you do this task.

  • How much assets have I acquired? If you have none, that is alright. You could work hard to acquire assets but try not to take on more debts to do so. If you have them, make sure that you prepare the documents that will determine who will get them in case you pass away.

  • What are the tax implications on my finances? Some people have no idea about the tax implications of senior – especially when it comes to their retirement funds. You need to learn about this because even as early as your 50s, you may have additional tax breaks that can increase your net income.

All of these money concerns will have to seriously considered once you reach your 50s. Do not fret if you still do not have sufficient retirement funds. You still have time for that but it will be a bit harder to reach your goals. But you need to start working on it now.

Military Debt: How To Deal With Debt In A Military Family

soldier and the US flagMilitary debt is a serious problem for a lot of our servicemen. It is a sad situation because they have sacrificed a lot in the service of their country while their families have all the signs of heading towards a financial catastrophe. While they put their lives in danger to make sure that the rest of the country is safe, their families are left defenseless against debt and other financial obligations.

We are not saying that their deployment is the cause of their financial troubles. We acknowledge that it is mostly because of wrong financial choices that they have made. But just like everyone else, they are susceptible to the same financial troubles that the rest of the American consumers are facing.

An article from CNN.com revealed a rise in the use of food stamps that are redeemed by military families. That means more and more military families are using food stamps in military groceries. At least , this is true since the recession in 2008. As of the last fiscal year that ended in September 30 2013, almost $104 million food stamps were redeemed. In 2012, the food stamps amounted to $98.8 million. Now it is at $103.6 million.

Military financial management statistics

It is hard to say if military debt is to blame for the rise in the use of food stamps. However, we can safely assume that this is part of why their budget on food falls short. It is also a good assumption to say that they have been making a lot of mistakes when it comes to their financial decisions.

The FINRA Investor Education Foundation conducted a military survey that revealed the financial behavior of military families. According to the results published on the FINRAFoundation.org, 36% of the participants in the survey admitted to having problems when it comes to keeping up with their financial obligations. The report revealed that this is still higher compared to the civilian population – with ⅔ of them having  similar problem. But still, ⅓ is still a high percentage.

Among the other findings in this statistic are as follows:

  • 25% of respondents with checking accounts have overdrawn their accounts.

  • 64% of military families who have overdrawn their account find it difficult to meet their monthly expenses.

  • 10% of families with a mortgage loan have been late on at least one payment in the past two years.

  • 3% of military families has foreclosed on their homes.

  • 3% of military families have declared themselves bankrupt in the past 2 years.

  • 9% of those contributing to their retirement funds have taken a loan in the past 12 months.

  • 6% have done a permanent hardship withdrawal from their retirement plan.

  • Around half of respondents claim to have an emergency fund.

  • More than 50% plan for life events

  • More than ¼ of credit card holders owe $10,000 or more on their account.

In terms of the personal finances, 19% are dissatisfied with their current financial condition. Only 26% are satisfied and 55% are neutral about it.

The survey was conducted last 2010 and we can only hope that things have gotten a lot better financially. With the declaration of President Obama that the federal minimum wage will now be higher, we hope that things will get better for these families.

7 steps to get rid of military credit problems

In most cases, military debt plays an important role in the lives of these households. Among the debts that they owe include credit card debt, mortgage loans, auto loans and student debt. If your family is going through the same problem, you may want to follow these 7 simple steps to get out of debt.

Step 1: Organize your personal finances.

The first step is to know how much you owe. To do this, you have to organize your personal finances. You need to categorize your income, expenses and your debts. While your military debt is a part of your expenses, it pays to separate it from your monthly household expenses.

Step 2: Create a debt payment plan.

The next step is to do something about your current debt. You have to choose a debt relief program that you can follow to help you make better progress when it comes to your credit obligations. Sometimes, what we need is a structured debt payment plan that will help us commit to our payments.

Step 3: Negotiate your debts. Get debt help if necessary.

If the total military debt that you owe is way beyond what you can really afford, you should call your creditors and ask them to give you a discount. You are negotiate for a lower interest rate or even a debt reduction. You can opt to hire a debt expert to help you with this. In exchange for a reasonable service charge, you can have the peace of mind that comes with having an expert deal with your debt problems.

Step 4: Appoint a financial manager in the family.

Choose who will manage your money. Having one person manage the finances in the household is a great way to organize and simplify the decision making process. While this financial manager should still consult the rest of the family, it is ideal to have one person responsible. They will take care of the monetary matters in behalf of the family.

Step 5: Refrain from adding more debt.

The next step is to keep yourself from adding more debt. You have to stop acquiring them – at least until you have successfully paid off what you currently owe. If not, you may have trouble keeping up with your payments. Put yourself under a cash only policy while you are still getting out of debt.

Step 6: Earn more money.

Although the member of the family that is deployed in military service is already earning, the spouse or partner left at home should try to earn more. At least, they should sacrifice until their military debt is paid off. This will help ease the burden for the one currently working.

Step 7: Educate yourself.

It is important for everyone to realize that financial management is a debt solution. Regardless of how you plan on getting out of debt, this is an important aspect in your debt relief program. You need to learn how to manage your finances. That is how you will learn to use a budget, save and make smarter choices about your money. Fortunately, there are many websites that will help educate you about your personal finances. Specifically, you can go to MilitarySource.mil for specific help about your military debt.

Here is a video from the Bank of America that has tips to help you pay off your debt.

4 options to get military financial aid

It may be a scary situation to watch your military debt grow. But your fear will do nothing to help you. It is important to start acting on it now to prevent it from further harming your personal finances. There are debt relief options that will help you with your financial struggles. Not only that, the government have put into place various programs and laws that will help military families deal with their respective debts. Here are 4 of them that can help you out.

  • Servicemembers Civil Relief Act. Also referred to as the SCRA, it aims to help families deal with military debt. This is mostly in effect for those who are on active duty. The provisions include an extension for lease contracts, cancellation or termination of any auto rentals and limits the interest that will be collected from them.

  • Joint Federal Travel Regulations. This is intended for military personnel whose landlords are about to face foreclosure. They are provided with cash allowances that will help with their military travels and transfers associated with the foreclosure of their landlord.

  • Military Lending Act. The next program is initiated by the Department of Defense to limit the interest and fees that are being imposed on military servicemen. These are imposed on payday loans, tax refund anticipation loans and vehicle title loans. The regulation limits its at 36% only.

  • Homeowner’s Assistance Program. This is to help military families who are having problems with their homes. This will provide them with financial aid in case they have to sell their homes at a loss – or even if they are unable to sell it. This is extended to both active and former members of the military to aid them in any military debt that is related to their home. Not only that, civilian employees of the Department of Defense, and the surviving spouses are covered by this.

You can say that these are among the perks of being part of a military family. But still, you should know that it still boils down to financial management. Make sure that you understand how to manage your money well so you can avoid the unnecessary burden of military debt.

Debt Is Not A Financial Problem. It’s a Personal Problem

Surviving Debt Despite UnemploymentIf you’re typical you probably hate being in debt. But here you are stuck in debt again. It seems like you just pulled yourself out of debt a few months ago and here you are back in debt again. How in the world did this happen and so quickly? And what could you do to solve this problem permanently so that you are never in debt again?

The first step

The first step in getting permanently out of debt is to define the source of the problem. While you may believe that the reason you’re in debt is a financial problem it’s not. It’s actually a personal problem that you just think of as a financial one. This is why you’re never able to permanently stay out of debt. In fact, treating debt as if it were a financial problem is about the same as trying to cure a cold by blowing your nose. You might be relieving a bothersome symptom but you’re not addressing the underlying cause.

A much larger problem

To put this another way, if you’re constantly falling into debt this is just a symptom of a much larger problem, which is that you’re addicted to an unsupportable lifestyle and self image and are spending more than you earn. If you are unwilling to address this root problem, the symptom will recur and you will be back in debt again.

Your personal life habits and attitudes are your debt’s real cause because this results in overspending. So, the answer is simple. You must spend less than you earn. There is just no way around this. Unfortunately, this answer is about the same as telling an overweight person that they need to eat less and exercise more. You probably already know this is what you need to do. The tough part is actually getting it done.

Slaying the monster that is debt

We understand that you want to get out of debt as quickly as possible but if you choose a superficial financial solution you just may end up as a repeat offender. For example, you could use debt consolidation, transfer all your debts to a 0% interest balance transfer card or take out a homeowner’s equity line of credit and pay off those debts. Or you could sell your house, your car or your boat. However, this does not address the root cause of your problem. You are trying to relieve the symptoms of your problem by looking only at financial issues.

What’s causing your debt?

You need to identify the ways that you spend more than you earn and then change these habits. This may mean tracking your spending for three or four weeks and then dividing it into categories so you can see exactly where your money is going. This will help you identify leaks or those areas where you’re spending too much. You need to plug all of those areas so that you will never go into debt again. This is not a very sexy solution but it will permanently solve the problem.

One day at a time

If you truly want to stay out of debt you must keep plugging those leaks until you are spending less than you earn. It may take you months or even years to do this. But that’s okay. The important thing is to not become overwhelmed. You might start by picking just one habit that produces debt and causes overspending and then correct it. When you’ve done this, pick another of those bad spending habits and go to work on it. Keep rinsing and repeating until you’ve completely stopped overspending. You will need to be persistent but if you are you will reach your goal.

Have realistic expectations

Understand that this is not a quick solution and that you need to set realistic expectations. What this is about is long-term financial management using permanent habits that will convert your debt into wealth. If you can learn to spend less than you earn, your debt issues should vanish forever. And that is a very good thing.

Tips for debt reductioncalculator with text how much

It’s also important that while you’re changing those overspending habits you are also working to eliminate your debts. Here are five steps that could help.

1. Evaluate your debts

Print out all of your credit reports and get all of your other financial statements so that you can see just where you stand. This can be scary but it’s critical. Take a piece of notepaper or a spreadsheet and put down your balances, interest rates and the monthly amounts due on each of your debts. Don’t forget your personal loans, credit cards, auto loans and any other debts. Be sure to also write down the annual fees you pay on those credit cards.

2. Determine what you can pay

Once you have all this information you need to determine how much you could pay on your debts. Add up all of your monthly earnings after taxes and then subtract your mortgage payment or rent from that amount. Next, subtract your other fixed monthly expenses such as payments on student loans, utilities, groceries and insurance. This will tell you what you have left to pay on your debts.

3. Create a plan

You now know your exact financial situation. So the next step is to make a plan for eliminating those debts. The way you do this is to subtract your monthly expenses and minimum debt payments from your monthly after-tax income. Use whatever money you have left over pay off the debt that has the highest interest rate and the highest balance. Continue to do this every month until you pay off the debt. Then start working on your debt that has the next highest balance/interest rate. This is the quickest way to reduce your debts. Make sure you do not charge anything on your credit cards during this time and be sure to make at least the minimum monthly payments on all your other debts. Try to also increase how much you pay on that debt with the highest interest/balance every month.

4. Contact your lenders

Step four in reducing your debt is to contact your lenders to see if you could get better terms. For example, you might be able to lower your interest rates or even get a reduced settlement on some of your debts. Most financial experts say that it’s easiest to negotiate debts that have already been charged off by the creditor or are already in collection. f you would like advice from an attorney on settling debts, watch this video …

 

5. Be sure to follow through

Do your best to meet your repayment goals every month. It’s not bad if the amount you put towards your target debt varies from month to month. Just try to put as much as possible consistently towards your debts. One good way to do this is to sign up for automatic payments.

Be sure to celebrate your success when you reach a major milestone. Do this and before you know it your debts will be a thing of the past.

Don’t forget to pay yourself

It’s important that while you’re paying off your debts and changing your spending habits that you don’t forget to pay yourself by putting money into savings. You need to have an emergency savings account so that when, and not if, you run into a financial emergency you will have the money to cover it. Otherwise, you’ll just be back in to debt again. If you have a tough time saving money, arrange to have automatic withdrawals from your checking account each payday with the money deposited into your savings account. The money you don’t see is money that’s harder to miss.

14 Signs That You’re Headed For Big Trouble With Debt

woman looking at billsUnless you’re one of that well-to-do one percent, chances are that you’ve gotten off track with your finances at least once in the past 5 to 10 years. You have good intentions to not let this happen again so it’s important that you can recognize the signs that you may be headed for a personal financial disaster. That way you could get back on track before it’s too late.

Here are 14 signs that you may be headed for trouble

1. Not paying your bills on time. One of the first signs that you may be headed for trouble is if you are unable to pay your bills on time. There are several reasons why this is important, not the least of which is the damage it does to your credit score. That little three-digit number rules your credit life in an inverse ratio. In other words, the lower your score the higher the interest rates you will be charged. For that matter, if your credit score falls below 580 you could even be forced to pay more for your auto insurance, your rent and even your utilities.

2. Struggling to just make the minimum payments. The minimum payments on your credit cards are just that – the minimum that you can pay to keep from being charged late fees. If you’re having a problem making just the minimum payments this is a sign that you are headed towards serious financial problems. Plus, it will take you much longer to get out of debt. As an example of this if you owed just $5000 at 19% interest and made only a minimum payment of $125 every month, it would take you roughly 273 months (nearly 23 years) to pay back the $5000 and would cost you $6,923.14 in interest.

3. Using credit cards to make payments. If you’re doing this, it’s the ultimate borrowing from Peter to pay Paul. Don’t fool yourself. When you do this you’re just piling debt on top of debt. The one exception to this is if you were to transfer all of your balances to a 0% interest balance transfer card. This would give you a sort of timeout period of anywhere from 6 to 18 months. During this introductory period of time all of your monthly payments would go towards reducing your balance instead of paying interest. If you could heavy up on those payments you could actually be debt-free before your introductory period expired.

4.Taking cash advances. If you’re taking cash advances on a credit card this is not only a sign you’re having a serious problem with your finances but is probably costing you big money. This is because almost all credit card companies charge you a much higher interest rate on cash advances than on purchases. Next time you get a statement from one of your credit card providers check the interest you’re paying on purchases versus cash advances. The odds are that cash advances will have an interest rate that’s at least 10% higher than on purchases.

5. Being refused for credit. When you apply for any type of credit, the first thing the lender will do is check your credit score to see how much of a risk you represent. If you have a low credit score and a credit report filled with late or missed payments this tells the lender that you are a very poor risk When you’re turned down for credit it’s because the lender believes that you won’t be able to pay back the money. This is a very serious red flag.

6. Earning less than you spend. Have you ever sat down to compare your spending with your earnings? If you’re piling up debt it’s because you’re spending more than you earn. You can double-check this by calculating your debt-to earnings-ratio. The way you do this is by dividing your fixed monthly debts by your earnings. If you find you have a percentage of 40% or higher, you’re headed towards a financial cliff.

7. Reaching or going beyond your credit card limits. Thirty percent of your credit score is computed by taking the amount you owe and dividing it by your total credit limits. When you reach the limit on a credit card or exceed it, you may be denied more credit or other lines of credit. As an example of this if you had total credit card limits of $5000 and had charged up $2500 on them you would have a debt-to-credit ratio of 50%, which would be much too high. This, too, would have a very negative effect on your credit score.

8. Taking money out of your savings or retirement. When you take money out of your retirement account you lose the returns you would have earned had you left the money alone. And when you take money out of savings, you will have less available should you run into a financial emergency. Most financial counselors believe you should have the equivalent of at least three months of living expenses in a savings account to protect yourself against emergencies. When you drain down your savings account this puts you at risk for running into an emergency where your only option would be to add more debt onto your credit cards.

9. Continually paying late fees. If you find that you’re always paying late fees you are either not doing a good job of managing your money or you’re just lazy. When you’re late on just one payment your credit score could be reduced by as many as 50 points. This could drop you from having “good” credit to “bad” or even “poor” credit and prevent you from getting any new credit.

10. Juggling bills. This tactic may help you in the short run but not over time. When you start shuffling bills so that you can at least make the minimum payments on the “hottest” ones, all you’re doing is putting off the inevitable. This, too, will damage your credit score and end up costing you money.A pile of bills, checkbook, pen and calculator on the table to create budget

11. Counting on a windfall. Are you putting bills aside waiting for a big Christmas check from Aunt Jane, a bonus or a commission? This is like one of those storm-warning flags that alert sailors to bad weather. It’s a distress signal that financial problems lay ahead and that you’re about to run into a storm of debt.

12. Doing the old credit card hocus-pocus. These are the words often spoken by a magician when bringing about some sort of magic change. But there’s no magic change you can make with credit cards if you’re continually making late payments or worse yet, skipping some. The only “magic” that can help keep you from falling further into debt is to pay off your balances.

13. Fighting over finances. Couples that are not struggling with debt rarely have arguments over money. If you and your spouse or partner is constantly arguing over money, it’s because you’re having financial problems. A better solution than fighting over finances is to sit down, have a calm discussion about the problem and then make a plan for getting them under control.

14. Paying overdraft fees. You could be on the brink of financial disaster if you’re constantly paying fees for overdrawing your checking account. Whether you want to face it or not, this means that you just don’t have enough money to support your current lifestyle. You will rarely find pages will get you

If you see some of these warning signs

If you see only one of these warning signs, you’re probably not headed for a financial disaster in the next few months. However, if you see three or more of these danger signs it’s time to buckle down, get to work and make a plan for getting your finances under control – before you start hearing from debt collectors. Trust us when we tell you that debt collectors are in general not very nice people and if you fall into their clutches, they can make your life miserable.

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