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10 Reasons Why You Are in Debt

10 Reasons Why You Are in Debt

If you are young, just out of college, starting a business, or starting a family, chances are that money is tight. Education costs dollars, as do building a business and creating opportunities for your children. Managing money is not always simply about noting how much money is coming in and what expenses you have. Money management is about your relationship to saving and spending and your attitude toward sharing your resources with others. Do you love giving to others? Do you share what you have or does it feel easier or safer to hold back, perhaps from a fear that giving means there is less for you? Here are some reasons for why you are in debt, along with some ideas and tips on how you can improve your relationship with the dollars, pounds, or euros in your wallet.

1. You haven’t realized that saving money is about creating new attitudes and emotional habits

Saving money is about creating new habits and attitudes. In reality, it has very little to do with the actual amount of money you have in your bank account. You can put aside money each month, but if you constantly overspend, you will end up borrowing from yourself and saving nothing. Rather than seeing money as a value in itself, consider what it gets you in relation to your goals and plans. Create an attitude that everything in your life is about moving towards your goals. The wealthiest entrepreneurs view money not as something scarce that must be guarded at all times, but as a tool or asset to help them invest in their goals and dreams.

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2. You haven’t worked out what is really important to you and what you value

Money is a resource. Resources can be wasted, misused, or directed to create even more wealth. What do you value? At the end of your life, what would you like to be remembered for? Working out what your values are will help you work out how to spend your money. If you love a hobby, then investing money in that makes perfect sense. How do you know what you value? Exercises such as writing a personal mission statement can be very valuable. Money is a resource like any other — move its focus to create the life you want to have.

3. You haven’t set up an easy-to-use budgeting system

Do you know right now if you are in credit or in debt? Imagine that you see a pair of shoes or a new tablet that you don’t need but would love to have. Would you know if you have enough money in the bank to cover the cost? Create an easy-to-use budget tool. There are some online, and often a notepad and pen works well too. Credit cards do have to be paid off and you will need to plan how much a month you can afford to contribute to paying these off. Debts don’t magically resolve themselves, so get to know your spending habits and ask yourself if you can afford all these items you want but might not necessarily need.

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4. You buy when you could just borrow or rent

You want to dig up a plant, so why buy a spade if you can borrow one from a kindhearted neighbor? If you need a big saucepan for a dinner party, why buy when you can borrow from a friend? We love to justify purchases by saying that the item will come in handy in the future. Yet, how many times do you really use it later? If you love a movie, don’t buy it, borrow it — the same goes with books. Think of all the things you own and have used only once or twice. Borrow or rent rather than buy.

5. You fall for those too-good-to-be-true, get-rich-quick ideas

Sorry to say, but it’s really true that success is normally 1% inspiration and 99% perspiration. Not everyone wins the lottery, so don’t assume it will be you. Use your time to create value that will last and give you pride and lasting returns on your efforts. Building a business or working up the career ladder takes time and effort, but the rewards will come. Get-rich-quick schemes work well for the people who create them when they convince you to part with your cash to buy into the dreams they are selling, but real wealth creation is a slow process.

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6. You have money-sucking (and life-sucking) habits

Where do you actually spend your money? What activities do you do regularly which cost money and return transitory pleasure? Most things are okay in moderation, but when you are spending money on smoking, gambling, drinking, or other bad habits, it’s time to think about changing those habits. Why do we spend our time and money on these activities? The simple answer is normally that addictive habits help us to avoid our feelings. If you are fed up with work, then a few drinks in the evening helps you forget that annoyance. If you are feeling bored, then some chocolate or cake can relieve that frustration a little. Gambling is an addiction which itself involves money directly. Though many gambling sites acknowledge that gambling is addictive and have put policies in place to help problematic gamblers, it is generally not in their interests to actively stop you from gambling. For any addiction, you should seek appropriate help.

7. You use credit to buy items you don’t have the cash for right now

It’s simple: if you cannot afford to pay in cash right now, don’t put it on your credit card. For necessary purchases such as repairs to your car or paying tuition or other costs, work out a payment and saving plan so you can see how much you need to save or can afford to pay each month. Don’t allow yourself to get into debt that you can’t get out of. Also, don’t borrow money from a bank unless you really need to. Banks will charge interest and often want to encourage you to take out loans.

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8. You pay retail prices on everything you buy

There are sales every six months and often you can find stores selling very good clothing or other items at discounted prices. An online search will direct you to goods with price cuts too. Many charity shops have started selling “seconds,” or clothing from last season. These garments are perfectly fine but since they are now no longer the most up-to-date line, they can be purchased at a reduced rate. The same is true of cars. Buy a brand new car and pay a higher price. As soon as it is driven off the showroom forecourt, a car is automatically significantly cheaper than a brand new one with very little difference in performance or condition.

9. You pay extra for labels or brands as status symbols

Consider two identical white men’s shirts. One is plain and one has that small blue polo player woven on it. Both are made the exact same way and in the same factory, but which is more expensive? The fashion industry makes a large chunk of money from our desire to be seen wearing a particular brand. Remember that you are lovable and wonderful as you are, without the need to have a name or label to confirm that. Think about purpose rather than about what others will think of you. Dazzle people with your wit and charm instead. Also, store brands are nearly always cheaper than national brands.

10. You think too much about today and not about tomorrow

We love advice like “Live life for today” or “Don’t put off for tomorrow what you can do today.” Of course, have as many experiences as life affords you. However, the money you have now can be set aside or invested so that in the future you will have a financial cushion. We also need to save for retirement and it is estimated that most of us are simply not putting aside enough for our futures. We are now living longer, and so the years post-retirement are increasing too. Think about what your money can create for you long term rather than the immediate gratification it can get you in the present. Think about your long term life goals and save now, whilst you have the opportunity.

Featured photo credit: picjumbo.com via picjumbo.com

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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