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6 Ways to Be More Prudent and More Financially Stable

6 Ways to Be More Prudent and More Financially Stable

We are taught to manage our finances while we are still kids. Our parents give us an allowance and see how we distribute our money throughout the month or week. Then when we move out during our studies, we have to pay bills and buy food so managing finances becomes a bit more difficult. Then we start to live in a home of our own, where there are all sorts of other bills and repairs to worry about, so staying within your budget becomes even more difficult.

If we are not careful, we can easily end up having money problems and this can lead to a very stressful life in the future. Furthermore, we live in a time of consumerism, so a lot of people out there are trying to sell you things you don’t even need, but they are making compelling cases so that you end up becoming a customer. Due to these reasons, managing finances becomes more challenging, so here are some tips that can help you become more frugal.

Plan out how much you are allowed to spend

Alright, one of the most basic mistakes one can make when handling salary, is to adopt a “go with the flow” point of view. When you get your paycheck, it would be wise to have some sort of basic budget plan i.e. a rough estimate of how much you can spend on a daily basis, so that you can go through an entire month living fairly comfortably.

Once you have that, you should by no means spend the entire daily budget, since you are bound to face unexpected expenses and you’ll need an emergency fund. Also, this daily budget is a good starting point for future financial strategies. You’ll need to find different ways of increasing your daily limit and challenging yourself to save more.

Do not be financially dependent on other people

Of course, if you are going through a bad financial patch, chances are you will borrow money from friends or family. However, you should not allow this to become a habit. Being financially dependent on other people makes you one step closer to financial suicide.

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Truth be told, you might not borrow much and your close friends or family won’t mind you borrowing some money, but this is more of a personal issue. If you constantly need to depend on other people, then you have a problem that has a rather simple solution. You can either spend less or find a way to earn more.

We live in a world where earning a bit extra cash is really not that hard, it’s simply tedious. You can complete surveys or install apps that you can use to earn money online and then can cash-in later. If you continue to rely on others from one month to another, it will only send a message that you refuse to solve your problems and this can leave severe consequences in the future.

Do thorough research before important decisions

It is important that you do not make any big investments without thorough research. You can visit different types of agencies and speak to different financial advisors, but bear in mind, that these people can have a vested interest when they tell you what to do. If the advice is not coming from a close friend or a family member who genuinely cares for you and who is well-versed in money management, don’t immediately adhere to it.

You can do online research and find more accurate information this way. Of course, the people who tell you how to handle your finances are also online and will probably advise you the same thing there, but there is a difference. Google has its own base of trusted websites, and there are always ways to check if sites are trustworthy. Here are some explanations on how to do it, but you can find even more online.

These big decisions are usually loans and these loans are sometimes a necessity, because it is unrealistic to expect that you can simply pay for an entire house with cash. So, at one point you might need to get a house mortgage. When someone explains to you how this whole process works and you feel that the explanation is oversimplified, then chances are that, the person has a vested interest in your investment.

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It’s important that you are vigilant and that you explore all of the other options before you go through with this type of decision. Here is a good guide that can help you gain a deeper understanding of mortgage rates; make sure you go through it if you plan to buy a new home, or if you want to be a real estate investor.

Another important thing to remember is not to turn to the payday loan industry. These are also known as predatory loans, because their interest rates are ridiculously high. They only offer a quick solution, but everyone ends up regretting their decision due to the astronomical interest rates.

In other words, if you really need a loan and intend to pay it back, then it’s far better to borrow from friends or family. People usually end up borrowing money from others, or pawn their possessions in order to return payday loans and they could have done those things in the first place instead of taking that loan.

Use money management tools

I have already mentioned how you can use apps to earn money, but you can also use apps to save money. There are apps that can calculate your expenses and give you good financial advice, but it’s always better to seek a financial advisor you can trust. However, there are apps which can help you get coupons or discounts in stores.

They will also provide you with insight into which stores currently have discounts, sales etc. These are really useful and with a good shopping strategy you can save a lot of money. It’s also important to know that some of these quality apps come at a price, so you should only buy them if you absolutely need them.

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In other words, if you are already having a hard time managing your resources and have debts, then these apps won’t do much good; they will only be an additional expense. On the other hand, if you want to create a good savings strategy, then buying them is a good idea, since they will eventually pay for themselves.

Use saving tactics

When it comes to saving money, there are so many viable tactics out there that you would be surprised. In this section I will only list some that I really like, but as mentioned you can find a lot more online.

  • Weekly challenge: Basically you set the amount of money you wish to put aside each week (it can be $1, $5, or $10). Then at the end of the week you put that amount in a piggy bank or a savings jar, but at the end of next week, the amount needs to be doubled and so on.

So, if you go for $5 then, next week you place $10, and a week after that is $20, and the last             week of the month is $40. You reset the amount at the beginning of the next month. Also it             might be better to place the money in the jar at the beginning of the week, so that you know             you cannot count on it.

  • Wait for a discount on general goods, like cleaning products, toilet paper, toothpaste etc. Then feel free to buy these goods in bulk and you won’t have to spend money on them in the near future.
  • If you need new furniture, check out sites like freecycle.org to see what you can get free of charge.
  • Instead of buying cleaning rags, you can save your old clothes that are no longer wearable, and use them to clean floors.
  • Before you go shopping, write a list and stick to it; don’t be tempted to buy anything you don’t need. In any store, the most essential items are usually in the back, so that shoppers are tempted by expensive products they do not need while they are walking to the back of the store to buy what they came for.
  • Learn how to repair clothes so you won’t have to toss it away at the first signs of wear and tear and you can also earn some extra cash if you monetize these skills.
  • Buy light bulbs that do not use as much energy as regular light bulbs, they last longer and even though they are expensive, they will pay for themselves and save you money.

Once you manage to accumulate a fine amount of resources with these saving tactics you can invest in things like solar panels and a tankless water heater, since these will also save you money in the long run. Moreover, in case you want to discover more saving tactics, you can use websites like thesimpledollar.com, and you can find some good tips in this article as well.

If you go through the links, you’ll find out that if you choose to live healthier you’ll also save a lot of money. We all spend too much on food and if you learn how to prepare it yourself, you will eat better and spend less.

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Furthermore, if you buy bottled water, you should stop and buy a filter for tap water; this way you can drink tap water and you won’t have to buy it from the store. Also, if you carpool with your colleagues from work, you save the environment and money that would go on gas. In other words, we spend a lot just to have a bit more convenience and we don’t really need to sacrifice much to save quite a  bit of money.

Eliminate minor but unnecessary expenses

Finally, you must never forget that we live in a world that is dominated by micro transactions. These are really tricky, since you can’t argue that someone is trying scam you and we have almost no issue with small fees, so we part from our money lightly.

However, one small subscription after another and you start to lose a significant amount of cash, and you barely notice it. These small subscriptions are very often for a magazine, for account maintenance, for private network channels or cable channels etc.

In reality we  rarely use these services, mostly when we are bored and quite frankly there are other ways to be entertained. It only seems cheap and convenient with these subscriptions, but in the long run, we end up regretting the decision when we find out just how much we could have saved. The point is, you should not fall for micro transactions for products you won’t use frequently.

As you can see, being more prudent is not that hard. All it takes is some effort and minor life changes, but there are long-term benefits for those willing to apply them. Make sure you go through the links in this article, as they can tell you how to save and how to think before investing, and they can also help you earn a bit extra.

Remember to operate within the borders of your daily budgetnand to invest in items that can help you save more money in the future. If you manage to do this, you should be just fine.

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Djordje Todorovic

Blogger, Gamer Extraordinaire

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Last Updated on July 10, 2020

The Definitive Guide to Get out of Debt Fast (and Forever)

The Definitive Guide to Get out of Debt Fast (and Forever)

Debt can feel crushing, like a weight that is always weighing you down. Looking at those numbers, it can feel as if you’ll never get out from under it. However, if you really want to learn how to get out of debt, it is possible with a great deal of focus and self-control.

Getting out of debt isn’t impossible. Like any big goal, all that it takes is an action plan to identify where you are and creating a plan to zero out your debt.

Identifying All of Your Debts

The first part of paying off your debt is getting a complete picture of what you owe. When you have everything written out in front of you, it makes it much easier to create an action plan. Depending on how much you owe, it might also help you realize it’s not as bad you might have originally thought.

Here’s how you can get started identifying your debts:

1. Own Your Debt

Before you start identifying all of your debts, take a moment to process that you have debt but want to get out of it.

Forgive yourself for any past mistakes, missed payments, or overspending. It might be painful to accept how much debt you have at first, but you must own it.

2. Make a Debt Tracker

It’s astonishing how few people ever created a tracker to understand their total debts. Most likely, it comes from not wanting to accept the guilt of having debt, but, if avoided, it can make it nearly impossible to get out of debt.

Open up a new Google or Microsoft Excel sheet and list out all of your debts. Start with the name of the creditor, interest rates, total balance, loan term length (if any), and the minimum amount due each payment. This will include student loans, credit cards, and any other type of debt owed.

3. Get Your Debt Number

Once you’ve made your debt tracker and taken the other steps, identify your total payoff number. This is crucial, as you will have a starting point and a clear goal that you are trying to achieve.

Prioritizing Your Debts

All debt is not created equal. It’s imperative to understand that there are different types of debt.

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1. Understand Bad and Good Debts

Bad debts are usually paying for things you want instead of always need. While there might be some emergencies that max out your credit cards, often times it’s excessive spending[1].

There are three main types of bad debt:

  • Credit Card Debt: The average American household owes over $16,000 in credit card debt!
  • Auto Loan Debt: According to CNBC , the average auto loan in the US is $30,032!
  • Consumer Loan Debt: Consumer loan debt isn’t as common as credit card and auto loan debt, but it’s still considered bad as interest rates are usually between 10-28%.

Good debt is identified as investments in your future. Here are three common types of good debt:

  • Student Loan Debt
  • Mortgage Loan
  • Business Loans

2. Decide Which Debt to Pay off First

Once you know each type of debt and their interest rates, you can begin to pay off debt quickly.

Focus on paying off bad debt first, regardless of if it is a credit card or auto loan. Start by paying off the loan with the highest interest rate first.

If you have several credit cards with different interest rates, you want to focus on the one with a higher APR. You will actually save more money by eliminating the card with the highest interest rate.

3. Don’t Pay the Minimum Amount

Paying the minimum amount digs you into a hole as interest rates will offset your payment. Even a small amount more than the minimum can help you pay off debt much faster.

Removing Obstacles to Pay off Debt Quickly

Creating a debt tracker and prioritizing a plan is simple, but avoiding temptation can be difficult.

1. Set a Reminder to Track Your Debt

“If you can’t measure it you can’t manage it.” -Peter Drucker

It’s so important to track your debt to ensure that you get it paid off quickly. Similar to working out and measuring your results, you need to track your debt constantly. Start with a weekly reminder, where you sign on and log your updated number. Did you increase, decrease, or stay the same?

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Regularly tracking your student loan balance can be incredibly motivating, as well. You will get a huge confidence boost each time you see your total debt amount decreases.

Set weekly and monthly goals so you can have short term wins and keep the momentum going.

2. Hide Your Credit Cards

If your biggest debt is credit cards, you need to eliminate temptation and remove them from your wallet.

Some people have gone to extreme measures by freezing their credit cards. Why? This would create an ice block around your card, which would require you to chip away at it slowly. This will give you time to think if it’s the best idea to buy that thing you’re about to buy.

3. Automate Everything

Willpower can be a huge downfall to paying off your debt. By automating your bills each month, you will ensure that willpower isn’t involved.

4. Plan Ahead

Getting out of debt will require some sacrifices, but with enough planning, you can make it work.

For example, if you know that you have a friend’s birthday or family dinner coming up, plan ahead for the costs. Whether you need to cut back on spending the week before, pick up a side job, or meet them after dinner, do what is needed.

5. Live Cheaply

The only way to get out of debt is to make some sacrifices on your spending habits. Find ways to save money each month so you can apply that amount to your outstanding debts. Here are some ways to save money each month:

  • Live with roommates
  • Cook dinners and prepare lunches for work instead of eating out
  • Cut cable and choose Netflix or Amazon Prime
  • Take public transit or bike to work

Finding the Lowest Interest Rates

The higher your interest rates, the harder (and longer) it will take you to pay off any debt.

If possible, you want to find ways to lower your interest rates to help get out of debt quickly. Here’s how you can get started:

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1. Maintain a High Credit Score

Your credit score will have a large impact on your ability to refinance your loans and receive a lower interest rate. If you have a low credit score, it’s unlikely you will be able to refinance your loans. Use these credit tips to increase and maintain an excellent score:

  • Never miss a payment
  • Don’t exceed 30% of your credit limit
  • Don’t sign up for more than one card at once
  • Limit hard inquires, like auto-loans and new credit cards
  • Monitor frequently with free credit-tracking software

2. Find Balance Transfer Offers

Start by opening a free account on credit.com. Credit.com offers you the chance to open a free account and see what type of balance transfer offers you can receive. Some of your existing credit cards might already have 0% or lower APR balance transfer offers available.

Contact each of your credit card providers to ask about lowering your rate for a one-time balance transfer offer[2].

If you do take advantage of this option, make sure that you use a balance transfer and not a cash advance. Cash advances have a ton of high interest fees (15-25%, depending on your credit card) and will only compound your debt problem.

How to Get Rid of Debt Forever

Setting up a plan, removing temptations, and getting the lowest interest rates is the first step to get out of debt.

1. Keep Monitoring and Adjusting

Once you have a plan, don’t get comfortable. Track your debt payoff plan and make the necessary adjustments when needed.

Monitor your credit scores with a free site like CreditKarma. The higher your credit score climbs, the more likely you will be to secure a new, lower-interest loan.

2. Earn More Money

There are only so many ways to save money. Instead of clipping another coupon or making sacrifices for your morning coffee, find ways to earn more money!

Think about it…it is much easier to find ways to earn an extra $1,000 per month than find $1,000 to cut from your budget.

Here are some examples of ways to earn more money:

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Talk to Your Boss

Have a conversation with your boss about current salary and/or commission rates. If you’re not satisfied or want a change, don’t be afraid to look around at other positions. Some of them might even have a student loan debt reimbursement plan!

Start a Side Hustle

This could be coaching students on the weekends, driving for Uber, or taking paid online surveys. There are tons of ways to make money outside your 9-5. Now that you have a clear plan to pay off your debts, you’ll be more motivated than ever to figure out creative new ways to earn money.

Build an Online Business

There are so many websites and blogs that earn money from ads, affiliates, and other online products. Find your niche and get started.

3. Celebrate Your Wins

As you progress in your debt payoff journey, don’t forget to celebrate your wins. You need to always reward yourself for the hard work and discipline that is required to get out of debt.

While you shouldn’t celebrate so big that it increases debt, make sure to factor in little rewards to keep you motivated.

4. Set New Financial Goals

Eventually, with a plan and these steps, you can rid yourself of your debt. Once you do, make sure to celebrate your monumental achievement, but don’t stop there.

Now, you can focus on acquiring wealth and increasing your net worth. Set new financial goals so you have a new target to aim toward. Here’s how to set financial goals and actually meet them.

These could be anything now that you are debt free! Think about where you want to travel, buying your first home, or saving for your future retirement. Just like before, make sure that your goals are specific, measurable, and achievable.

Conclusion

Congrats, you can now set a plan in motion to finally pay off your debt quickly (and hopefully forever)!

Remember, if you want to get out of debt quickly, it’s not always easy. Just like any big goal, there will be sacrifices, challenges, and problems to overcome.

More Tips on Getting out of Debt

Featured photo credit: Pepi Stojanovski via unsplash.com

Reference

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