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Avoid These Mistakes When You Are Under A Debt Burden

Avoid These Mistakes When You Are Under A Debt Burden

We live in a debt-ridden world where credit cards and bank loans are the new norm and the fact that they provide us with a much needed financial impetus in times of need adds to the increased inclination to opt for them. They provide us with financial semblance and help us to cover those purchases that we don’t have the money for right now, but we can certainly cough up in instalments over a longer period of time.

But, sometimes we do find ourselves under a debt burden as we skip on one or two of our payments and that added debt just continues to keep piling on and on, making our financial position highly vulnerable. We find ourselves under intense pressure due to the constant phone calls and notices to settle our outstanding debt, and in that very time we often commit mistakes that prove very costly in the long run. When we find ourselves under a debt burden, we should think with a steady mind and take note of tricks to get out of debt without haphazardness. These are the decisions you need to absolutely avoid when you are in debt:

1. Mortgaging Your Home

Real estate always has a considerable value and is one of those commodities that is zipped up fast in the financial world due to the demand supply gap in housing markets. But your home is the place you stay in and you bought it for that very purpose – you should never mortgage it to get a loan to pay your outstanding debts.

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This is the biggest mistake that people stuck in debt usually make. Leveraging your home to pay up your debts is never a good idea because that money will be given towards your creditors and you will end up creating another debt to settle the previous one and this time round, your house will be at stake. Even the slightest mistake here will deprive you of your precious house and render you homeless to bear the brunt of rentals and save again to get a new one for you and your family.

2. Borrowing Money From Your Acquaintances

We often look towards our friends and family for support in times of need and it’s a great feeling to know that someone has got your back, but having to borrow money to settle your debt burden from your close ones should be your last resort as this is a dangerous position to be in.

You borrowed money from your friend and there is no interest involved. You settled your loan but now if you don’t pay your friend on time and it gets late, you will end up compromising a precious relationship just for the sake of money and will still be left with a loan to pay to him or her. Never indulge in such practices as relationships are precarious and can be affected quite easily by disagreements on the pretext of the slightest of grievances.

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3. Opting for a One-Time Loan Settlement

Most of the financial institutions today keep the option of a loan settlement open for all defaulted loan payers so that they can get most of the money out of this transaction and close the account which keeps troubling them. It’s a great proposition for the loan houses but not so much for you as all of your credit and debt details land up on your credit report, which is a sort of financial resume for your future loan applications.

Getting a loan settlement will not only make your credit score drop down but will also highly affect your credit report. The transaction you just made to settle that loan will remain there for the next seven years and will render you unable to get another loan for yourself in the future, no matter how severe your need is that time.

4. Using your retirement savings

Most of us are of the perception that retirement is a far off thing and we have enough time on our hands to take care of how we end up after we are no longer suitably aged for the jobs that we hold. Hence, we think of using our retirement savings to settle our debts and this idea is also propelled by the fact that this is our money anyway.

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What we don’t realize here is that, our future selves are dependent on the actions we take today and that money takes a lot of time to compound. Taking money out of our retirement savings and then starting again from scratch will considerably lessen our money’s compounding power and we will be left with a lower amount than we require once our retirement becomes a reality.

When you get credit on a regular basis to fuel your lifestyle, debt accumulation becomes a high possibility but you are not alone. There are millions of people out there who default on their payments. It’s not good to do that but it does happen and people do get out of it without damaging their personal financial buffers.

Debt burdens definitely put us under a lot of pressure and anxiety, but things that took time to go wrong, will take time to come back in order as well. Discipline is the key here, keep maintaining a budgeted lifestyle, utilize discount offers, try earning more money through freelancing and don’t indulge in impulsive buying. Keep doing these things for a few months and the debt will take care of itself, leaving you with a high degree of experience and a sense of pride over how you handled the situation.

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Featured photo credit: Empty Pockets/Dan Moyle via flickr.com

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Muhammad Bilal Shahid

SEO Consutant and Marketing Manager at Dream Products Creation

Empty Pockets Avoid These Mistakes When You Are Under A Debt Burden

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Published on November 11, 2020

10 Best Ways to Save Money Faster and Smarter

10 Best Ways to Save Money Faster and Smarter

People love to talk about budgeting, reducing spending. and investing. But unfortunately, talk is cheap, and poor money management is expensive. It’s easy to talk about the best way to save money, but putting it into practice is a different thing.

What people need to talk about is the practical and efficient ways you can quickly save money to accomplish your goals. After all, they don’t teach this stuff in school.

Here are the 10 best ways to save money faster and smarter.

1. Cancel All Your Subscriptions

Yes, all of them.

Okay, you can keep your wifi and trash. But other than that, cancel all your monthly subscriptions for one month. You will survive, I promise. Better yet, you will realize you won’t miss all of them.

Now that you have had 30 days to examine what you really missed and what you never thought twice about, you can add some of them back in. The others? you never have to think about them again.

This is something you can and should do with every part of your life. If it’s clutter, cancel it. Being able to step back and see what is cluttering your life and what is excelling your forward helps improve your quality of life and financial standing.

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2. Automate Savings From Your Paycheck

Many of us are so excited about getting a new job that we rush through the paperwork during the hiring process. Good news for you, I have had lots of jobs so I have seen it a million times.

There is an option for a portion of your paycheck to go directly into a secondary savings account. This is by far the most effective way to save money every month. We tend to spend most of what we have. So, if we take it off the top first, then it’s less likely to be spent. Just head over to HR and ask. It will only take two minutes.

3. Cancel the Happy Hours for the Rest of the Pandemic

We are in the middle of a global pandemic, which means that there is no better time to buy some drinks from the local store and stop shelling out $5 a drink at the local cocktail bar. When we look back at our bank statements, we are always shocked that fast food and alcohol can add up so quickly. You can easily save a couple of hundred dollars just by taking this step.

A great exercise is to print out your last bank statement and highlight all the areas of alcohol and fast food. The amount may surprise you and make you think twice about that old fashion.

4. Online Grocery Shopping

Some people think online shopping increases the amount they spend. For the most part, I would agree—except for this category.

Online grocery shopping is now a no-brainer, though. Whenever you walk through a grocery store, two things always happen: you always grab impulse items, and you never know the total of your cart until you checkout. This means that we always spend more than we originally planned.

With online shopping, you can see your total as you add items to your cart. You are way less inclined to make those impulse purchases and because of that, I would venture to say that you could even pay to have them delivered to your door and still save money each month by choosing online grocery shopping.

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5. Get a Famzoo Debit Card

This is something my wife and I swear by, and it’s great for the entire family! Famzoo strictly exists to help families and kids budget their money better. Each month, my wife and I have an allotted amount loaded onto our pre-paid Famzoo debit card. This amount has changed every year depending on promotions, kids, stage of life, etc.

The important part is that when you give yourself the freedom to spend a certain amount, you are more likely to only spend the allotted amount. Think of it as a diet. If you are counting calories, you are more likely to stick close to the amount you set. You can also look for some tips online to better stick to your family budget.

6. Purge

This is actually my favorite to do, and it is actually one of the best ways to save money. Raise your hand if you have ever moved. Okay, so everyone.

When we move, we are always amazed at how much junk we have acquired. I have found that about every 6 months, I can find a couple of boxes to sell online of things that we never use. This not only gives you so extra quick cash, but it also keeps your house more tidy and organized.

Now, go clean out that garage!

7. Amazon Subscribe and Save

32! That is how many items I have setup on amazon subscribe and save. Let me explain.

This sounds expensive, I know. But it actually saves us hundreds of dollars per year! We all need toothpaste, shampoo, razors, laundry detergent, toilet paper right? This feature is truly a triple threat. When you have more than 5 items on subscribe and save, you automatically unlock the max savings for every product on your list. This can be up to 20% per item!

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Now, even better is that it ships straight to your door on the exact day you want the item, maybe monthly or maybe you only need it every 4 months. This way, you never have too much or never run out. Either way, it’s totally customizable.

Lastly, there is no contract for any items, which means you can switch brands or items at any given time at no cost. My advice: every single staple item should be on your subscribe and save.

8. Rewards

This may ruffle some feathers, but if you are using your debit card for purchases, you are missing out on free money! We have this notion that credit cards are evil but in reality, they are the same piece of plastic as your debit card.

How you use it can be bad, don’t get me wrong. But if you want my opinion though, ditch the debit card and get a rewards credit card. Use it just like you would your debit card and make sure to pay it off as soon as the statement comes in!

Just to give you an idea of how powerful this can be in terms of money, here are some things that our miles have paid for:

  • 4 nights in Vail with Flight
  • Rental car in Vail (convertible might I add)
  • Flight to Ireland
  • Flight to Hawaii
  • Multiple staycations at very nice Hotels

That’s roughly about 7 thousand dollars in travel expenses so far! Remember that the credit card is just a tool and can be one that benefits you if you use it wisely. Ironically, this can be an effective way to save money.

Pro tip: If you don’t trust yourself carrying around a credit card, then set up all your monthly bills with your credit and leave it in a drawer at home. This way, you rack up miles but don’t get tempted to overspend.

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9. Vacation With Friends

Now, I know travel is hard right now but what a perfect time to go grab an Airbnb in the woods with a couple of friends and detox from the world right now!

Vacationing alone can be pricey and get rather boring quickly, but if you split lodging and set out for a road trip, it can become affordable quickly! For a couple of hundred bucks apiece, you can have one of the most relaxing vacations ever. Don’t forget to pick up your food at the local grocery store to avoid eating out every meal!

10. Make a Budget

When is the last time you updated your budget or made one for that matter? Making a budget is like writing down your goals. If you don’t make a budget, then you will struggle to save.

How can you know if you are spending wisely if you are not tracking everything?

Our advice would be to get a finance app like Mint, Every dollar, or personal capital. All these apps are free and do a tremendous job of tracking spending and budgeting. I still am old-school and have an excel spreadsheet which I do highly recommend.

Work Smarter, Not Harder

The entire goal is to boost your bank account while reducing the effort required. Efficiency is the name of the game, and automation is the key player. Luckily, we live in a world that has more perks than we can ever take advantage of. But if I were to choose a few, it would be the ones above.

Taking on all 10 of these steps may seem a little daunting. You can first try to pick three of your favorite and start there. Saving money doesn’t have to be a chore as long. As we use the tools correctly, it can be quite effortless. And now, you have a great blueprint to get started!

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Featured photo credit: Sharon McCutcheon via unsplash.com

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