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11 Reasons Why You Stay In Debt

11 Reasons Why You Stay In Debt

According to the Federal Reserve, 43% of Americans exceed their income with their spending habits. This means that 43% of people are going further and further into debt each year and racking up interest charges at an alarming rate. They might as well be burning their money.

Many people never even plan on paying all of that money back, citing bankruptcy as their way out.

Here are 11 ways you are staying in debt, and what do do about it.

1. Your expenses are too high

This one is obvious. If you have backed yourself into a corner by amassing a huge house payment, huge car payments, large insurance premiums, and other gigantic fixed costs, then you are never going to have any money to pay down your debt.

If you want to pay your debt, you must reduce your expenses. Get a used car. Downsize to a smaller house. Shop around for insurance. Cancel recurring subscriptions. Question everything. Do anything you can to lower your expenses so you can begin to put that saved money towards your debt.

2. You have no additional income

If you only have one source of income, odds are that you base all of your expenses on that.

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The secret to being able to save money and pay down debt is doing things on the side that you enjoy that will also make you extra money. Pick up freelance work that can make you an extra few hundred a month.

You can then leverage this money to build a side business, which can turn into an enjoyable way to get extra cash flow to begin paying down your debt.

3. You have no picture of your money

Do you know where your money goes each month? If you look at your bank account and just sit there wondering, “What did I spend all of that on?” then you have an issue.

Sign up for an automated financial tracking site, like Mint.com, to get a better idea of what you’re spending where without having to do all of the manual work of balancing your income and expenses. This can help you perform a detailed analysis of where your money goes, and make changes based on the results.

4. You don’t take advantage of technology

The technology that exists today is incredible. You can literally pay your debt on autopilot. All it takes is a few minutes to set up an automated transaction to your creditors each month. You’ll find ways to adjust.

Couple that with a little bit of extra money on the side towards your debt, and you’ll have it paid off in no time.

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5. You use your time poorly

How many hours a week do you work? 40? Do you do anything after work to make extra money? Are you furthering your education to increase your worth? Are you networking to increase your level of influence?

Expenses, if left alone, will almost always increase over time. If you’re not using your time wisely, you’ll never increase your ability to earn more to keep up with those expenses, keeping you at the same level of income and plunging you further into debt as your expenses increase over time.

Always be improving your ability to earn more.

6. You run a balance on your credit cards

Credit card debt is the absolute worst type of debt you can have, because the interest rates are so high. You can literally rack up tens of thousands of dollars in interest alone in just a few years. Yet so many people just view them as a way to pay for things without actually having to pay for them.

But the fact is, that minimum payment is going to grow and grow over time as you spend more, and you eventually won’t be able to get any more credit. At that point, you’re going to have to pay before you can buy anything else. That’s no way to live.

Use credit cards wisely. Only put items on them that you can pay off each month. The day you start to run a balance on your credit card is the day you start racking up hundreds of dollars in interest, and it’s hard to escape from the high rates of credit cards.

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7. You worry about everyone else

The quickest way to get into debt and stay there is to start worrying about what everyone else thinks of you. The fact is, not everyone makes the same amount of money, but everyone likes to try to act like they do.

Stop worrying about what the image your car, house, clothes, and whatever else says about you and just live the life you are able to without going into debt. At the end of the day, those things are just liabilities on your balance sheet, nothing more.

8. You don’t have a spending plan

Money is made to be spent, but if you do not have a plan for what you are allowed to spend it on, then you’re going to be throwing it around everywhere.

Sit down and think about what brings you the most joy to spend your money on, and allow yourself a guilt-free spending fund each month. Spend it on one or two things that bring you joy and cut it off there.

9. You afford things

“Affording” things is a very quick way to get into debt. Because when you afford things, you are only thinking about how you can leverage all you own to buy them. Unless it’s your house, only buy things you can pay off completely in less than two years.

Otherwise you’ll spend your whole life with monthly payments towards things that are probably worth less than you owe on them.

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10. You buy too many little things

10 bucks here, 20 bucks there, $8.50 there—it all adds up. It’s very easy to tell yourself that “It’s only $10. Go ahead and spend it.” But the problem with that is when you keep saying that day after day, eventually you’ve spent $300 on nothing but a bunch of little trinkets, snacks, and things you ultimately don’t need that will just end up in a yard sale.

Resist the urge to spend money on little things. You’ll be a lot happier with one high-quality, large purchase.

11. Your money is not working for you

With a boatload of debt, you’ll never be able to invest in anything.

At some point in your life, your money must make money for you, not the other way around. Instead of spending all of your money, save some of it to invest in assets that will make you money over time.

Learn about high yield savings accounts, stocks, real estate (that you quickly profit from), building businesses, and other forms of wealth creation. Eventually you’ll get to the point where all you have to do to collect money is sit back and watch the birds.

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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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