Advertising
Advertising

5 Steps that Will Help You Cope with Your Debt

5 Steps that Will Help You Cope with Your Debt

There is an old saying that goes something like this “He who goes borrowing, goes sorrowing”, and I couldn’t agree more. In the good old days, borrowing was considered the last resort for a person in need, but nowadays it seems that everybody has some sort of debt, no matter how small. Our society is built upon the idea of credits and loans and the more you take, the more you need. The more you have, the more you want. And no matter what we do, we end up paying the price, sometimes for years. Chances are that at some point, some fancy guy in a suit will knock on your door and take everything you have. Luckily, all problems have solutions. So in order to get out of debt, or at least limit your debt, there are 5 steps that must be taken.

Step #1: Make Your Problems Your Priorities

It doesn’t matter if you work for a minimum wage or earn a decent living. With all these temptations, it is hard to stop getting loans and credits. The truth is that debts have become a normal part of our lives according to recent studies, and we are more often than not tempted to take on more than we can handle.

And although there is nothing more rewarding than standing on your own two feet, it is hard to do it with no debt whatsoever. College life is expensive, so you choose a student loan. Then, you want your own apartment or house, you get married, you have kids, you need cars and a change into the household appliances every now and then. And many people don’t get rich overnight, nor do they win the lottery or land on a gold mine. So credits and loans are the only solution to lead a normal life, like everyone else. But unless you want to spend the rest of your life paying interest, and worrying about your overdo payment, you have to take steps to dissolving your debt. Make the clearing of all your unresolved financial issues a top priority, and no matter what interference might occur, stick to your plan.

Advertising

Step #2: Stop Spending Your Money on Useless Stuff

It isn’t easy to embrace the frugal lifestyle, but nowadays there are so many resources and living examples of people who did it and who are living a care-free life, that you can’t be scared of trying it yourself. You know the saying “less is more”, so try applying it in your own life. Do you really need to buy all the junk you find in stores? I know you love chocolate, and you’re craving for a dinner out in the town, but you should focus on things that actually matter if you ever want to start moving forward. And it’s not a matter of giving up, it is a matter of simply clearing that cloudy sky and making a difference in your lifestyle, by creating balance. Balance leads to well-being.

Plus, you’d be amazed at how much money you can save if you put a little effort into it. Here is an idea to experiment: every time you go into the supermarket, try to think if you really need a certain item, and if you don’t, put the amount of money you would have spent on it somewhere else. Check that little deposit in a few weeks. And smile.

Step #3: Dealing with the Reality of Debt

If you accepted the fact that you have a debt problem and that you have to stop spending money on things that lack importance, the next step is to actually deal with the reality of debt. This means understanding the fact that although the bank may be offering you loans and credits for personal needs or for business needs, it certainly does not hold back from taking it all away when payments are not made in time. You go from wanting it all to losing even the little you had.

Advertising

There are many online resources and finance blogs that can advise you how exactly to deal with your debt in your country and which debt tools to make use of. In Australia, for example, debtconsolidation.com.au shows us that consolidation tools such are repayment are the most preferred ones. A repayment plan of your home loan would look like this:

    In other countries, people prefer to make one big loan, so they can cover all the other small ones.The most important focus of this strategy is that you will no longer risk missing payments and getting into more problems, because there is only one big problem that you have to worry about. It might sound a bit harsh, but having just one problem to deal with can be a life saver.

    Advertising

    Step #4: Write Everything Down, Keep a Check List and Open a Savings Account

    It may not sound like the best advice, but writing down all your costs and profits will significantly help you manage your money. How exactly, you might wonder? It is simple: if you are diligent, and never forget to write everything in a notebook, you will be able to make a grand total at the end of the month/week, and see exactly what it is that is burning a hole through your pockets. To add more, try keeping things organized in a check list, so that you know what is a must and what can be saved for later. Organizing your spending budget is a key part in preventing new unwanted debts.

    Remember, we want to deal with each problem at a time, so preventing unwanted problems is also a smart way of living. Each time you managed to do something, even if it is just a simple action as to giving back some borrowed money, check list it. But what about holidays and expenses? Well, open up a savings account. Be it for Easter, Christmas, or other holidays and birthdays. It’s better to plan ahead. So if you want to spend some money, but not over do it, then this is the answer. Wondering what to do and where to “cut” from, so you can save money? Scroll up to Step 1 and read the experiment suggestion again and then come back to Step 5. Now you know where to start.

    Additional Pieces of Advice

    1. Never Give Up

    It takes a few weeks to get into serious debts, but you might be paying for this mistake your entire life. Nevertheless, if you have found yourself in a truly dire situation, where everything looks as though it could come crashing down in the blink of an eye, try to remain calm. Put your patience hat on, stay strong, and try to make the best out of what you have.

    Advertising

    2. Stay Positive

    Optimism is the key to give peace to our minds. Nothing good will come out of stressing yourself. Remember that important lesson in math class: every problem has a solution. Stay focused and find it through creative realistic ways. But before that, keep your mind sane, so that it functions to its full potential.

    3. Carefully Choose Your Words and Your Actions

    Think, before talking and acting. Your actions can have side effects on your happiness and on the happiness of your dear ones. There are so many people who are consumed by their financial issues and still fail to understand that money does not bring happiness and luckily, there still are plenty of things money can’t buy.

    Word of advice: never joke around or say “I am forever in your debt” to a bank representative. He might take your word on that one.

    More by this author

    Roxana Nasoi

    Jedi of all kinds

    Freelancing Success 35 Tools and Resources to Absolutely Hack Your Freelancing Success valentine's destinations digital nomads The Top Five Valentine’s Day Destinations for Digital Nomads Ways to generate and preserve startup revenue streams Entrepreneur Corner: 5 Ways to Generate and Preserve Revenue Streams in Your Startup Entrepreneurial Stress: 10 Scenarios and Their Solutions startup launch Startup Launch: 3 Ways to Get Your Business Ready for Takeoff [Infographic]

    Trending in Money

    1 How to Invest for Retirement (The Smart and Stress-Free Way) 2 How to Nix Your Credit Card Debt in Less Than 3 Years 3 Top 5 Spending Tracker Apps to Manage Your Budget Smart in 2019 4 How to Use Credit Cards While Staying Out of Debt 5 How to Use Debt Snowball to Get out from a Financial Avalanche

    Read Next

    Advertising
    Advertising
    Advertising

    Published on May 7, 2019

    How to Invest for Retirement (The Smart and Stress-Free Way)

    How to Invest for Retirement (The Smart and Stress-Free Way)

    When it comes to stocks, I bet you feel like you have no idea what you’re doing.

    Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

    Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

    You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

    Here’s how to invest for retirement the smart and stress-free way:

    1. Know Clearly Why You Invest

    Odds are you already know why should invest for retirement.

    But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

    • Will you spend more time with your family?
    • What does retirement mean to you?
    • Are you looking to launch that business you’ve been holding off for years?

    Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

    Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

    2. Figure out When to Invest

    “The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

    It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

    The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

    Advertising

    A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

    Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

    3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

    Investing your money well depends on your emotions.

    Why?

    Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

    Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

    Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

    Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

    4. Open a Reliable Retirement Account

    Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

    If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

    You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

    1. Vanguard
    2. TD Ameritrade
    3. Charles Schwab

    5. Challenge Yourself to Invest Consistently

    Committing to invest for retirement is hard, but continuing to do so is harder.

    Advertising

    Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

    That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

    Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

    A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

    6. Consider Where to Invest Your Money

    The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

    Robo Advisors

    Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

    Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

    Bonds

    Think of bonds as “IOUs” to whomever you buy them from.

    Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

    Here are the different types of bond categories:[5]

    1. Treasury bonds
    2. Government bonds
    3. Corporate bonds
    4. Foreign bonds
    5. Mortgage-backed bonds
    6. Municipal bonds

    Mutual Funds

    Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

    One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

    Advertising

    Real Estate

    Yes, buying a home is an investment when done correctly.

    Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

    This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

    But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

    Savings Accounts

    Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

    7. Master Disincline to Dodge Short Success

    Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

    So how can you master delayed gratification?

    By building your discipline.

    Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

    Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

    8. Aggressively Invest on This One Investment

    I’ve mentioned several types of investments but haven’t covered the most important one.

    It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

    Advertising

    More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

    But, how can you invest yourself?

    Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

    Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

    But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

    Retire Happy with Excess Money

    The key to a secure financial future doesn’t only belong to financial experts.

    It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

    I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

    Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

    One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

    More Articles About Making Wise Investment

    Featured photo credit: Matthew Bennett via unsplash.com

    Reference

    Read Next