If you are struggling with debt problems, you are not alone. More and more people are getting into debt every month by spending more than they are earning. It is a simple fact, but one that has caught out many thousands. The solution should be an easy one: Stop spending! The fact is, though, that it isnt as easy as it sounds. Many people just arent aware of the seriousness of their debt problems. Many couldnt even tell you what their credit card balance is they never even open their statements. Does this sound like you?
If so, you are following a path that has been carved out by many others before you. This route only leads to one destination serious debt problems! Learn from their mistakes before it is too late. The chances are you can still turn your situation around by taking control and making a budget.
Start by opening those credit card statements. Prepare yourself for a shock, it is likely to be a lot more than you expected. Dont let this dishearten you though, write all your debts down and give yourself a clear picture of your financial situation. This is the first step to gaining control.
Now you need to work out what you have coming in. This can be your salary, any overtime, benefits and any other regular form of income. Write it all down.
The next step is to make a list of all necessary expenditures. Things you NEED, not want. Things you need are a roof over your head, so your mortgage or rent payments should be included. You also need power, heat and running water so include your utility bills. Dont forget to eat; work out your monthly food expenses. Other necessary expenditures could be nursery fees, transportation costs, insurance policies and council tax payments. Things you dont need are a new pair of designer shoes, a meal out at a swanky restaurant & tickets to see your favourite band. You do need clothing but be sensible.
Whatever you have left over, use to pay off your debts. It is usually recommended to leave 5% for emergencies. These can arise at any time and having a fund for such things can relieve a lot of pressure.
If possible, leave some to save too. This can be rewarding when you eventually save up for something you want and buy it with money you have, not on your credit card! By knowing exactly what your financial situation is, you can take control and plan, instead of making impulsive purchases.
If you are already too far down that road, you neednt worry either. The fact that many people have already gone down this road and come out the other end should fill you with confidence. There are solutions available to most debt problems.
September 7th, 2007
It is probably not a news alert to you that you need to keep your credit as clean as possible, since a good credit report is widely used these days. A good credit score can help you to get the most favorable loan programs and interest rates on anything from department store credit cards to new car loans and mortgages. When you are applying for a new job somewhere, a good credit score can be the deciding factor as to whether or not they offer you the job. And recently, your credit score is being used by car insurance companies to determine your car insurance premiums, with the thought being that someone with good credit is more fiscally responsible and therefore less likely to be filing claims.
A good credit report and good credit history takes work to create and maintain, but not so much work as to become a burden to you if you can develop and maintain good credit usage habits.
The most obvious credit tip is to pay your balance in full every month. Even with a very good interest rate, there is no sense in paying interest on something if you can afford to pay it off and keep that interest money in your pocket. Some people think that it’s only like $5 for my balance. But do the math that $5 times 10 credit cards, times 12 months is $600 over the course of a year!
Do not be dazzled by the incredible rate that a new credit card is offering, because chances are that the very low interest rate is only a teaser rate that will expire in a few months. If you can make use of the card and the low interest rate for a temporary period of time, then you can save money there, but be aware of when that teaser interest rate expires and the real astronomical interest rate kicks in, at which point it is time to make sure that account has a zero balance or to close the account.
Did you know that credit cards actually have two separate interest rates? They have one that is assessed on your outstanding balance, and they have another one that is applied if you use the credit card for a cash advance. Never use your credit card for a cash advance, because those interest rates are typically truly obscene, usually being 25% or even more. And when you make payments on your credit card, those payments go against the balance first before they start paying back the cash advance, so the cash advance is the last thing paid off, allowing the credit card company to make the most amount of interest from you.
If you carry a balance forward from month to month instead of paying off your card in full every month, try to keep your outstanding balance below 30% of your credit limit. Doing so in conjunction with timely payments will result in a good credit report on that card, but if your outstanding balance is more than 30% of your credit limit, then you start getting credit score deductions.
Never pay just the minimum payment. Pay more than the minimum, because if you pay only the minimum payment due, this will maximize the amount of interest that the credit card company will collect from you.
The best thing, above all, that you can do is to make sure that you make all your payments on time. If you mail them in, allow time for the mail to arrive and for your payment to be posted to your account. If for example your payment is due on the 10th, having your payment arrive on the 10th may not help you since it needs to be processed and it may take a day or two for the payment to get posted to your account. This also allows the credit card company to charge you a late fee.
Responsible use of credit will reward you with a good credit score, which will be very useful when you get the best rates possible on your next big ticket purchase like a new car or a mortgage. It is much easier to get in the habit of using credit wisely before you get yourself in a situation that could have been avoided and will haunt you for years.
September 7th, 2007
