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6 Ways to Stave Off Debt Disasters

6 Ways to Stave Off Debt Disasters

The type of lifestyle in which there is no budget, and there are no limits except when you run out of money originate from poor money habits.  You can bet on the lack of sound money management habits to drive your finances on the upward slope in a short amount of time no matter what your monthly income is.  Whether you’re a salaried employee or just cashed in on a millionaire lotto ticket, spending as much as you earn or living above your means will soon get you in financial troubles.  Many a millionaire goes broke due to lack of foresight and restraint.  Budgeting is not just for people with low to moderate means.  Everyone benefits from budgeting.

Having a budget makes it easier to stave off financial contingencies including credit card debt, high-interest rates, and low savings.  Budgeting is the blueprint for financial success. You can see how your debt decreases and your assets increase with a well-thought-out budget. Take, for instance, your income tax return amount, if you get one.  IRS returns are usually treated as extra cash by those who can’t wait to go out and spend it on high-tech entertainment devices, like television sets and next-generation smartphones.  However, a prudent personal finance manager can put it to work and multiply it over time by opening a mutual funds account, investing in stocks or futures, or paying off credit card balances to avoid paying interest. Credit card debt resolution is part of dynamic budgeting where balances on credit card accounts can flip and become assets.

2. Track Your Spending

The backbone of budgeting relies on tracking all expenditures, the big ones and the small ones. Start getting into good budgeting habits by sticking to your shopping list, putting away as much money for emergency contingencies and investing in your future.  Surprise expenses can derail your finances when you are unprepared.  However, living within your budget and saving at least 20% of your income are habits sure to keep you in check.  “A minimum of three months of living expenses is a rule of thumb for a two-income family and six months for a one-income family,” adds Ashton, “but it is common to see people getting into debt when auto and home repairs are necessary.  Any amount of money saved can ameliorate the consequences of a layoff or any emergency situation before having to resort to credit cards and their ensuing credit card debt resolution process. Most credit card debt resolution tactics begin by keeping your credit to debt ratio at 80 to 20. That means you have paid 80% of your credit card debt and therefore have 80% of credit limit available.

3. Saving And Investing

A well-planned budget includes saving for emergency situations and retirement.  Michael Ashton, financial advisors from  Austin, TX, says, “lack of emergency savings often results in having to take out a second mortgage or a Home Equity Line of Credit which is typically repaid over a ten year period before interests start compounding.” Getting into debt due to lack of planning is avoidable.  A practical credit card debt resolution technique involves consistently making higher than the minimum payment due on credit card debt whether it is a HELOC or an unsecured card.  Believe it o not, the first step to saving is getting out of debt. Credit card debt resolution will free up that money to be saved for an emergency and your retirement fund. No matter how little you can save for both, the sooner you start saving, the better.

Check savings and CD interest rates nationally and internationally. Remember the 80/20 rule.  Divide your 20% into emergency and retirement funds. Invest in mutual funds monthly, call an expert and get started on building wealth.

4. Monitor And Dispute Your Credit Report

By law, the Federal Credit Reporting Agencies are required to provide you with a copy of your credit report, if you request them, once every 12 months.  Your credit report contains detailed information about your life including your address, employment history, lawsuits, arrest records, and bankruptcy and the way you pay your bills. The national credit reporting agencies sell your credit report information to creditors, employers, insurance companies and any other business where you apply for credit, insurance, employment or renting a home. To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

If you have been denied credit you qualify for a free credit report as well.

Credit history affects your financial standing and prosperity. The Federal Trade Commission is the nation’s consumer protection agency. Follow their format and guidelines to make disputes on your credit reports. Disputing errors on your credit reports is easy.

5. Don’t Put Your Bills On Automatic

It may seem like a relief to have your bills on auto pay. However, what if you forget to keep enough money in your checking or you have a contingency situation and need to withdraw funds, or worse come to worse, you get laid off?

Not only will you not be able to make those payments on time and receive a negative report on your credit score, but you may be charged double by your bank and the crediting institution.

If you know that you’re going to be late on a payment, it’s best to ask your creditors for an extension.  They usually consent to extensions if you’ve been paying on time. However, your bank will also charge you overdraft fees. Avoid this quagmire by not putting your monthly bill payments on autopilot.

6. Stop Cycling Your Debt

Many people have debt they cannot get away from because they never get to the bottom of it.  Instead of fixing the problem at the root, they just get another loan to pay off the debt in an endless cycle.  Those who are able to afford monthly payment are still trapped in a never-ending debt cycle. There are legitimate debt consolidation and credit card debt resolution companies to help you get out of the endless payday to payday cycle.

If you have credit card debt or are caught in a debt cycle you cannot get out from, tighten your belt, find the experts that can help you, and be off to a debt-free financial successful new you!

Next article 6 Simple Strategies to Save Money on Groceries
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