Posts Tagged ‘Debt’

Developing your money habit

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October 2nd, 2011

Look how financially secure people behave

The important keys to financial security are good habits. If you want to put yourself in position to weather any financial storm, you need to understand and follow only four good habits:

Stay out of debt.
Work hard, preferably at a job you love.
Save at least 10 cents of every dollar you earn.
Protect yourself against catastrophe with appropriate insurance.

Stay out of debt

Studies show that Americans load themselves down with large debts compounding the difficulties they face in making themselves financially secure. Only those who keep their debts under control stand a chance to make themselves financially secure. Homeownership is a reasonably good store of value in the long-term. There’s nothing wrong with taking on debt to buy a car, either.

Consumer debt

Consumer debts are those that people pile on to buy consumer goods such as televisions, do-it-all telephones, vacations at expensive resorts and the like. Credit card use is usually a bad idea for the individual because it leads to overspending, not to mention high interest charges if you don’t pay your balance off every month. The solution: Use cash when buying anything other than irg-ticket items.

Work hard

Studies show that Americans work harder than most other people in the world, and what they have to show for it is an economy that creates extraordinary wealth year after year, decade after decade. People who want to make themselves financially secure don’t always love their work but they need a paycheck like everyone else. Hard work pays off in many ways. It creates opportunity, for example; in any company, it’s the hard worker who gets the difficult assignment, and it’s the difficult assignment done well that gets the raise or the promotion, or both. Hard work brings you two bonuses: The first is the satisfaction of knowing that you’ve done your best. The second is a small miracle. No matter what your job, if you master it, you can’t help but like it. And if you like your job, you’ll work hard at it.

Save

At least 10 cents of every dollar you earn. The solution to the problem of putting money aside into savings is simple. If you don’t make it a priority to put money aside into your savings every month, you won’t lose your house, to be sure. You’ll just lose the chance to make yourself financially secure, and no matter what your age, study after study shows that you will almost certainly reach that goal if you put aside at least 10 cents of every dollar you make, and preferably 15 cents.

Insurance

Protect yourself against catastrophe with appropriate insurance. No matter how good a driver you are, you can have an accident. No matter how carefully you guard your health, you can get sick. No matter how young you are, you can die. Insurance is the only way to protect yourself and your family against these risks. Find a good insurance agent, figure out what risks you face, and get insurance to cover them.

Tags: Debt, Financial stability, Hard work, Insurance, Savings
Posted in Assurance / Insurance, Business, Finance, Money | No Comments »

America’s Debt Hits The Ceiling. How’s Yours Doing?

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August 4th, 2011

How is your debt on a scale of 1 to 10?

The Bank of Montreal has issued five tips on how individuals can avoid hitting their own personal debt ceilings. Like Washington, many of us live beyond our means, with a quarter of us living paycheck to paycheck – a 10% increase over last year. The average household carries $75,600 in debt and 44 million souls rely on food stamps.

Don’t overspend and curb credit card debt.

These are obviously related. Overspending increases debt. It’s taken Uncle Sam decades of profligate spending to reach this crisis, but the average citizen can get deep into credit card trouble far more quickly.

Credit card limits

Individuals who hit their credit card limits should take it as a sign that their spending is out of control and start cutting back. Or they can raise revenues by getting a raise, finding a better paying job, moonlighting or running a business on the side. Maintaining or increasing spending without boosting your income means trouble. Too often, indebted consumers ask their financial institution to raise the limit on their credit card. The request is often granted because that’s how the banks make their money.

Financial destruction

But even if your card issuer refuses to raise your limit, debtors hellbent on financial destruction may apply for second and third cards, bypassing the safety mechanism of hitting the limit on the first card. Problems snowball if you pay only the suggested monthly minimum payment. The power of compound interest goes into reverse and you get in over your head, drowning quickly if unexpected job loss curtails your ability to meet even the seemingly low monthly minimums.

Mortgage free

Another tip is to become mortgage-free faster. This tip comes after curbing credit card debt, since mortgage interest is much lower than that charged by most credit cards. Credit card debt is considered bad debt because it involves spending on consumption. Mortgage debt is good debt because it helps you build equity while putting a roof over your head, and is tax-deductible.

Monthly payments

If the mortgage is large and monthly payments small, you pay more in interest than the house cost, meaning your effective home price is double or triple the asking price. The best mortgage is no mortgage at all and the way to eliminate one is to have high regular payments that reduce significant amounts of principal from day one. Take advantage of annual prepayment privileges and you’ll be amazed how fast your personal debt ceiling fades into irrelevancy. Once credit card and mortgage debt are eliminated, along with student loans and car loans, focus on becoming the beneficiary of compound interest instead of its victim.

Invest to save

BMO’s fourth tip is invest to save, ideally through tax-free savings accounts.

Plan B

The last tip is to have a Plan B. Unfortunately, too often the B stands for bankruptcy. This is invariably a disaster for consumers and as the world almost discovered the past week, a disaster for everyone if the government of the world’s largest economy goes bankrupt.

Tags: Credit card debt, Debt, Debt ceiling, investing, Mortgages
Posted in Business, Economy, Finance, Money, Personal / Internet | No Comments »

Money Lessons for High-School Graduates

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May 25th, 2011

The sooner you start learning the easier it will be
Here are five things every high-school graduate should try to remember:

Debt is slavery
“The borrower is slave to the lender,” says the Bible. When you have monthly payments to make, your life choices are greatly reduced. You can end up chained to a job you don’t like, unable to take the low-paying, entry-level job in your dream field or pursue further education to gain the qualifications for the career you really want. Constrained after College a study by researchers from Princeton University and the University of California at Berkeley, found that graduates who borrowed heavily to pay for college were less likely to take public-service jobs than those who didn’t borrow.

College debt takes its toll
Going deeply into debt to pay for a prestigious college degree rarely pays off in the long run. Not only does it saddle you with a large, pressing debt that limits your options upon graduation, you’re not likely to be any more successful either. A recent study by economists Stacy Dale and Alan Krueger found that, once you control for aptitude, career earnings don’t vary based on the college attended: if you’re smart enough to get into a brand-name private university, you’ll do just fine going to a state college. What will determine your success will be your aptitude and your work ethic, not the name on your diploma.

Rich friends may be broke
When I was in high school, I hung out with a girl whose parents lived modestly and drove a beat-up station wagon that you could hear coming from a mile away. Our other friend drove a BMW Z3 and made fun of the junky cars we drove. Four years, a real-estate crisis and a few foreclosures later, the Z3′s gone. My friend’s parents who drove the station wagon sidestepped the crisis; they owned their home outright. The dangers of conspicuous consumption are best learned vicariously, and here are a couple of factoids that might get you thinking. According to Thomas J. Stanley, author of “The Millionaire Next Door,” the most popular car among millionaires is the Toyota Camry, and only 7.3% of millionaires own a bottle of wine that cost more than $100.

Materialism is misery
Lives of thrift and conscientiousness lead to less stress, greater enjoyment of the things we do have and a lighter carbon footprint. But most of our societal associations with wealth are deeply connected with materialism: luxury goods, power and status.
“The more materialistic values are at the center of our lives, the more our quality of life is diminished,” says Knox College psychologist Tim Kasser, author of “The High Price of Materialism.”

TV makes you feel poor
One of the fastest ways to make yourself better with money is to smash your television, or watch it less. A 1997 study by researchers Thomas O’Guinn and L.J. Shrum found that people who watch more TV believe that a higher percentage of Americans have tennis courts, luxury cars, maids and swimming pools.

Tags: Debt, High school graduates, Materialism, Money lessons
Posted in Advance Cash Loan, Cash Advance, Economy, Employment, Finance, Loans, Money, Personal / Internet, Scholarship / Education, Student Loans | No Comments »