By Bernard Freeman
Part 1 of 2
A Cash-Only Mindset
Incorporating a cash-only mindset into various aspects of your personal economy can limit your reliance on credit cards or high-interest loans.
A cash-only lifestyle means you refuse to buy things that you can’t afford without physically having the funds. By spending conscientiously, you avoid lavish spending on extravagant items that you don’t actually need.
It’s also an excellent mindset to help you become better at saving money, as you must strive to save enough to pay for the asking price. Check out a few small steps to work this habit into your lifestyle and watch your debt shrink.
Wine and Dine
Before hitting the town for a fancy dinner, stop at the ATM to withdraw the amount of money you can comfortably pay. This will help you and guests be more mindful of what is ordered and spend accordingly. Make sure to leave your credit and debit cards at home to resist the urge to impulse buy.
The same tactic should be instilled during grocery shopping trips. Each week, make a list, calculate the estimated cost, and avoid buying items that aren’t documented. You can find accurate pricing by visiting your local store’s website and looking for deals within their weekly advertisements.
Try to buy the food and drinks that will last you until the next shopping trip. Sometimes, stopping by a convenience store on the way to work to grab a coffee will lead to other purchases that are more expensive than those at your regular grocery outlet.
If you are planning a weekend getaway to visit a sporting game, concert or another type of event, it’s good practice to develop a spending plan. Try to bring along enough funding so your excitement won’t be hindered but be diligent to avoid buying souvenirs, merchandise or food that’s not in the budget.
Avoid Online Shopping
For many, the conveniences of online shopping are too great to resist. When you can stock up on clothing, gadgets and even food from the comfort of the couch, it can be challenging to limit your purchases. Rather than entering your credit card into numerous online databases, commit to shopping locally and only buying things you can afford.
Paying the Right Debts First
When building your nest egg is challenging due to a lack of extra money after paying monthly expenses, it’s imperative to create a strategy to cut down debts. Unfortunately, it’s not always easy to understand which financial commitments should be eliminated first.
With the right approach, you can cut out high-interest fees, lower your balances and get yourself in better monetary shape with more saving power.
The first step in getting out of debt is making a list of all the debtors you owe. Perform an analysis of your mortgage, car loans and any existing credit cards. In addition to documenting your balances, you must also understand the interest rates on the accounts. Don’t automatically assume that knocking out the highest monthly fee will be the most effective move in your financial plan. The journey to living debt-free can take time.
Find out more about two strategies from InCharge Debt Solutions that are effective for managing debts.
When using this method, people must focus on paying off debts with the highest interest rates first. To be successful with the avalanche process, you should be able to make your payments without disrupting your monthly installments and other outstanding debts. If you’re serious about making the commitment to begin restoring your financial health, you may have to sacrifice a few things from your daily life, including:
- Avoid eating out.
- Skip an out-of-town vacation.
- Put buying a new wardrobe or extravagant items on the back burner.
Preparing a budget and sticking to its guidelines is an excellent strategy to save money and focus on paying down debts.
On the other side of the spectrum, the debt snowball plan means paying off your most expensive obligations regardless of the interest rates. This method effectively eliminates high costs and uses the money you’re saving toward the next highest debt. It can provide instant gratification and a mental boost as you begin checking financial responsibilities off your monthly bills.
Effective Credit-Building Tips
The question of your credit profile will come up in numerous scenarios throughout your lifetime.
When you show a lender that you are responsible for repaying financial commitments, your chances for loan approval and competitive interest rates increase. In some industries, an employer may also look into your credit history to discover your qualifications about managing finances and assets.
If you’re unsure of where you stand, ask for a free copy of your credit report. The Federal Trade Commission enacts the Fair Credit Reporting Act to ensure that nationwide credit reporting companies must provide Americans with a copy once per 12 months. Reach out to outlets like Equifax, Experian and TransUnion for yours.
After analyzing your report, it’s vital to address the discrepancies that you discover. Negative marks, even erroneous ones, can remain on your profile for multiple years, severely inhibiting your score and financial reputation. Once you cleaned up mistakes that accrued along the way, here are some tips to boost your score.
Pay Bills on Time
Making payments on time, every time is crucial to impacting your credit score positively. You should make a budget based on your pay periods and have a plan in place on how to spend the money. Rather than waiting for the due date, try to transfer what you owe a few days before the due date or as soon as you receive your paycheck. Of course, this can be risky as you never know when a financial emergency will occur, so be diligent in building a fund that’s intended to cover unexpected expenses.
Make More Frequent Payments
In addition to paying on time, consider making more frequent payments to pay down debts faster. While hitting the minimum requirements will prevent negative marks on your credit, you can expedite the payoff process by actively cutting down the total owed.
Keep Credit Cards Open
Even when you make timely payments on credit cards, having high outstanding balances can lead lenders to disqualify a loan. Once you pay the card off, keep the account active and use it for small items that you can quickly pay off on the due date. Things like filling up your gas tank or buying a few groceries each month will show healthy credit activity and show that you’re responsible for your finances.