Archive for Personal Finance

Are Loans a Good Idea to Pay Off Credit Card Debt?

Credit CardsThe following article is brought to you by Travis Holmes.

Credit cards are open lines of revolving credit, often charging high interest rates and tempting the consumer to run up a high amount of debt without really thinking about it. By the credit card companies own admission, this form of credit is not meant to be used often or extensively, and no one should carry a debt.

When facing a situation where you are carrying credit card debt, it is vital to find ways to pay as little interest as possible, without doing anything to damage your credit score. One of the better ways of handling this is to transition the debt to a personal loan, and close all but the oldest credit card account you have. Here are a few reasons why you should do this.

Lower Interest Rate
Credit card companies can often charge over twenty percent in interest. This can result in the average consumer spending a great deal of money in maintaining a debt, rather than paying it off. Over the long haul, having to spend money on interest decreases the fiscal strength of the borrower and actually increase the amount of debt carried.

A personal loan has a fixed interest rate, and since it is not a revolving line of credit it is impossible to add new principal to it. In short, it is a one-shot deal, with limited interest and a payment plan that is predictable.

Take note not all loans will have a lower interest rate. Some quick loans might be good for your situation but may carry a higher rate. It’s best to verify the rate and do the math yourself.

One Line of Revolving Credit
By closing out all but the oldest credit card account, the consumer is doing two things. The first is limiting the potential for future debt, by decreasing the amount of available credit at any given time. Since you will have less free credit to utilize, it would be harder to make impulse purchases that land people in debt to begin with. This article helps you weigh the pros and cons of both.

The second reason for keeping the oldest account open is to take advantage of long term credit on the consumer’s credit report. A credit report is only as strong as the oldest item on it, so it makes more sense to keep a credit card in play if the consumer has had that account for several years. Doing so can reduce the amount of interest paid on other forms of credit, including the personal loan.

Additionally, having an open line of credit is a good thing in an emergency. It can provide an emergency cushion if you encounter an expense that you cannot fit in your monthly budget, but can pay over the course of two or three months. This becomes less needed as the consumer starts saving money, but starting out this flexibility is crucial.

Transitioning debt from a higher interest rate, revolving account to a lower interest rate, closed account, can serve as a way of lowering the amount of hard earned money wasted on interest.

Doing so can set the stage for a better, more stable financial future as long as certain steps are taken at the same time. Eliminate most of your open credit, in order to limit potential exposure to negative forms of debt. Start putting back the extra cash each month, to provide a means of paying for emergency expenses without having to turn to credit.

A personal loan can be invaluable when trying to improve one’s fiscal health. By taking the time to formulate a plan, it is possible to create a system that will lead the consumer to a better and more stable financial future. All it takes is the ability to take advantage of the lower interest rates.

How To Curb Your Impulse Spending

Piggy Bank SavingsImpulse spending can cause havoc to any well-developed budget. No matter how carefully you plan your budget, if you impulsively diverge from your spending plan, your budget will be worthless. Controlling impulse spending is imperative if you are going to live frugally.

Getting away from the impulses that urge you to make unplanned purchases is often an exercise in trial and error. The system that works for one person may not work for another. Fortunately, there are several different methods of curbing these impulses. Try one of these to see if they help you. (I didn’t mention freezing your money but hey if it works give it a shot!)

Avoid temptation.
Stay away from your weak points that tempt you to make impulse purchases. If you are compelled by the attractive window displays at your local mall to buy the featured items, you can choose not to go into the mall. Likewise, if discount stores like Wal-mart and Target are your weakness, make a shopping list and send your spouse to the store.

Leave credit cards at home.
Credit cards make it easy to make purchases without worrying about the financial consequences of your purchase. You won’t feel the pinch of credit card purchases until the monthly statement arrives at your house. If credit cards are your Achilles’ heel when it comes to spending, leave them at home. When you plan to use your card, you can remove it from its hiding spot and return it after the purchase is complete.

Make it hard to make purchases.
Carrying only the money that you need each day will make it very difficult to make unplanned purchases. If you don’t have the means to buy anything, you simply can’t do it.

Get off the mailing lists.
Catalogs often inundate people with temptation to buy something. Maybe the catalog featuring clothes for next seasons is simply too good to pass up. Maybe the clearance items compel you to make a bargain purchase. As these catalogs appear in your mailbox, call the customer service number on the back and ask to be removed from the mailing list. Then, throw the catalog away before it can tempt you.

Get inspired.
Dieters use motivational pictures all the time to help them work towards their goal. If cutting impulse spending out of your life is your goal, find something that inspires you and keep it in your wallet. Maybe your family is saving for a vacation to Disney World. If that’s the case, keep a picture of a Disney character with you. Then, every time you open your purse to buy something you’ll be reminded of your goal.

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5 Tips For Starting To Save Money Right Now

Save MoneyFor lots of people saving money may appear to be a hopeless task. They try and try to save money but struggle to consistently put money into their bank account. Failing to save money can often occur because you have so many other things to do on a daily basis. The key to saving money is to make it as easy as possible to do. Here are a few tips that will help you start saving some cash right now.

Save a little at a time
You don’t have to start with some grandiose savings goals in order to save money. Saving small amounts of money is actually a whole lot easier than saving a lot of money at one time. You can schedule small amounts like $20 to $30 a week to start building up your savings account. You won’t miss the money and these tiny deposits can add up over time.

Make saving money easier
You always want to make saving money as easy as possible for yourself. Take the burden of having to remember when and how much to save by doing it automatically. Schedule automatic transfers from your checking account and automatic deductions from your paycheck right into your savings account. After a month or two, you will get used to this amount of money being deducted from your account every month.

Make withdrawing money difficult
While you want to make saving money easy, you want to make withdrawing money a real pain. Resist the urge to withdraw by not getting an ATM card for your account. This will force you to go into the bank during banking hours whenever you need to take out some money. Also, place your savings at a bank that is inconvenient to get to. This will keep you from making frequent trips to your banks to withdraw your money.

Get a side job
If your reason for not saving money is that you simply do not have enough cash, you should get a side job. Side jobs are great at providing a side income. Find something that you are passionate about and would enjoy doing for money. You can designate this income for the sole purpose of funding your savings account. A few hours a week working on the side can grow into large savings account deposits.

Use your spare change
Sometimes the best solutions to problems are the ones that you learned in your youth. Remember having a piggy bank in your room that you would store all of your spare change in. You would fill the piggy bank up with coins until it couldn’t hold anymore. You can do the same thing as an adult. Store all of your spare change in a piggy bank and take it to the bank when it gets full. Deposit all of your change into your savings account and repeat this on a monthly basis.

Saving money does not have to be as hard as you thought. Apply these simple tips and you will be on your way to building up a savings account.