The main causes of debt are:
Spending more than you earn
This is simple to understand but hard to fix. Lets say you earn $1300 a month and your rent is $500 a month, bills are $300 a month and food is $200 a month. Alright, that leaves you with $300 a month, not good! Car repairs, gasoline, tax - bam there goes another $400! Now you're losing $100 each month.
Recless spending
Same scenerio as above, but lets say you earn a little more like $1500 a month and consistent outgoings are $1200 a month, leaving you $300 a month for fun. Wanna go out at the weekends - $100 gone. New lawn mower - $150 gone. New Car... $250 a month for 4 years! Can you really afford all this stuff?
Loss of job
This is a horrible situation to be in. You have costs of $1000 each month but you used to have $1500 income each month. The income is gone but the costs haven't. If I were in this situation I would cancel all TV, Internet, subscriptions etc and start looking for a job anywhere doing anything! Time is against you here.
Unavoidable costs
Lets say you or someone in your family needs an emergency operation. They HAVE to have it and you need to pay for it. The bill is $3000 and you don't have it. The bank does. Loan company's do. Welcome to debt land, population - you... and about 100 million others
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Saturday, 11 July 2009
How to Get Out of Debt
Everbody has a reason they are in debt, and it is usually down to their finances being all over the place.
Here are 8 simple steps for getting out of debt:
1. Work out your debt
Who do you owe and how much do you owe them?
2. Budget your money
Draw up an excel spreadsheet to show your income, and what you will be spending it on. Make sure you include monthly debt payments.
3. Discipline yourself
Don't get into further debt with recless purchases or taking any more loans.
4. Cut your daily spending
Give yourself a weekly budget and withdraw that much from the bank. Leave your cards at home and spend only the money you have withdrawn. If you have some left at the end of the week, put it in a jar on the side and repeat. In a few months, check the jar and see how much you have saved.
5. Organise your bills
Account for all utilities bill, making sure they are ALL in your spreadsheet with the actual figure.
6. Change your utility suppliers
Get the best possible deal. Many people use the same utility supplier from the moment they move into a property. Always shop around.
7. Change to a cheaper credit card/loan
Many loans and credit cards will offer better rates then the one you are using right now, and when you switch you will usually be given a 6 month interest free period.
8. Discard store cards
Store cards are a great way for a store to make money... from you. You pay for the product and then some! They have higher rates then any credit card and should be cut up and thrown away.
9. Organise your bank account
Make sure you are getting the best deal you can on you bank account such as low interest on overdrafts, and high interest on savings accounts. Increase your overdraft limit if you often go into it.
10. Change your mortgage
Shop around and find the best deal on your mortgage. Remember that you want to pay as little as possible each month until your debts have cleared. If you have been paying off your mortage for 10 out of 25 years thats 15 years left at the same rate as day one, like £500 a month. You can switch to another mortgage for another 25 years on as low as £300 a month.
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Here are 8 simple steps for getting out of debt:
1. Work out your debt
Who do you owe and how much do you owe them?
2. Budget your money
Draw up an excel spreadsheet to show your income, and what you will be spending it on. Make sure you include monthly debt payments.
3. Discipline yourself
Don't get into further debt with recless purchases or taking any more loans.
4. Cut your daily spending
Give yourself a weekly budget and withdraw that much from the bank. Leave your cards at home and spend only the money you have withdrawn. If you have some left at the end of the week, put it in a jar on the side and repeat. In a few months, check the jar and see how much you have saved.
5. Organise your bills
Account for all utilities bill, making sure they are ALL in your spreadsheet with the actual figure.
6. Change your utility suppliers
Get the best possible deal. Many people use the same utility supplier from the moment they move into a property. Always shop around.
7. Change to a cheaper credit card/loan
Many loans and credit cards will offer better rates then the one you are using right now, and when you switch you will usually be given a 6 month interest free period.
8. Discard store cards
Store cards are a great way for a store to make money... from you. You pay for the product and then some! They have higher rates then any credit card and should be cut up and thrown away.
9. Organise your bank account
Make sure you are getting the best deal you can on you bank account such as low interest on overdrafts, and high interest on savings accounts. Increase your overdraft limit if you often go into it.
10. Change your mortgage
Shop around and find the best deal on your mortgage. Remember that you want to pay as little as possible each month until your debts have cleared. If you have been paying off your mortage for 10 out of 25 years thats 15 years left at the same rate as day one, like £500 a month. You can switch to another mortgage for another 25 years on as low as £300 a month.
Read More
Reclaim Bank Charges
Greedy banks are taking money from millions of their customers world wide, you are not obligated to pay. If if have a direct debit bounce back for insificient funds, then the bank will charge you for this, which they are not untitled to.
You can reclaim the last six years worth of bank charges. The reason you can claim is because bank charges are unlawful. Banks should only impose charges which are in proportion to their costs. Under the Unfair Terms in Consumer Contract Regulations the charge should not exceed the cost to the bank.
If you go beyond your overdraft limit or have a cheque or direct debit payment bounce, the banks charge up to £39 even if you’re only £1 over the limit. All the bank does is sent an autmated letter which costs only between £1 and £3.
That is the argument and it will stand ina court of law. If you request the money back from the banks, they will give it back, as they know if you take them to court they will lose and will incur court charges but anything else you want to throw into the case. Maybe you suffered alot of stress for the money they took from you? That should be worth a few thousand pounds.
Read More
You can reclaim the last six years worth of bank charges. The reason you can claim is because bank charges are unlawful. Banks should only impose charges which are in proportion to their costs. Under the Unfair Terms in Consumer Contract Regulations the charge should not exceed the cost to the bank.
If you go beyond your overdraft limit or have a cheque or direct debit payment bounce, the banks charge up to £39 even if you’re only £1 over the limit. All the bank does is sent an autmated letter which costs only between £1 and £3.
That is the argument and it will stand ina court of law. If you request the money back from the banks, they will give it back, as they know if you take them to court they will lose and will incur court charges but anything else you want to throw into the case. Maybe you suffered alot of stress for the money they took from you? That should be worth a few thousand pounds.
Read More
Reduce Monthly Expenses
With the global resession kicking in, individuals and families across the world are suffering more than businesses. We all need to tighten our belts and try to spread what little money we have each month finely over the essentials.
So what do we need to pay for and what luxuries are just.. luxuries?
First things to do is reduce direct debits!
Do you need satelite tv with all the channels? Probably not. Either get rid of it altogether or drop down to a smaller and cheaper package. Drop this from $80 to $30 now!
Cell phone deals should only cover what you use. Do you really use 1000 minutes and 1000 texts a month? You can easily drop this from $40 to $10 a month.
Don't make expensive Long distance phone calls which can cost up to $1 a minute (it adds up!). Use Skype for free! Convince your family and friends to install Skype on their PC and get a webcam and mic. Congradulations, you saved yourself and your friends and family, $50 a month.
Save electricity by turning your thermostat down (17c is warm enough in winter) and if you get cold put on a jumper! Turn lights off when you leave the room and only use lights if its dark. Turn the applicances and other electrical devices off at the wall. This includes the TV and PC. You could save yourself $100 a month this way. I do this and my electricity bill was $10 a month for the last 3 months of winter.
Cancel nonessential spending such as gym memberships, subscriptions and services.
Read More
So what do we need to pay for and what luxuries are just.. luxuries?
First things to do is reduce direct debits!
Do you need satelite tv with all the channels? Probably not. Either get rid of it altogether or drop down to a smaller and cheaper package. Drop this from $80 to $30 now!
Cell phone deals should only cover what you use. Do you really use 1000 minutes and 1000 texts a month? You can easily drop this from $40 to $10 a month.
Don't make expensive Long distance phone calls which can cost up to $1 a minute (it adds up!). Use Skype for free! Convince your family and friends to install Skype on their PC and get a webcam and mic. Congradulations, you saved yourself and your friends and family, $50 a month.
Save electricity by turning your thermostat down (17c is warm enough in winter) and if you get cold put on a jumper! Turn lights off when you leave the room and only use lights if its dark. Turn the applicances and other electrical devices off at the wall. This includes the TV and PC. You could save yourself $100 a month this way. I do this and my electricity bill was $10 a month for the last 3 months of winter.
Cancel nonessential spending such as gym memberships, subscriptions and services.
Read More
Eliminate Credit Card Debt
The average credit card holder now has an outstanding balance of almost $2,000, a study by a money saving company has revealed. And with one in 10 cardholders only paying off the minimum amount each month, an estimated 200 million people will take almost 30 years to pay off their credit card debt.
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With mortgage costs rising and inflation now rising faster than take-home pay, many cardholders could be forgiven for feeling that they will never be able to clear their balances.
However, with a bit of budgeting, a fair amount of restraint and by carefully reorganising of your finances, clearing your credit card debt could be easier than you think.
Here are seven most do methods for clearing debts:
Step one: switching to a better card
If you shop around, you'll probably be able to find a credit card with a better rate than you're paying now. Most credit card companies will offer interest free 6 months, which will allow you to catch up on your debt.
Step two: stop spending on the card
It might sound obvious but stop using the card for purchases. The more you spend on credit, the more interest will be added.
Step three: use your savings to pay off your credit card
A common mistake for well-meaning but misguided savers is to carry debt on the credit card while stashing money away in a savings account.
Step four: pay more than the minimum each month
If you ever hope to pay off your credit card debt, you'll need to pay more than the minimum required each month. Even small, seemingly harmless debts can grow out of control.
Step five: draw up a budget and stick to it
Once you know how much you owe, draw up a budget and include a schedule for repaying your debts
Step six: consider switching current accounts
Most new current accounts come with interest free periods and give you more interest on your money.
Step seven: switch mortgage companies and utility suppliers
Your mortgage payment is probably your biggest expense each month, so it's important to ensure you have the best possible deal.
Here are seven most do methods for clearing debts:
Step one: switching to a better card
If you shop around, you'll probably be able to find a credit card with a better rate than you're paying now. Most credit card companies will offer interest free 6 months, which will allow you to catch up on your debt.
Step two: stop spending on the card
It might sound obvious but stop using the card for purchases. The more you spend on credit, the more interest will be added.
Step three: use your savings to pay off your credit card
A common mistake for well-meaning but misguided savers is to carry debt on the credit card while stashing money away in a savings account.
Step four: pay more than the minimum each month
If you ever hope to pay off your credit card debt, you'll need to pay more than the minimum required each month. Even small, seemingly harmless debts can grow out of control.
Step five: draw up a budget and stick to it
Once you know how much you owe, draw up a budget and include a schedule for repaying your debts
Step six: consider switching current accounts
Most new current accounts come with interest free periods and give you more interest on your money.
Step seven: switch mortgage companies and utility suppliers
Your mortgage payment is probably your biggest expense each month, so it's important to ensure you have the best possible deal.
Read More
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