Getting Aggressive: How to manage and strangle your debt

Saving money hardly is a one dimensional as it sounds.

Sure, you can look at saving money as the simple act of putting aside what is leftover after you pay your bills and thus build a savings account, emergency fund, all the while thinking about retirement and how you’ll spend your golden years (either still working or managing money like a professional).

But saving money goes beyond just simple subtraction of expenses versus income and instead can center on another key contributor to your finances: debt, and more importantly, paying it off completely.

The real disappointing aspect of debt is the perception of it, so before you consider paying it off in full, how do you really see debt as a whole? Most view debt as a necessary evil and something that everyone has.

You could argue, however, that some individuals want nothing to do with debt whatsoever and work diligently and tirelessly to rid themselves of it or not have any at all. They do so not because they’re rich but because they live within their means and don’t overspend or buy impulse items.

Remember, if you use the 24 hour rule, chances are you won’t be spending on what you don’t need. The 24 hour rule says if want something leave it at the store or don’t add it to your cart until you wait 24 hours, and if you still want it after that “impulse” has run its course then so be it, but nine times out of 10, you’ll be glad you didn’t jump in head first but rather dipped your toe in the water first.

Managing debt is not only avoiding it altogether but coming up with a system to pay off what you owe. The same bet is to start small and work your way toward bigger balances, so that you have that feeling and sensation of actually paying off cards and lines of credit, then moving on to the larger ones and so on and so forth.

A good debt to income ratio leads to a better credit score and with a better score you’ll have the inside track on interest rates that can’t be beat, and for example, a 30 year mortgage with a few interest points knocked off because of your lack of debt and better than average or below average credit score gives you a rate that saves you thousands over the course of the loan.

If you don’t believe debt and doing right by it makes a difference, ask someone with a sub 600 credit score or who is spending 60 to 70 percent of their income on credit cards, and you’ll quickly see that debt isn’t an isolated financial responsibility or factor but rather affects your entire outlook as far as saving money goes.

Building Blocks: Don’t have any money saved, why worry?

If you’re like the majority of people, you don’t have very much money in a savings account or an emergency fund, just in case that rainy day becomes a reality.

Nearly half of the population have zero dollars in a savings account, and instead live from paycheck to paycheck with a budget that it obviously broken. That simply means you’re making less than you spend or dead even with those two line items, meaning you aren’t able to save due to your higher end of living or the fact that you don’t recognize that your income isn’t what it needs to be.

But if you don’t have money saved, you shouldn’t worry.

Instead, you start thinking and planning accordingly, and that includes not only reworking your budget but being able to set a goal that is reasonable as far as how much money you want to save in, let’s say, one year.

There’s no reason you can’t have a few thousand dollars put aside in that time period, no matter how ludicrous you think that number or time frame sounds at the moment.

It may sound odd but a lot of individuals have found a means to save money that have little to do with eliminating expenses, although that should be priority number one. You can’t save what you don’t have, so anything that you aren’t using (obviously) or don’t need truthfully, you can eliminate with little or no hesitation.

Things like clothing (excessively buying, that is), cable television, cell phone plans, home security premiums or spa visits are just a few of the things that can be cut from your budget.

But what about doing a few other things that will help you save as well.

You can save money by meal prepping and being smarter with how you spend at the grocery store, thus eliminating the need to eat out at restaurants.

When you put together a budget, make sure you pay yourself at least 3 percent of what you make, at minimum. Also, if you get a raise on a yearly basis or any sort of bonus, make sure you lose it.

And by “lose it,” that simply means that you should forget it even existed and just put it in a savings account right away. Some who aren’t so adept at money managing want to immediately buying something or take a trip because the “earned” that money and want to do something fun with it.

Nothing is fun about having to borrow money or go into debt if your roof springs a leak or your car quits working, so that money is better served in reserve.

A few simple tricks will be the treat you need to save money and do so in a reasonable amount of time as long as planning and patience take hold of your financial decision making.

Life Saver: How to start saving young

Like any child, you probably had and coveted your piggy bank or some sort of ceramic or plastic apparatus (in some animal other than a pig, perhaps) because every time your grandmother gave you a quarter or your dad let you keep the change from a purchase, chance are you couldn’t wait to drop that coin in the slot and watch your modest amount of money grow.

Not sure what happened between being a kid and saving at almost every turn versus being a young adult and not really valuing money all that much at the moment, but the disconnect in the 20 something crowd is rather stunning in relationship to saving money.

For the most part, the average 25 year old isn’t really thinking about saving per say but rather are in a state of financial influx as a result of where they are career wise along with other contributing factors.

The average 20 something year old is most likely fresh out of college and is pursuing their career of choice but may have not found much in the way of a job that pays all that well. Perhaps they’re living at home or have ventured out into a modest apartment, and money really isn’t over abundant but you make enough to pay your expenses and have a little bit leftover as a result.

The most apparent and common reaction to that scenario is to spend the money freely, whether it’s dinner or a night out or some sort of entertainment factor that allows you to spend what money you have remaining and not really give saving a whole lot of thought. If you’re living at home with your parents, and you’re not saving money then you’re missing out on that final opportunity to be gainfully employed and not have to shell out a good portion of your paycheck on rent.

If you have rent as an expense, and have money leftover, you should really consider budgeting properly and putting what little profit you have aside given this might be the leanest you will ever be living expense wise.
The biggest misstep by most young adult are those who have employers who have a retirement plan, yet they scoff at the idea of retiring because the topic seems like it is light years away at 25 or 26 years of age. Don’t make the mistake of giving away free money and instead think about even a modest contribution in the 2 or 3 percent mark, which is only going to grow (even if it’s in small chunks) as you continue to invest and work.

Being young is one thing but don’t follow in the young and dumb blue print that is only going to make your 30s and beyond that much more of a struggle now that you let your 20s fly by with little to show for it financially.

Fund times: How to start an emergency fund

The term “emergency fund” isn’t something that sounds, at first glance, all that appealing.

For starters, the word “emergency” doesn’t really do a whole lot of the average person given that they tend not to want to think about something, an event specifically, that elicits panic that courses through their entire body at a moment’s notice.

“Fund” isn’t too bad since it’s pretty close to the word “fun” but really is mostly centered on money, a topic that few want to think about or discuss at any given moment in time.

But thinking or talking about an “emergency fund” is of the utmost important because without one, you’re never going to feel that sense of ease about money in general or the thought of something happening in life and being totally unprepared to pay for it.

Those who have money set aside live by two very golden financial rules: they have at minimum three months of salary in the bank at all times and make it a point to save about, again at minimum, five percent of their monthly earnings. That money, in turn, is automatically put into a savings account or the said emergency fund.

Paying yourself isn’t uncommon when trying to establish an emergency fund, and that practice is one of two that separates having an emergency fund and not. The Catch 22 in this discussion is that most argue they can’t afford to set aside five or 10 percent of their pay each month because they need that money to pay bills.

And in that breath is when the second point resonates all too loudly: budgeting.

The only way you can save money and in essence build an emergency fund through paying yourself on a monthly basis is through budgeting. You have to take into account the idea that if you’re living paycheck to paycheck or if your expenses match or, worse yet, are more than your income that you need to start cutting or at the very least replacing some of your expenses with lesser alternatives.

Cable bills go away in favor streaming, cell phone plans become talk and pay as you go or you complete go without new clothes every season or a few summer vacations just to prove a point that saving trumps all. And as much as those cuts will sting, they’ll be a staunch reminder of just how important saving money is, not to mention that emergency fund taking on a whole new meaning when you actually have one to speak of now.

Hard Target: Why are you making easily avoidable money mistakes?

No one ever argued that saving money was easy. Most of us just make it much harder than it needs to be.

Why is saving money so difficult?

Let’s start first by figuring out the easy part. Money mistakes that are easily avoidable center on not following a spending plan, something you’ve carefully crafted to take into consideration your income and expense and understanding that living below your means in paramount.

If you stick to that simple formula, chances are you won’t have much in the way of money problems. Furthermore, that same formula is going to do something that most of us can’t do well: save money and have an emergency fund.

The Catch 22 of the emergency fund links with running up high balances on credit cards. Something major happens, and you use the credit card or borrow money because you don’t have any saved. The reason you don’t have any saved is because you either don’t have a plan or you have one and don’t follow it.

Saving and managing money is difficult because we make it that way, mostly due to a need to satiate our wants and forget about our needs as being part of that aforementioned plan.

Those “wants,” things we convince ourselves we need and then spend money we don’t have on them translates into elements of money mismanagement that is highly avoidable.

First and foremost, you are taking those wants and turning them into credit card debt, running up balances on high interest cards and thus never truly getting out of debt. The more alarming fact beyond the average of $20,000 owed per household of unsecured (credit card) debt is that most of it can’t be related back to a specific, tangible item but rather things like taking a vacation or worse yet paying bills with credit cards or using an advance to put a down payment on a car.

Money also becomes difficult when you don’t understand the value of what you buy, and when you should spend wisely, underspend and, at times, spend a little more based on quality.

Buying a car that is brand new is overspending when a used one is going to have a lower payment and still plenty of repair free miles on it. You shouldn’t skimp on certain things, but those are few and far between, such as investing in your 401K as much as you can (overspending, in some ways).

Smart money managers also know how not to lose money on things they don’t need, such as overpriced utilities like cable television, warranties on almost all products or spending too much on insurance for your car or losing hundreds of dollars of year on bank fees.

Saving money is never going to be universally considered

Spending Flee: Why saving money starts with skipping extraneous spending

Experts debate back and forth the main reason why the majority of individuals can’t save money and still somehow manage to rack up thousands and thousands of dollars in borrowed money, specifically credit card debt to the tune of $16,000 on average per household.

And plenty of shortcomings come to the forefront, such as the lack of a budget or trying to convince yourself that you don’t make enough money as the reason you’re not able to save.

The last point is one that has quite the ripple affect when you consider that income shouldn’t dictate a lack of savings if you, of course, budget properly and don’t do one thing that continues to plague those who are trying to set aside an emergency fund.

Spending money on things you don’t need.

The “want” versus “need” debate is one that runs roughshod over most people since the black and white discussion that it should be is mired in shades of gray. Not knowing the difference or, for that matter, not paying attention to those same difference is why we simply can’t save money. Buying what we don’t need and doing so in droves is sabotaging our savings accounts, or lack thereof.

Your best option to avoid impulse buying of products or services is to truly think long and hard about what you’re actually buying and determine if you really need it. And while you argue that you already do that, you might want to revisit that subject.

The 24 hour rule is the most proven method: you consider the purchase, and decide at the moment not to buy then determine after that time span if you still want or need it after you’ve given yourself time to think it over. Most of the time, you end up not going back to claim what would eventually be described as something you truly don’t need.

Questioning the purchase is paramount.

And of course having a budget is key, but have you ever considered writing down how much you spend. One of the drawbacks of the convenience that are credit cards is that they don’t really allow you to see at the moment what you’re spending. Sure, the receipt can do that, too, but in the span of a week, write down everything you spend money on, the old fashioned way with pen and paper and tally up the total. That figure might be enough to deter you or at least give the buy a second thought.

Saving money starts with planning and part of that is making sure you’re not spending frivolously and without thought of the much bigger financial picture.

Alarm Clocked: How to get out of debt and being yet another statistic

The statistics regarding debt range anywhere from shocking to sad and everything else in between.

Then again, do we have anyone else to blame but ourselves for the mess we’re in?

Sure, you can argue that the cost of living hasn’t improved, food costs are high and everything else we spend money on has inflated and yet salaries have been stagnant, at best.

While all of that is true, you still should be alarmed about $15,000 (the average amount of debt per person), and $50,000 (the average amount of school debt per household). Those two numbers alone suggest that you are about $65,000 in debt on unsecured items, things that aren’t cars or homes that you can’t trace back to at a moment’s notice.

But despite the numbers being less than enviable, you don’t have to become another statistics, as cliche as that sounds. The truth is getting out of debt is more about changing your perception on how you look at money, learning to budget properly, live without for a little while and simply pay closer attention to income versus expenses.

The irony about those numbers is that while they’re discouraging, they don’t have to define how you are with money. They can be there, but yet still be accounted for and subsequently handed just by your day to day decision making.

For example, if you have $15,000 in debt, your game plan should be two things: patience and persistency. You should start with debt that has the highest interest rate and then pay it off more so than the others. You also can consider consolidation but only in order to shorten the time you pay on the loan or lower the interest rate by combining higher ones per line of credit.

Debt is something you just don’t pay and then forget about, but rather you should be constantly thinking about, pondering or wondering how you can be better at it, starting with stopping the use of credit cards altogether. Whether your rip them up, shred them or freeze them, you have to remind yourself that you days of charging are done.

And the argument that income isn’t keeping up with cost of living, well that is partially true. While the cost of goods rises each year, and your income might not keep pace, that simply means the onus falls on you to change how you budget. The truth is your income might not be keeping up with your wants more than anything else but admitting that can be tough.

Debt is what it is: you owe someone else money. But paying off your debt can be viewed as business as usual and as a means to an end. Those who see it as crushing numbers and all hope lost won’t have much luck whatsoever in paying it off completely.

Savings Can: How saving starts with below means mentality

Do you know how much the average person has in their savings account?

The statistics look bad. No, let’s just say they’re terrible.

The answer to that question is startling and stunning: about 40 percent have no savings account whatsoever. About 80 percent have about a thousand dollars or less.

So that begs the question: where is all of our money?
Look around your house, your driveway and you might get your answer. Living beyond what your means or even just at your means tends to lead to the biggest reason why we don’t save money.

We’re simply too busy spending it to think of that.

And then, you have the kind of success stories that you marvel at, the ones that are written in big bold headlines that leave you thinking “why can’t that be me?” when you hear about a couple that buys a $150,000 house with cash or a 25 year old that has managed to work a modestly paying job and save a half a million dollars and set to retire by the time he reaches 35, at the latest.

How exactly are all of these things possible?
There really is no magic theory in regard to what makes money tick for these people and why they’re so far removed from the aforementioned statistic about money saved, or lack thereof.

They simply live below their means.

Just because you make $70,000 per year doesn’t mean you should spend $80,000 on your expenses or even butt up against that 70K mark. The truth is those who have money saved and don’t worry about money are able to save it because they’ll take a $70,000 year paying job and live off $30,000 of it quite comfortably because they make decisions that allow them to work, have a car, house and other amenities but focusing primarily on having money leftover as the most important piece to that puzzle.

How do they do it?

Simple. They don’t buy used or pay full price. They’ll take a $15,000 vehicle instead of buying a new one for $40,000. They are approved for a home at $250,000 and instead buy one for a third of that price and have a mortgage that allows them to do two things: have money leftover and add to the home through renovations with money that comes out of their own pocket versus expensive loans.

For most, we equate spending to happiness and that just isn’t the case. Those types of purchases, services or items that you don’t need don’t create the kind of smile you’d have it you went without those and instead had the peace of mind that your money is exactly where you want it to be: saved.

Trend Unsettling: How to save money when so much is centered on spending

The numbers are in, and the winner is: your job.

So, maybe that is an oversimplification of the overall topic at hand, and that is how much you have to spend just to be able to save. And the “save” portion in this discussion means working.

The average person spends almost $4,000 per year in order to work, when you factor in things like lunch at a restaurant, clothing allowances and the cost of transportation (such as gas or tolls, etc.).

That adds up to just under $200,000 in your lifetime, which might not sound like a whole lot but the more glaring is the $4,000 number mentioned that we’ll spend from one year to the next.

So when so much is about saving money, how can be justify spending that much just to work? Even more important of a question is how to we actually get that $4,000 number lowered so that work doesn’t seem like we’re just punching in and punching out just to barely get by?

Well, almost half of that total number focuses on eating, specifically spending money eating out at restaurants for lunch. The easy fix on that is to actually take the time to plan meals, make lunch the night before and stop spending between $10 and $15 on just one meal a few times per week. A good plan would be to make dinner at home, and then leave just a little bit aside for the next day, so that lunch isn’t about making a sandwich or another meal per say but rather over preparing and cooking and then having leftovers. If you must eat lunch out, such as a working lunch or food that is bought and centers around a meeting where food isn’t provided, go light.

Transportation is another higher end cost, even though the cost of gas is down somewhat versus a year or two ago. Some have found that carpooling works well, while others have started to think more efficiently when it comes to vehicle purchases and gas mileage. More progressive employers allow you to work from home a few days per week, and if they don’t, it certainly wouldn’t hurt to ask if you have that sort of job that includes office days for paperwork, the same work that can easily be done at home.

The average worker might also want to consider small expenses throughout the course of the day, such as bottled water or snacks.

No one is going to suggest that a work stoppage is in order as far as saving money goes, but you still can implement certain techniques to keep your yearly expenses in check.

Card Sharks: How to avoid credit card missteps

Credit cards, for those who have them and struggle mightily with them, can be summed up in one very simple word.

Evil.

The other end of the financial spectrum views credit cards for what they are: emergency funds or a line of credit that can be manipulated and used to get a higher credit score, when you know exactly how to navigate one.

That means opening a card, using it, and paying off the balance in full (or close to it) as soon as the bill comes. The other side of the coin is filled with a bevy on mistakes that, when made, are not only going to kill your credit score and ability to borrow money but make saving that much more difficult since you’ll be saddled with more bills to pay, some of which can cost in upward of a minimum payment.

The biggest mistake most make when it comes to credit cards is using them too often for the wrong reasons. Credit cards can be used to order something online when you don’t want to give your debit card out or if, again, you’re trying to build credit.

These cards were never designed to be used to charge vacations, for down payments on a vehicle, pay bills or buy groceries. If you can’t afford to hit the beach, you don’t go. If you can’t pay your bills or buy food with your money, then your budget needs reworked and thought through a few more times.

You also can’t be credit card happy and lapsing in the same breath. Opening too many credit cards or lines of credit at once only is going to serve to destroy your score and the overall picture painted by creditors of you when you apply for loans that matter, such as a home or car. The lapse part comes with your propensity for making payments past the due date. If there is one simple, commonly agreed upon principle of credit and credit cards that would be to always pay on time, even if it is just the minimum.

At the very least, the minimum payment shows that consistency and responsibility creditors absolutely need to see when they even consider you for a loan, and your credit score will reflect just how good or bad you are at being able to make payments on time.

Credit cards don’t always have to have such a bad wrap. They can be useful when the person behind the plastic card knows exactly the pitfalls and how to avoid them.