debt-consolidation-tips

Pros and Cons of Debt Consolidation Loans

If you’re dealing with multiple streams of consumer debt such as credit card, store accounts, personal loans or even outstanding medical bills, chances are that you may have considered applying for some form of debt consolidation loan at some point.

Obtaining any form of debt consolidation loan can make a lot of sense if it allows you to lower the interest rate that is being charged on the outstanding debts, but there may be some downfalls to obtaining this form of loan as well.

Pros

You Could Obtain Lower Interest Rates

One of the main advantages of debt consolidation loans is that it could allow you to repay what is owing at a lower interest rate, which could save thousands of dollars over the course of a year or two. If you’re fortunate enough to qualify for an interest free balance transfer credit card, you’d pay 0% interest for the entire promotion period – but a 3% to 5% transfer fee may sometimes apply.

Deal with One Monthly Payment

Instead of struggling to keep track of several different payments each month, consolidation loans allow you to combine all of your debts into a single payment with a fixed interest rate that won’t change over the life of the loan.

You Could Improve your Credit Score

Although applying for the consolidation loan will temporarily lower your credit score, making regular monthly payments towards it will help improve it again over time – often to a higher score than you had previously.

Cons

It Won’t Solve Financial Problems Over the Long Term

Opting for a debt consolidation loan doesn’t guarantee that you won’t accrue more consumer debt over time, especially if you have a history of living beyond your means. You will need to compile a strict budget and stick to it in the future if you intend changing your financial behavior for the better.

You Could Pay More Interest over Time

Regardless of whether you obtain a lower interest rate when consolidating your debts or not, you could still end up paying more in interest charges over time – especially if you’ll be repaying over a longer period of time. In some cases, debt consolidation loans can take as long as seven years to pay in full, so you must consider this before signing on the dotted line.

It Can Encourage Increased Spending

Paying off credit cards, store cards and other bills with a consolidation loan often creates an illusion for consumers to the point where they think they’ve got more money than they actually have. As such, you could find yourself in an even deeper hole of debt over time, especially if you aren’t willing to rein in your bad spending habits.

If you would like to learn more about compiling a realistic household budget that will allow you to keep up with expenses and even start saving towards your retirement, you can get started by chatting with one of our experienced financial advisors. Contact us today to set up an appointment.

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retail therapy

How much will that Retail Therapy Really Cost?

Many consumers turn to retail therapy as a means of helping them to feel better for a short while after dealing with a difficult situation. Although engaging in a little impulse spending on that new dress and shoes may pick up your spirits for a short while, the truth is that your retail therapy habit is probably costing you a lot more than you can afford to spend. 

Crunching the Numbers

A survey conducted a few years ago studied the habits of approximately 2,000 shoppers and found that the average American spends a little over $2,200 per year on these ‘pick me up’ purchases. The poll went on to note that the typical shopper purchases around 12 items per month in store and eight to 10 online, with their shopping taking up almost 90 hours a year in-store and more than 70 hours per year online. 

Most Americans have admitted that as much as 25% of their shopping is based more in pleasure than in true necessity nowadays, with more than 65% stating that shopping has therapeutic qualities for them. Around 70% of shoppers admitted having purchased something nice just to cheer themselves up, and approximately 15% of them said that they engage in retail therapy quite regularly. 

More than 70% of the survey respondents also said that they were living from paycheck to paycheck at the time, meaning that their retail therapy habit was hurting their finances severely. 

Ditching the Habit

If you regularly succumb to retail therapy and you’d like to break this habit for the sake of your finances, the tips below will help get you on the right track:

  • Identify your triggers – What causes you to go impulse shopping? A stressful day at the office? Feeling lonely? Trying to fit in with certain friends? 
  • Delete spending apps and emails – unsubscribing to emails from your favorite stores and removing shopping apps from your phone will go a long way in helping to reduce temptation substantially
  • Try a new hobby – although initial expenditure may be needed to get set up with your new hobby, it will leave less time for going impulse shopping – which will help your budget recover over time
  • Entertain at home – if you’re in the habit of heading to the mall to meet up with friends, go shopping and eat out, this will definitely hurt your budget over time. Instead, invite friends over for coffee or a meal at home. You’ll still be able to enjoy spending time together, but for a fraction of the price – and there won’t be any items tempting you in the store windows at the mall

Although there is usually no harm with engaging in a little retail therapy from time to time, it becomes problematic when your household finances start suffering as a result of this habit. A great way to ensure that you’ll still be able to treat yourself from time to time is to set aside a few dollars in your weekly or monthly budget specifically for this purpose. 

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bad credit

Bad Credit Score? Improve it with these Tips

Your credit score is probably the most important aspect of your financial health because it provides information to potential lenders regarding your level of responsibility where using credit is concerned. This means that the higher your score is, the better your chances will be for obtaining various forms of credit and/or loans. In addition, holders of higher credit scores will normally benefit from lower interest rates when borrowing money.

If you’re struggling with a low credit score, the good news is that there are steps that can be taken to improve it:

Start by Paying Down Revolving Credit Balances

If you’re able to pay more than the minimum required amounts on any outstanding balances you’re carrying, now is the time to do this. Paying more than the required amount will not only reduce the amount of interest you’ll pay over time, it will help lower your credit utilization rate as well – which will in turn improve your overall score. 

The sooner you can pay off your balance each month, the better – and once repaid in full, your credit score will usually increase again.

Don’t Miss Payments

When determining credit scores, your actual payment history will be one of the most crucial aspects that are considered. As such, having a long history of paying on time – or even early – will go a long way in helping to improve your credit score.

Aim for 30% Credit Utilization or Less

Credit utilization refers to the amount of your credit limit that’s being used at any given time and it is the second most important factor when it comes to credit score calculations. 

The easiest way to keep this ratio under control is to repay credit card balances in full each month. If this isn’t possible, your next best option is to ensure that your total outstanding balance is kept at 30% or less of your full credit limit. From there, you can start working towards getting this down to 10% or under – which will be ideal for helping to improve your credit score.

Request a Credit Limit Increase

When your credit limit is increased and your outstanding amount remains the same, it lowers your overall credit utilization virtually immediately. If your income has increased over the past year or two, you stand a fairly good chance of having your request for a credit limit increase approved – which will ultimately improve your credit score.

Check your Credit Report for Errors

Another way to increase your credit score relatively quickly is to review your credit report for any errors that could be affecting it negatively. You stand an excellent chance of increasing your score by disputing errors and having them removed as quickly as possible. 

When it comes to improving your credit score, it’s important to remember that there’s no one solution that will work for everyone. It’s also strongly recommended that you obtain copies of your credit report from the various institutions such as Experian or Equifax annually, as this will allow you to spot errors and dispute them as quickly as possible. 

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new year finances

New Year, New You? How About a new Financial Plan as Well?

The New Year is the ideal time to set up some new financial goals for your family, but it’s essential to start with smaller goals that will help you work towards those that are bigger over time. Regardless of the financial goals you intend achieving, it will be a good idea to set up a support system that will help make it easier to achieve them. 

Below are some examples of financial goals you can consider setting for your family:

Compile a Realistic Budget

Several individuals who earn six figure paychecks still struggle financially because they don’t take the time to compile a budget for their money. As such, setting up a realistic budget will probably be the most important step you can take if you intend being financially successful. 

Although it might seem intimidating to compile a budget for the first time, you shouldn’t let this stop you from doing it. Tracking your income and expenses will not only help you understand your finances better; you’ll also be able to plan ahead for any major financial decisions that may need to be made. For instance, perusing your spending will help you differentiate between genuine needs and wants – which will result in a change in your spending habits over time. 

When compiling your budget, have copies of bank account statements on hand because this will help you see exactly where your money is being spent each month. If you find that expenses are exceeding your income, you’ll either have to cut items out of your budget wherever possible or find ways to earn additional income to cover the shortfall.

Repay Consumer Debt

The next financial goal to set should be repaying any consumer debt you have from store cards, credit cards and any other places where you’ve been making purchases on credit – and your budget will go a long way in helping to achieve this. 

Most financial experts recommend listing debts from smallest to largest, paying as much as possible towards the smallest amount owing and paying minimum required amounts on the rest each month. As the smaller debts are fully repaid, the amounts that were being applied to them can then be rolled over to the next outstanding bill in line.

Start a Savings Account

Up to 60% of Americans have noted that they would struggle to cover a $500 emergency if it arises because of not having any money saved. 

Once your debts have been fully repaid, place the money you were paying towards them into a dedicated savings account until you have approximately three months of living expenses accumulated. This will provide a lifesaving financial cushion in the event of possible job loss or other emergency that may occur.

If the idea of setting financial goals is leaving you feeling overwhelmed, it may be a good idea to schedule an appointment with an accredited financial advisor. Contact us today if you would like to learn more about taking control of your financial future.

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black friday

Broke After Black Friday? Get your Finances Back on Track for the New Year

If you’re dealing with a holiday spending hangover after recent Black Friday and Cyber Monday sales, you aren’t alone. In fact, the Experian Holiday Shopping Survey has revealed that up to 60% of adults admitted that this type of shopping places immense strain on their finances. 

Getting your finances back on track may seem impossible, but it need not be if you implement the following budgeting tips:

  1. Review your Spending

This is the first and most crucial step to take. Review credit and debit card statements and check to see how much you spent from savings, while also listing the categories where you spent your money – such as food, gifts, entertainment, clothing or gadgets. This will allow you to see where you’ve spent your money, which in turn gives you a good starting point for rebuilding your savings and repaying the debt. 

  1. List Everything You Owe

After seeing where you spent your money on Black Friday and Cyber Money, you’ll need to face reality by listing each debt that has been incurred. When doing this, specify the total amount owing, minimum required payments for each debt and the interest rate being charged on them. 

  1. Pay more than the Minimum Required Amounts

Credit card companies conveniently display the amount of time to pay off your balance and the full amount of interest if you only repay the minimum required amount each month. However, remember that any savings on your purchases will be negated if you only pay back the minimum amount required each month. As such, you should do everything possible to pay a little extra each month – even if it’s only $10 or $15.

  1. Consider the Snowball Repayment Method

After listing your debts, start by applying as much extra money as you can afford to the one that you owe the least on – while paying minimum required amounts on the balance temporarily. This will help get it repaid a lot sooner. Once this debt has been fully repaid, take the amount you were paying on it and add it to the amount you’ve been paying on your next largest debt and so on. 

This strategy will not only help get your debts repaid; you’ll enjoy a sense of victory as you see each one of them slowly disappearing. An added advantage of this method is that by adding amounts to larger debts that were being repaid on smaller amounts will help get them repaid far quicker. 

An alternative approach to this is to repay the debts that are carrying the highest amounts of interest first. However, it may take you longer to start seeing progress this way. 

Getting your holiday debts repaid will allow you to start focusing on saving money because any amounts that were being paid towards outstanding bills can now be placed into a savings or investment account instead. If you’d like to obtain more advice regarding getting your finances in order, contact our team today. 

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christmas-shopping

Why Celebrating Christmas on Credit is a Bad Idea

With the holidays almost upon us, it often means taking trips to visit family, purchasing gifts, going out to celebrate with friends or even a combination of all of the above. If you don’t have much in the way of savings set aside, you may be asking yourself how you’ll be able to pay for it all. 

The above-mentioned scenario has resulted in several lending institutions now offering holiday loan products to clients. However, it’s crucial to remember that these are nothing more than unsecured personal loans being marketed under a different name. While this may seem like the answer to your holiday finance problem, there are many reasons why you should never succumb to celebrating Christmas on credit – especially this form of credit. 

  1. Discretionary Spending is a Bad Reason for Borrowing Money

When you opt for using a holiday loan, you’ll end up paying a high amount of interest for items that you want, but don’t truly need. Regardless of whether you have an excellent credit score or not, obtaining a holiday loan or even maxing out your credit cards will put you in a more difficult financial situation than ever when January arrives. 

  1. You’ll be Making Christmas Even More Expensive

Although purchasing gifts and everything else you’ll need to celebrate Christmas on credit may seem like it will be extending your buying power, the truth is that your buying power will actually be decreased and gift giving will become unnecessarily expensive. 

When borrowing money, you’ll spend more than you would have if you limited yourself to the cash you have on hand. To add insult to injury, the money you borrowed will have to be repaid with interest as well – making your so-called Christmas celebration costlier than you imagined. 

  1. Borrowing Helps Set Unrealistic Expectations

If you ‘do Christmas on credit’ this year, you’ll be helping to set unrealistic expectations with regards to gift giving and general spending for the years to come. It will also make you a lot more likely to depend on credit for the next Christmas…and the one thereafter. 

Borrowing to pay for Christmas will also not only get your children into the habit of expecting large and costly gifts each year; you’ll be teaching them that it’s OK to borrow money so that you can have what you want when you want it – not a good idea. 

  1. The Joy of Giving will be Stolen because of Borrowing

Although your kids will be thrilled to open their gifts on Christmas morning, you won’t be able to truly enjoy the moment because deep down, you know that it’s going to be difficult to repay the amount you borrowed to buy them. You’ll also experience feelings of guilt because you know that those gifts will only really belong to your kids once your borrowing has been fully repaid. 

Instead of succumbing to putting your Christmas spending on credit again this coming year, commit to saving some money each month. By the time December arrives, you’ll have a tidy sum saved up and be able to enjoy a guilt-free celebration. 

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impulse shopping

Avoiding Impulse Purchases while Shopping

One of your budget’s biggest enemies is that of impulse purchases. Despite going into Target to ‘only get a few things,’ you end up leaving the store with new décor items, some bath towels and new kitchen glassware as well. If you find that you’re falling prey to impulse shopping more and more often, the tips below will help get you back on track and beating the urge to purchase unnecessary items.

Don’t go to the Mall Unnecessarily

You’ll only get the urge to purchase something if you’ve seen it while browsing, so stay out of malls and other shopping areas unless you truly need to be there. While at the mall, only go to the stores you have to be at as well – this will prevent you from seeing anything else that ‘would be nice to have,’ but that wasn’t even a consideration before you’d actually seen it.

Edit your Junk Mail

 The main reason why companies send out junk mail is to encourage consumers to purchase more of their products and services – regardless of whether they’re needed or not. Items you purchase as a result of ‘seeing them in a junk mail advert’ are classified as impulse buys – again, you wouldn’t have bought the items previously because you hadn’t seen it before.

Start by getting your name off of as many mailing lists as possible – online and offline. A non-profit organization called 41pounds.org can be a big help regarding getting your details removed from physical junk mailing lists, while the ‘unsubscribe’ button on shopping emails can become your best friend at a time like this as well.

Pay with Cash

Several studies have shown that when shoppers pay cash instead of whipping out the debit or credit card, they will usually spend a lot less because it’s physiologically more difficult to part with physical money. Individuals who pay cash for their purchases end up spending as much as 50% less than if they had used a card to pay for the goods.

De-clutter before Buying Anything New

Before allowing anything new to be brought into your home, implement a rule that sees one old item being sold or given away first. This will not only prevent your home from becoming too cluttered over time; it will also remind you of the items you already have – chances are that you may already have something similar at home to the item you’re looking at in the store window.

Ask yourself some Questions

Before picking up that new item, ask yourself if it will improve your life in any way, if it will help you achieve one of your life goals or whether it will make your life easier or not. Answering these questions will help you evaluate whether it will be beneficial to purchase the item or not.

Resisting impulse purchases will not only help ensure that your home remains as clutter-free as possible; over time, your bank account will also thank you because you’ll be able to save more money – that can be used at a later time to purchase something that you may have been wanting for a long time.

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christmas gifts

Don’t Bust your Budget this Christmas

Although Christmas gift giving has been the norm for many years, this activity can drain your finances far quicker than you realize – especially when family and friends have come to expect certain standards in this regard. 

If you’d still like to ensure that your family and friends get to enjoy this time of year as much as possible without having to worry about how long it will take you to pay off those gifts, the tips below will help you get started.

Set your Budget

Festive season spending can go overboard very quickly if you fail to formulate your shopping list according to your budget. Before committing to purchasing any gifts, food, decorations or other Christmas supplies, determine the amount that you’ll genuinely be able to afford to spend on these items. Once you’ve done this, you can sit down and start making a list of gifts and other supplies that need to be purchased.

Track your Spending

Many individuals spend wildly throughout December, thinking that they’ll be able to deal with the aftermath in January. However, your finances will be far better off if you track your expenses as you make purchases because it will prevent you from overspending or having to put Christmas gift purchases on your credit card.

Prioritize Gift Giving

Although you may be used to purchasing gifts for several family members and friends, you may need to prioritize whom to buy for if you intend sticking to a budget. Consider focusing on the people you spend the most physical time with – don’t feel obligated to purchase costly gifts for relatives you seldom see. Chances are that they may also be feeling the financial pinch and will be relieved to not have to reciprocate.

Shop Around

These days, consumers are beyond spoiled for choice when it comes to doing Christmas shopping in-store and online. As such, taking a little extra time to shop around instead of grabbing the first offer you come across could enable you to save a lot of money on gifts. 

Many stores offer discount codes when spending over a specified amount or if you’re purchasing specific items. Before clicking on that ‘place order’ button, be sure to spend a few minutes searching online and on the store’s website to see if you can shave a few dollars off your order cost.

Ditch the Random Gift Exchanges

When questioned, most individuals state that they absolutely dread having to take part in any form of random gift exchanges, such as those that are often hosted at workplaces or social clubs that they may belong to – Christmas tends to be costly enough without having to deal with the added stress of purchasing a gift for someone you hardly know as well. If asked to participate, simply mention that your budget has been allocated elsewhere for this year. 

The saying of, “It’s the thought that counts,” certainly applies to gift giving this time of the year. If you simply cannot afford to purchase multiple gifts, most family members and genuine friends will still appreciate the time that you’ll be able to spend with them during the Christmas season.

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Overwhelmed by Credit Card Debt? Take these Steps to Improve your Finances

The aspects that consumers love the most about credit cards are safety, convenience; being able to track spending and often earning rewards are unfortunately the same qualities that cause so many people to accumulate high levels of debt on them. 

If you’re unfortunate enough to have accumulated large sums of credit card debt, chances are that it’s leaving you feeling overwhelmed and stressed because you think that you’ll never be able to repay it all. However, the good news is that there are effective strategies and tips that can be implemented to help ensure that you’re able to repay every last penny in full.

Target One Card at a Time

Although minimum monthly payments will be required on each of your credit cards, paying a little extra over and above this amount on the card that carries the lowest balance will help lower its balance just that bit quicker. Once this card has been paid in full, take the amount you were paying on it each month and add it to the minimum payment amount on the next card in line to be repaid – and keep repeating this strategy until all credit cards and store cards have been paid in full.

Request Reduced Interest Rates

In many cases, getting the interest rate reduced on a credit card can be as easy as contacting the issuing company directly and asking – provided that you either have a fairly decent credit score or you’re a long-term client that always makes payments on time. 

If any of your other credit cards have lower interest rates, be sure to inform the customer service representative that you’re dealing with – in many cases, they will at least be able to match it.

Transfer Balances to Interest-Free Cards

These days, many new credit cards offer interest-free introductory periods to customers who want to transfer credit card balances over to them. Interest-free timeframes can range anywhere from six months to as long as 18 months in some cases.

While this is an excellent strategy to use to save on interest charges, keep in mind that you will need to commit to repaying the balance in full before the introductory period expires. Failure to do so can result in hefty interest rates being billed on outstanding balances.

Commit to Not Accumulating More Credit Card Debt

Once you’re on the journey to get all of your credit cards fully repaid, it’s crucial that you not take on any further consumer debt. After everything has been repaid, you’ll usually be able to start saving a portion of your income each month that can either be put towards an emergency fund or invested in a retirement fund. 

If you’re feeling overwhelmed by the amount of debt you’re carrying and aren’t sure how to go about putting a plan of action into place to repay everything, contact our financial advisors today. We look forward to being able to assist you with becoming financially independent over time. 

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bad-credit-card-habits

Break These Bad Credit Card Habits

Bad credit card habits not only cause chaos with your credit score; over time, they will result in you accumulating more debt than you can afford to comfortably repay. Your long-term financial plans can also be derailed completely, which is why it’s essential that you eliminate these bad habits right away.

Failing to Inspect Credit Card Statements

While it may seem like nothing short of the most boring chore on earth to check your credit card statements thoroughly, the truth is that perusing each line item on them can help prevent any fraudulent purchases from being added without your knowledge. 

If you notice any charges that you haven’t made, you’ll need to notify your credit card provider immediately so that the necessary actions can be taken to reverse them. Another aspect you should always check is your credit limit – over time, your bank can change this without notifying you and this can result in some hefty fees being charged if you exceed your limit.

Only Paying Minimum Amounts

Credit card companies provide a convenient feature in that they only require you to repay a small amount of your outstanding balance each month. While this may seem handy, you will not ever be able to repay your card in full if only minimum require amounts are being applied. In addition, you’ll be paying hefty amounts of interest on the outstanding balance.

When the time comes to make repayments, always ensure that you pay as much as you possibly can against the outstanding balance. Over time, you’ll save thousands of dollars in interest.

Withdrawing Cash

Taking out a cash advance is most likely the costliest type of credit card transaction. Not only will you pay a higher interest rate on the amount you’ve withdrawn; the grace period for interest being charged with normal transactions is usually voided and an additional cash advance fee will normally be charged as well.

Purchasing Unnecessary items

This is another bad habit that should be stopped immediately because it results in you accumulating debt that you might not be able to repay at a later stage. 

If there are items you want, but cannot afford to pay for in full, it’s best to save up instead of placing these purchases on a credit card. You will feel a tremendous sense of satisfaction in knowing that you own the item from the start instead of only truly owning it after repaying your credit card balance.

Making Late Payments

These days, it’s possible to schedule payments so that they are sent to your credit card provider on time each month – meaning that there is literally no excuse for making late payments anymore. 

Late payments not only affect your credit score; over time, additional penalty fees and interest will be applied to your credit card as well. Again, this will result in you wasting money on unnecessary late payment fees. 

Exercising good credit card habits such as never carrying a balance until such time as interest is charged and ensuring that repayments are always made on time will go a long way in helping to build an excellent credit score – while allowing you to keep more of your hard earned cash because of not paying interest. 

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