How to Stop Spending Money You Don’t Have

So, you want to stop spending money.  That might be easier said than done.  When it comes to managing your money, there are things you need to do.  You know you need to budget, try to get out of debt and control your spending.

stop spending money

stop spending money

The issue is not necessarily that you are spending money on things you don’t have; you just aren’t spending it in the right way.  The issue is not that you don’t make enough money, it is just not having a plan on how to use it once you get it.

That’s what happened to me.  Unfortunately, I didn’t have a plan for my money.  That lead me down a path I did not like.

After years of working without a plan, I found myself on the steps of a courthouse declaring bankruptcy. And, because I did not learn how to make the right changes in managing my money, my husband and I found ourselves in debt a few years later.

The difference with the second time I had debt was that I took responsibility for it.  I owned what happened, and he and I worked together to make changes to not only pay off our debt but never go down that same road again.

If you find yourself in the same situation, you need to make big changes.  To start, you have to stop spending money you don’t have.  Plain and simple.

HOW DO YOU KNOW IF YOU ARE OVERSPENDING?

You’ve maxed out your credit cards

When there is no room to charge anything on your cards, you might have a problem.  In most cases, maxed credit cards signals you are living beyond your means.  If you have to continue to charge because you don’t have money, then you are spending too much.

You can’t find a home for your latest purchase

Your temptation might be electronics or handbags. No matter what you love to buy, you might notice you are running out of room to store things.  When the stuff takes over your home and is causing clutter, it is time to take a long hard look at how you spend money.

Your budget never works

There may be months when you don’t have enough money in your budget to cover your mortgage or food.  When you continually spend money on the wrong things, your budget will not work.

That means if you have just $50 for entertainment, do not spend $75.  That other $25 has to come from another budget line.

You spend more than you earn

Take a look at your credit card balances. You might be paying only the minimum balance because you can’t pay it in full. When you spend more than you make and continue to add more debt, take a look at what you are buying.  It might be time to pull back and stay out of the stores.

HOW TO STOP SPENDING SO MUCH MONEY

Use a budget 

When many people hear the word budget, what they hear is “you don’t get to spend any money.”  That is the opposite of what a budget does.  Your budget is a roadmap.  It shows you where your money should go – including the fun money you want to spend!

Your budget helps you know what you need to do with your money when you get paid.  Look at every penny as an employee of yours.  You get to tell it where it needs to go.  Some of them will go to rent, others to your car payment and still others will go to the into your savings account.

The best part of a budget is that you can allow for fun.  Learn how to budget to have fun and even how to budget if your paychecks are never the same amount.

Related: How to Figure Out How Much to Budget for Groceries

Write down your financial goals

Successful people start planning by having the end in mind.  It may mean taking a backward approach to your finances.

Think about what you want.  Do you want to get that credit card paid off or maybe take that dream vacation?  No matter your goal, figure out what it will take to get there, and that will help you set your goal.

It may mean fewer dinners out or putting in some overtime at work.  Whatever your goal, make sure it is clearly defined and you keep it front and center.  Put it on your refrigerator.  Keep a photo of it in your wallet.  Make sure you see that budget staring you back in the face every time you even think about spending money.  That will usually stop you right in your tracks.

Related:  The Secret Trick I Use to Stick to My Budget

Cash is a Must so that you never overspend

If you are someone who is always saying “I can’t stop spending money,” then you need to use cash.  I’m sure you’ve heard it time and time again. Using cash is one of the simplest tricks to help you stop spending money you don’t have.

It works because it gives you defined money.  If you have $100 to spend at the grocery store, there is no way you can even spend $101.  You don’t have it.  You are forced to spend wisely and think more about every purchase you make.

I know some of you are reading this saying “but if I have cash I just spend it so fast.”  That is because you are not tracking it and taking responsibility for your spending.

You need to use the cash envelope method.

If you have an envelope for groceries with $50 left in it, sure, you can dip into that and grab $20 to spend on lunch.  But, what happens when you need food for your family?  That means you’ve just $30 to buy food – which may not get you much.

Cash forces you to think about every purchase you make.

Related:  How You Can Become Accountable With Your Money

Stop paying for convenience

There is a quick fix for nearly everything.  You can find dinners in boxes, small pre-packaged snacks, etc.  Rather than purchase convenience items, buy the larger size snacks and then re-package yourself into smaller baggies.  You will not only get more out of a box, but you can even control how much you put into each baggie.

There are other ways we pay for convenience.  We pay for someone to iron our shirts, wash our cars and even mow our lawns.  By doing these things ourselves, we can keep much more money and easily stop overspending.

Read more:  How You are Killing Your Grocery Budget

Put away the credit cards to halt spending money

One of the simplest ways to stop spending money is to get out the scissors and cut up those credit cards!!  Or, if you aren’t ready to cut them up, put them on ice.  Literally.  Freeze your credit card in a block of ice.

If you keep spending, you have to cut off the source at its knees.  While I don’t think credit cards are a good fit for everyone, I know they work for some.

If you must use credit cards, never charge more than you have in the bank to pay it off.  That means you can’t charge the amount you believe you will get on your paycheck.  There is never a guarantee that your check will arrive.  Spend only the amount you have, not what you will receive.

Related:  How to Pay off Your Credit Card Debt

Pay your bills on time

We all have bills.  We know when they are due.  When you miss the payment due date, you get assessed a late charge.   Pay them on time, so you don’t pay more than you need to.

In addition to late fees, not paying your bills on time can have an adverse effect on your credit score. Learn how to organize your bills, so you never pay them late again.

Do not live above your means

Few of us would not love new clothes or a new car. We all would like to make more money or get the hottest new device.  The thing is, can you afford it?  Is it a want or is it a need?

If you are using credit or loans to get items that you can not afford, then you are living beyond your means and spending money you don’t have.  Scale back and make sure that you can honestly afford the house or the car and that it doesn’t ruin your budget and cost you too much.

Read more: Defining Your Wants vs. Your Needs

Don’t fall for impulse buys

Stores are sneaky about making us spend money.  They use signs, layout and even scents to lure you into wanting to buy more.  The thing is, if you purchase something you did not intend to, then you are already blowing your budget and probably overspending.

Another way that you are spending too much is when you plan dinner but then decide at the last minute to go out to dinner instead.  Why do that when you have food waiting for you at home (which you’ve already paid for)?

The final reason you may impulse buy is that of emotion.  If you feel a rush because of that new item, you may purchase out of impulse and emotion instead of need.

Read more:  Stopping Impulse Shopping

Plan your meals

One of the most significant changes we made was to menu plan.  It took me some time to put it all together, but now, I can plan our meals in no time at all.  I use the simple menu planning system that I’ve taken time to build over the years.

While this works for me, I remember when I was learning how to menu plan.  It was quite a process, and I relied upon the help of some experts in the field.   One of them I have used is Erin Chases’s $5 Meal Plan.  I loved how simple it was to create our meals each week.

Even the best menu plan won’t work if you aren’t eating what you buy.  Make sure you are not making mistakes with your grocery budget and eat what you buy.  After all, throwing food away is just money in the trash.

Related:  Money Saving Secrets Stores Won’t Tell You

Challenge yourself to spend less 

There is something fun about trying to beat yourself at your own game.  By this I mean, if you have $150 to spend on groceries for the week, try to spend only $130.  That gives you $20 more to spend on something else — or put towards your goal.

Related:  The Yearly Savings Challenge for Kids and Adults

Stay out of the stores so you don’t shop

If you can’t control your spending and continue spending money you don’t have, you have to remove the temptation.  Even something that seems harmless can result in spending money.

Related:  Fun and Frugal Date Night Ideas

Track the money you are spending

Keep track of your spending by adding up the amounts on your phone.  That way, you’ll have no surprises when you get to the checkout lane. You can try Shopping Calculator for Android or Total-Plus Shopping Calculator on iTunes.

When you start to see that total creep up, you realize how much you are spending. That may help you think twice about that extra box of treats you are tempted to toss into the shopping cart.

Use the three-day rule before you spend a dime

The three-day rule is pretty simple.  If you see something you want, wait for three days before you buy it.  Once the third day is up, ask yourself if you still feel it is something you need.

If it is, look at your budget to ensure it works with this month’s spending.  Then, double check the cash to make sure you have enough to pay for it.  If both of these work, you can consider buying it.

The funny thing is that most purchases are impulse buys and the three day waiting period helps you realize you don’t need it.  And had you purchased it, you may even have buyer’s remorse at the three-day mark.

Related:  The Trick To Make Sure You Never Overspend

Don’t use coupons and skip the sales

Sales are very tempting.  They lure you in and often result in making purchases you would not do otherwise.  That is why you nee your list. Stick to it and don’t fall for the sales.

You also need to put away the coupons.  Well, you can use them, but responsibly.  If you would not purchase an item at full price, you should never buy it only because there is a coupon.  A coupon is not a golden ticket to shop.

In addition to this, avoid the clearance aisles and end caps.  These are money spending traps!  You walk by, and your eye is drawn the end cap with the big SALE sign in front of it.  If you don’t need that item, don’t grab it.  Also, don’t walk by the clearance section.  It is very easy to pick up items you don’t really need.  That makes you again spend money you had not planned on.

Instead, shop the sections you need.  If you need detergent, go to that section and grab your item and then go to the next on your list.  Don’t wander through the store as you will be more likely to do “cart tossing.”   This is when you put items in your cart without noticing what you are spending.

I’m not saying not to buy anything on sale.  Just get the things you need that are on sale this week, or that you will need in the next weeks.  You probably need spaghetti noodles, but you don’t need a new pair of shoes.

Related: The Money Traps You Will Fall For

Never shop without a list

Never shop without a grocery list. Ever. Then, force yourself to stick to it.

Some simple ideas include using a timer to limit how long you can be in the store.  If you have only 20 minutes to shop, you will be less likely to grab the items you don’t need and stick with those that are on your list.

Another is to challenge yourself to see how fast you can finish your shopping.  If you have the list and stick to it, you’ll find you spend less time shopping and more time enjoying the things you love.

The best reason to use a list is that you don’t have to worry about forgetting that “one item” you know you need.  When you force yourself to make a shopping list and stick to it, you’ll always have everything you need on hand for dinner.

Keep emotion out of shopping

One tip is never to shop hungry.  When you do, your stomach controls what you buy.  The added benefit is buying the healthy foods you need.

If I am feeling bad about myself, buying something I have been wanting may end up making its way home with me. Spending money to make myself feel better never works.

There are many emotions attached to spending.  You have to identify which one(s) apply to you and find a way to fulfill that need through another method – other than spending money.

Define Needs vs. Wants

There are items we need.  You need food, but do you need the extra box of cookies?  Yes, the sweater is really cute but is it something you need or just something you want.  Ask yourself  “is this a need or a want” with each item you buy.  You’ll soon be on your way to less overspending.

Clean and declutter

When you declutter, you find all of those items you’ve spent money on and no longer need.  It makes you realize where you are spending.  You will also recall how clean your closet now is. Do you really want to fill it back up with more stuff?

The added benefit of decluttering is that it keeps your house clean and organized!  You can find what you need more easily and don’t have so much “stuff” cluttering the house.

Save first, spend later

It is important always to pay yourself first.  Remember that the amount you have to spend is what is left over after you pay your bills and pay yourself.

You should always tell your money where to go instead of it deciding for you.  So many do that the opposite and save after they spend.  If you still save a little, you will quickly build a nice emergency fund and can have less guilt about your spending.

Learn from your mistakes

The most important thing you must do is figure out where you’ve gone wrong in the past.  Your mistakes will be different from everyone else’s.  You may shop out of emotion while someone else does out of boredom.

You also need to keep in mind that you will make mistakes.  There will be months when you fall off the wagon.  Don’t beat yourself up over it.  Use it is a chance to learn from them and do what you can to not repeat them again.

Related:  The Mistakes You Will Make When Getting Out of Debt

Gaining control of your spending is possible.  You just need to have the desire – and the tools – to make it happen.

stop spending

stop spending

Source: pennypinchinmom.com

How to Negotiate Your Medical Debt

  • Get Out of Debt

Let’s face it: The worst thing about having to go to the hospital to receive medical treatment is being slammed with a huge bill afterwards. Sometimes, these medical bills are so expensive that you simply don’t have the means to pull it off right away, especially without health insurance. While we may find it easier in the short term to pretend that our unpaid medical bills don’t exist, avoiding the problem could only make it worse. Many medical providers are aware of this, which is why there are ways that you can negotiate your medical debt when you are unable to pay in full. In this article, we will discuss the different ways you can go about taking care of those medical expenses so that they don’t stack up later and wreak havoc on your credit.

Negotiate for insurance rates

Without health insurance, you’ll most likely be charged a much steeper price. If you want to negotiate your medical bills, one thing you can do is research what the fair market value is for whatever treatments you received. Usually, this is the price that insurance companies have to pay medical providers, and most of the time, it’s a lot cheaper.

Once you’ve found the dollar amount you’d like to ask for, you will need to get in touch with the billing department. If the person on the phone turns you down, ask to speak to their supervisor. It’s important to remain calm and polite while doing this but be persistent. Continue to ask to speak to a higher ranking individual until you reach someone who agrees to make a deal with you.

Pay it in cash

Cash payments are hard to turn down in most cases. if you want to negotiate a lower price on medical bills, you can offer to make a cash payment. Call your medical provider or the billing department and ask them if they would be willing to knock down the price of your bills if you were to pay in cash. Explain to them that if they can’t offer you any other sort of financial assistance, then this is another route you can take.

Not only will this save them money on credit card fees and hours worked by office employees, but it will also save time spent on processing paperwork. This is a smart offer to make, as instant cash payments as opposed to electronic payments are a lot harder to say no to for any business or institution.

Ask for a payment plan

There’s a good chance that even after you’ve asked for a lower price and offered to pay in cash, your medical provider will be unwilling to give you a deal. When this happens, there is still one more thing you can try. Before readily handing over your credit card, ask them if you can make payments on your bill. Most companies will allow you to do this and are used to working with people who are unable to pay their bills in full. Be honest about how much you are able to pay at a time.

It’s likely that they will try to negotiate a higher payment amount, but politely tell them that it’s not feasible for you. Most of the time, they will be understanding and take whatever payment they can get. If you’re struggling financially, making small payments on your medical bills is the best way to go to keep your credit score in tact. As long as you are making payments on your bills, the companies will not report you to the credit bureaus.

Take precautionary measures

A lot of medical providers and medical facilities have programs that offer financial assistance, but you are going to have to ask them for it. Be transparent at the time of or even before your medical treatment occurs. If the treatment you are seeking is not a medical emergency, ask ahead of time if there is a cheaper option or if you can get a discount. If you don’t have health insurance, this needs to be explained as early on as possible. Let your doctor know if you are living off of low income or if you are in the midst of some other type of financial hardship that is keeping you from being able to pay for service.

If you are successful in negotiating your medical bills, you might want to get it in writing so that you have proof. In some cases, you may even want to make your request in writing so that you have it on record in case anything goes wrong later. Once a deal has been agreed upon by both you and the medical provider or billing department, type up a summary of the conversation including key details of who you spoke to and the prices that were negotiated.

Other options for paying bills

There is no one-size-fits-all way of clearing your medical bills once and for all.  Some people have insurance, some can afford to pay in full, and some are going to have to negotiate a lower price. If you have already tried negotiating medical bills and were unsuccessful, there are other options to explore. Here are some other ways you can go about paying your medical bills:

  • Medical credit cards: There’s no guarantee that your medical provider will accept a payment plan. However, most of the time, they will accept payment with the use of a medical credit card. If you have no other choice, ask your doctor’s office about how you can apply for a medical credit card. Usually, you are able to apply at the office right then and there. Most medical credit cards offer zero interest for up to 12 months. If you can manage to pay off the medical debt within that timeframe, then perhaps a medical credit card is a good choice for you. Be wary of this if you already have poor credit.
  • Personal loan: If you’ve already been through all of your other options and were unable to make something work, it might be time to look at taking out a type of unsecured credit, such as a personal loan. If you have a significant amount of medical debt looming over your head, this might be a good idea as you can usually take out anywhere from $1,000 to $100,000. Once again, if you don’t have a good history with using credit, seriously consider the pros and cons of doing this.
  • Interest free credit card: If you don’t end up qualifying for a payment plan or a medical credit card, you can use a 0% interest credit card to pay the tab as long as you have good or outstanding credit.
  • Hire a medical bill advocate: If you feel overwhelmed by the task of reading through your medical bills and looking for errors, you can hire a professional to do it for you. Medical bill advocates are familiar with common procedures and the prices of treatments. If you have been wrongfully charged or overcharged, a medical bill advocate will be able to find this right away. Aside from pinpointing any errors, experts in medical bills will also do the negotiating for you.

Final Thoughts

If you are feeling overwhelmed by a large medical bill, remember that you have several options for taking care of it. It might be tempting to ignore the bill altogether but doing this could really damage your credit. Being honest with your medical provider from the beginning can prevent you from having to deal with extra costs. However, sometimes medical bills are ineveitable and we have to pay them. Consider payment plans or a medical credit card, but whatever you do, don’t let your unpaid medical bills be a show stopper!

Source: pocketyourdollars.com

How to Avoid Filing for Bankruptcy

The biggest obstacle to someone with a crushing debt burden is a lack of knowledge of how to get their arms entirely around the problem, and know how to go about making it right.

They do not understand what options are available to them, and if they do, they are unsure as to what the right first step for them is.  While many think bankruptcy is the answer, some alternatives may work better.

I can relate to the soul-crushing feeling of debt. I declared bankruptcy in 2010.  While it wasn’t my finest moment, I was able to learn from my mistakes and now live the financial life I want.  But, it wasn’t easy.  I had issues with my credit for years, and it followed me everywhere I went.

Had I known about some of these bankruptcy alternatives, I could have saved myself a lot of headaches.  Take the time to research your options before you pick up the phone to call an attorney.

HOW TO AVOID FILING FOR BANKRUPTCY

Debt Management Programs

Debt management programs, also called debt consolidation programs or credit counseling, is a way for people to pay off their unsecured debt using a third party debt relief company. A debt management program (DMP) works like this:

  • Customer enrolls in a DMP with a debt relief company providing them with information regarding the accounts to include in the program.
  • The debt relief provider negotiates a monthly payment and reduced interest rate with the creditor that results in the elimination of the debt in 3-5 years.
  • The customer makes a single payment to the debt relief provider, including a monthly administration fee based upon the amount of debt enrolled in the program. This fee usually ranges between $10 and $50 per month. The debt relief provider then disperses the agreed upon payment amounts to each creditor.
  • In exchange for a fixed monthly payment and reduced interest rate, creditors close the accounts so that you do not accumulate additional debt. While the act of enrolling in a debt management program does not affect your credit score, the closing of accounts will affect your debt to income ratio, as well as your credit history likely causing your credit score to dip in the beginning. However, by making consistent payments to the DMP, as well as to other financial commitments, a customer’s credit score usually rebounds quickly.

DMPs generally work well for people who are current with their payments but cannot make any progress on the balances due to high interest rates. By closing the accounts to avoid future debt, and having negotiated monthly payment and lowered interest rate, DMP customers can repay their unsecured debt within 3-5 years.

Debt Settlement Programs

A Debt Settlement Program (DSP) involves legal representation and for people who have a dier financial situation, but who still would like to try to avoid bankruptcy. People who enroll in a DSP go through the following process:

  • Customers stop paying the creditors enrolled in the program
  • Customers make monthly payments to the debt relief provider to fund an escrow account.
  • Over time, the customer’s accounts become severely delinquent. The lawyer assigned to the account will then reach out to creditors to negotiate a settlement of the account for less than the full amount.
  • The agreed-upon settlement is paid from the escrow account.

Debt settlement will have an adverse effect on a customer’s credit score since payments to the creditors are halted. Customers may also begin to receive collection calls from the creditor, at which time they are to inform the caller of the legal representation now handling the account. By law, this should stop the phone calls. There may also be tax implications for the amount of debt forgiven through a DSP.

DSPs are generally used by people who cannot meet all their monthly financial commitments and need to lower their monthly payments but want to avoid bankruptcy. By having the debt relief provider negotiate a settlement of less than the amount owed, customers can make progress on getting creditors off their backs in 3-5 years and then focus on rebuilding their financial future.

Negotiate directly with your creditors

Your creditor would much rather work with you than deal with bankruptcy.  If you have assets you can liquidate and use to pay down the debt, they may be willing to accept a lower amount.  Reach out and talk to your creditors to negotiate rates or even the balances to a more manageable amount.

If your creditors are harassing you, that is illegal and you can stop it.  Read more about how to stop collectors from calling you.

Just Keep Trying

If you are getting by and your budget works, there may not be a reason to give bankruptcy much thought.  Instead, work to create a debt repayment plan you can follow.  It may mean getting a second job or selling items, but there are many ways you can come up with more money to throw at your debt

The worst thing that will happen is your credit score will drop.  But, if you aren’t trying to get new credit for any reason, I would not stress about it in the short term.  Once your debt is paid down, you can do many things to increase your score quickly.

Debt consolidation

Check with your lender to see if there is a way you can consolidate your debts into a more manageable payment.  You usually need to provide collateral, such as your vehicle.  Alternatively, you might be able to tap into the equity in your home by getting a new mortgage for the balance owed PLUS the equity (where you can use the equity to pay off your loans).

If you’ve tried everything, but can’t see any other way but bankruptcy, make sure you know what you are getting into before you file.  It affects you and your family.

bankruptcy alternatives

Source: pennypinchinmom.com

New Rules May Offer You More Protection Against Debt Collectors

New Rules May Offer You More Protection Against Debt Collectors – SmartAsset

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Dealing with debt collectors can be a real drag, especially if they’re constantly hounding you to pay up. The Fair Debt Collection Practices Act (FDCPA) protects consumers against harassment from debt collectors but the industry still generates millions of complaints each year. Fortunately, the Consumer Financial Protection Bureau (CFPB) has proposed new guidelines that shield debtors from abusive debt collection efforts.

Check out our personal loan calculator.

The Proposed Rules

In July, the CFPB proposed a new set of rules aiming to completely revamp the debt collection market. The proposal is focused primarily on doing two things: limiting contact between debt collectors and consumers and making sure that collection agencies have accurate information before they try to collect on a debt.

The proposed rules are meant to alleviate some of the problems associated with the debt collection industry, which affects about 70 million Americans. Essentially, the CFPB wants to increase transparency and cut down on errors and inaccuracies. The agency’s proposed rules would require debt collectors to do the following:

  • Verify that they’re collecting the right debt. Debt collectors would need to make sure that they’re targeting the right person before trying to collect a debt. Specifically, they’d have to verify the debtor’s name, address, phone number, account number, date of default and the amount of debt that’s owed.
  • Limit how often they contact consumers. Instead of calling debtors repeatedly or flooding their mailboxes with letters, debt collectors would be limited to contacting them six times per week.
  • Simplify the dispute process. Consumers have the right to dispute a debt but the CFPB wants to take things one step further. Debt collectors would have to give as much information as possible about debts when sending out written collection notices. They’d have to include a form that consumers could mail in to dispute their debt.
  • Provide written verification. If a consumer mails in the form to dispute a debt, the debt collector would have to mail them a written debt report. The collection agency would be barred from pursuing the debt without sending out a report.
  • Review documentation of debts before trying to collect. Debt collectors wouldn’t be able to collect anything until they’ve reviewed the documents related to the debt. If a collector wanted to sue someone, they’d need sufficient evidence and documentation of the debt.
  • Notify other debt collectors of disputes. If a debt collector sells your debt to another collection agency after you’ve disputed it, the new collector wouldn’t be able to come after you before resolving the dispute.

Related Article: The Worst Ways to Deal With a Bill Collector

When Would the New Rules Go Into Effect?

The proposed rules need to be reviewed by small business leaders and industry experts before they can be implemented. But if the CFPB successfully pushes them through, they could go into effect in 2017. In the meantime, you’re still covered by the FDCPA.

In case you’re not sure what your rights are, here’s a quick rundown of what debt collectors can’t do:

  • They can’t make false statements. A debt collector can’t give out false information about the amount of debt you owe or say that you’ve broken the law by falling behind on debt payments.
  • They can’t use unfair practices to collect. Debt collectors can’t try to garnish certain assets in order to cover your debts. For example, they can’t take a portion of your Social Security benefits, your workers’ compensation benefits or your Supplemental Security Income.
  • They can’t harass you. Debt collectors can’t threaten you or be verbally abusive. They can’t use profane or obscene language or call you repeatedly just to annoy you.

Get your free credit score now.

Final Word

There is some opposition to the CFPB’s proposals. So we’ll have to wait and see what happens. In the meantime, if a debt collector has been hounding you or your feel that your rights have been violated, you can file a complaint with the Consumer Financial Protection Bureau.

Photo credit: ©iStock.com/BrianAJackson, ©iStock.com/Todd Keith, ©iStock.com/mj0007

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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Source: smartasset.com

3 Ways to Change Your Relationship with Money

  • Get Out of Debt

Most people have a love-hate relationship with money. When you’ve got cash to spend, you feel fantastic. You can do whatever you want, go wherever you like, and there’s no worries in your mind. However, when your cash flow starts to dwindle, your entire outlook suddenly goes sour. The high of having cash can mean that you even end up spending it too quickly, so you end up putting yourself in a more difficult situation long-term. Changing your relationship with cash can be one of the first steps to ensuring that you have more of it in your future. If you can take a more positive approach to the way you handle your finances, you’ll be less likely to end up in debt. So, how can you change your relationship with money?

Do Your Research

Most people struggle with their financial freedom because they don’t actively pay attention to the way that they’re spending money. You sign up for essential things like gas and electric and continue paying the same bill for months without checking whether you could be getting a better deal elsewhere. Actually doing your research and making sure that you’re not missing out on opportunities to save will ensure that you can discover some quick wins for your cash flow. You could even find that you can get out of debt a lot faster and make a huge difference to your savings account by refinancing your existing student loans and similar debts into a loan with a private lender. One small change can make a big difference. 

Automate Your Savings

Do you find it hard to stop yourself from spending every penny you earn each month? You’re not alone. A lot of people who have a difficult relationship with money discover that it’s difficult for them to just have cash sitting in their bank accounts. That’s why it’s so important to find an easier way to convince yourself to save. One good option is to open a separate savings account where you can transfer a portion of your earnings every month. You can automate this process by setting up a direct debit to ensure that the cash leaves your account at the same time that you get your wages each month. This means that the next time you check your bank balance, you won’t be tempted to save the cash that should be going to savings. 

Educate Yourself

Finally, stop avoiding the opportunity to learn more about money and how it works. Most of us feel so uncomfortable talking about cash that we barely even look at our bank statements. However, only by examining your spending habits can you determine where the best options are for you to make some significant changes. Be willing to develop a better knowledge of how money works, and how you’re using it. It’s also helpful to learn everything you can about things that can make you more money long-term, like investing in stocks and shares, or setting up savings accounts with extra interest.

Source: pocketyourdollars.com

6 Reasons You Will Fail at Getting Out of Debt

Whenever you make decisions to improve your life, it can be scary. For instance, when you first start out with your debt plan, you are excited and ready to go.  Sadly, many will fail at getting out of debt.  And, it may happen to you too.

making a debt plan

making a debt plan

You might look at your debt plan and think that this time will be different.  You will start out thinking that this time you WILL do it.  Then, something happens, and you find that you are once again right back at where you started.  Before you know it, you’ve failed so many times that you just don’t think it is worth it.

I’m here to say – it is.  Please.  Don’t give up.

If you are struggling  with paying off your debt, these folks may be able to help:
Call 866-948-5666.

Believe it or not, there may be actual reasons as to why you fail.  Of course, there are the issues such as unexpected financial setbacks. However, it is more often out of a failure to have the right debt free plan in place.

Here are six reasons why you will fail at getting out of debt — and what you can do to make sure that this time really IS different.

WHY YOU ARE NOT GETTING OUT OF DEBT

1. You are not mentally ready.

Before you can ever make any change to your life be it healthy eating, exercise or even getting out of debt, you need to make sure your mentally ready. You need to look at your debt plan with a positive mind.

Instead of looking at the amount you owe and feeling like you will never do it, look at it as I can do this.  It is important to me, so I am willing to put in the work to get the reward.  Consider yourself strong and tell yourself that it is worth it and you know you can and WILL be successful this time.

2. You have no plan at all.

It seems that this should go without say.  However, it is the #1 reason why you will fail when it comes to getting out of debt.

If you tried to go to a town you had never visited but did not have a plan including a map or directions, how would you get there?  You probably wouldn’t.  At least, not without getting lost and off track several times.  You may even end up back at home having to try it again.

The same is true with debt.  You need to create an action plan including your debts to pay, budget and then a plan of action to attack them.  Once you have a plan, post it where you can see it (every day), so you don’t forget what you need to do to reach your goal.

Read more: How to Get Out of Debt (Even on a Lower Income)

3. You don’t have a budget.

I know, I know.  You hear this one every time you turn around.  There is a reason for that.  Any successful debt plan absolutely must have a budget.  You just can’t do it without a budget.

The reason is you need to see where your money goes.  Then, and only then, can you see how much money is available for your debts so help you do what you can to pay them off as quickly as possible.

Read more: How to Create a Budget (Even if you don’t know where to start)

4. You are easily distracted.

If you turn on the TV, go online or even pick up a magazine you are constantly being shown ads.  Retailers are trying to sell you on their item and telling you why you can’t live without it.  Sadly, many allow these influencers to affect their spending, forcing them further in debt.

You must find contentment with what you have.  You might also want to be like your neighbors, but how do you know that they are not as deeply (if not further) into debt than you are.  Find a way to be happy with your life and don’t fall into the trap that “things” will make you happy and leave you feeling fulfilled.

5. Your plan is not realistic.

As much as we’d all love to pay off hundreds (if not thousands) towards our debts each month, that is just not possible.

You need to be completely honest with yourself when it comes to your plan.  You might think that you can eliminate clothes from your budget and just not buy anything new, but is that really going to work?  Can you truly not spend anything on clothing  — ever?

6. You don’t have an emergency fund.

Your emergency fund is mandatory when it comes to getting out of debt.  Why do you ask? Well, if you do not have an emergency fund, what happens when the air conditioner needs to be repaired?  Chance are you will go further into debt to get it fixed.

Make sure you have a minimum of $1,000 in the bank before you even think about trying to tackle your debt.  That way, when the unexpected happens (and trust me, it will), you can pay for it without having to rack up more debt and end up throwing your debt plan out of the window.

Read more:  How to Create an Emergency Fund

Once you change your attitude, outlook and spending habits, you will be on the path to financial freedom and quickly be on the road to getting out of debt.

Source: pennypinchinmom.com

What Is Austerity?

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Austerity policies are nothing new. But talk about them in the news has recently escalated. In response to its ongoing debt crisis, the Greek government is preparing to implement austerity measures aimed at helping the country regain its financial footing. If you didn’t major in economics or you have no clue what austerity means, read on to find out how this fiscal program works.

Check out our personal loans calculator.

Austerity: A Definition

Trust us, austerity isn’t as complicated as it sounds. Austerity is a type of economic policy that governments use to deal with budget deficits. A country faces a deficit whenever it’s using more money than it’s earning from tax dollars.

By taking on an austerity package, a government hopes to reign in its spending, improve the status of its economy and avoid defaulting on its unpaid debt. Governments usually take on austerity measures in order to appease their creditors. In exchange, these lenders agree to bail out countries and allow them to borrow more money.

If you look up the word austere in the dictionary, you’ll see that it means severe, grave, hard, solemn and serious. Indeed, austerity is nothing to joke about.

Austerity Measures

Austerity plans normally involve increases in different taxes, (property taxes, income taxes, etc.) budget cuts or a push to incorporate both. Government workers could lose their jobs or see their wages and benefits either decline or become stagnant. Hiking up interest rates, adding travel bans and keeping prices at a fixed level could be other strategies put in place to reduce spending.

Naturally, austerity measures typically aren’t viewed in the best light because they mean that there might be fewer government programs available to the public. Aid for veterans and low-income families, healthcare coverage and pensions are some of the benefits that normally take a hit when a country’s using an austerity package. Government services that aren’t eliminated might not be as comprehensive or as beneficial as they once were.

As you can see, in an austere environment, conditions are tighter overall. Historically, austerity has been implemented in the US during tough times including World War I, World War II and the Great Recession of 2008.

Greece’s new austerity package – which government lawmakers finally accepted in July 2015 – will feature less government funding, higher taxes and cuts to pension plans. As a result of this deal, the country was allowed to begin talks with its creditors about a third bailout.

Related Article: All About the Greek Debt Crisis

The Problems With Government Austerity 

Experts on the economy tend to go back and forth about how effective austerity can be. Some believe that instead of turning to austerity, the government should pump out more money and borrow as much as possible if an economy is on the rocks.

From a political standpoint, austerity is often controversial and results in riots and demonstrations. Anti-austerity protests erupted in Greece, where quite a few folks say that past austerity programs have only made social and economic conditions worse.

Beyond slowing down the economy, an austerity bill can cause a country to remain in its debt crisis, particularly if it’s in the midst of a recession. As fiscal austerity decreases spending, GDP can go down while unemployment goes up. Consumers can get nervous and stop spending and investing their own money.

In short, austerity policies can make life even more difficult for people who are already struggling. That’s why governments tend to turn to them as a last resort if other strategies aren’t working.

Why Austerity Might Not Be So Bad

Notable European creditors have argued that austerity can be beneficial to a country’s long-term economic state. For instance, the International Monetary Fund (IMF) has previously reported that austerity has done more damage than anticipated. But the European Central Bank released a paper saying that austerity has been helpful, at least for some of the weaker eurozone countries.

In fact, austerity has helped strengthen the economies in European countries like Latvia and Iceland. Although Spain’s unemployment remains high, its economy is in better shape overall. Ireland has made considerable progress as well toward rebuilding its economy.

Proponents of austerity policies say that they can make investors feel more optimistic when a country is being run more responsibly. Austerity has the potential to bring a shrinking economy back to life as everyday citizens invest in the private sector instead of relying on support from the federal government.

Try out our free investment calculator. 

The US used austerity measures between 2010 and 2014. Not only were our policies harsher than those employed by the governments in the UK and other European nations, but our economy fared better than theirs.

The Takeaway

The point of austerity is to tighten the government’s belt, bring a country’s debt back down to a more manageable level and stimulate an economy that has stopped growing. Countries generally try to meet these goals by cutting spending and raising taxes.

The debate over whether austerity works continues but one common theme has emerged. Timing matters. Some critics suggest that cutting too much too quickly during a recession can be painful. When introduced more slowly, however, (or when the economy is doing very well,) austerity measures can turn things around.

Photo credit: ©iStock.com/Eltoddo, ©iStock.com/DNY59, ©iStock.com/Peter Booth

Amanda Dixon Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.
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Deciding When to Use Your Emergency Fund: Is Now the Right Time?

Personal finance expert Jim Wang offers tips and best practices on how to use your emergency fund.

When the coronavirus pandemic hit the U.S., it sent shock waves throughout the economy and people’s pocketbooks.

Millions have lost their jobs or taken pay cuts, causing families to make hard financial decisions. For those with emergency cash saved up, it has become an important lifeline. But it’s not always obvious how and when to spend your emergency fund. So if you’re wondering, “How should I manage my emergency fund during a recession?”—you’re not alone.

“Sometimes [emergencies] can be foreseen, but most often they come out of the blue,” says Jim Wang, founder of personal finance blog Best Wallet Hacks. “It’s okay to use [your emergency fund]—that’s what it’s there for.”

Emergency cash can be an important lifeline. But it’s not always obvious when to use your emergency fund.

This economic crisis came out of the blue for many families. A May 2020 AP-NORC poll1 found that 49% of Americans say they or someone in their household has lost wages either through being laid-off, having a wage or salary reduction, working fewer hours or having unpaid time off.

In response, the U.S. government acted quickly to introduce financial relief, sending stimulus checks to taxpayers and providing qualifying businesses with loans to help them meet payroll. And in a sweeping change to a law called Regulation D, the Federal Reserve Board suspended enforcement of the monthly limit for certain types of withdrawals or transfers from savings deposits. Financial institutions may opt to suspend the six-transfer limit, but are not required to do so.

All of these factors are impacting considerations around emergency funds and may have you questioning how to use your emergency fund. To help steer you through whatever uncertainty you might be facing, Wang offers insight into when to use your emergency fund, how to manage your emergency fund when times are tough, how the Regulation D change may affect you and tips on how to build (or rebuild) your emergency fund.

To spend, or not: When to use your emergency fund

Commonly known as a last-resort reserve, an emergency fund is supposed to be there for you when you’re in a jam.

This can mean large, unexpected expenses, like when your fridge springs a leak, your stove is on the fritz or you need emergency dental work. But expenses come in all shapes, sizes and moments of your life. So how can you tell when to spend your emergency fund—especially during a recession?

It can be hard to know when to spend your emergency fund because expenses come in all shapes, sizes and moments of your life.

Simply put, if you think your short-term checking account isn’t going to cover any essential bills or expenses, such as housing, utilities and food, then you should use your emergency fund. Products and services that aren’t essential, such as TV streaming services or magazine subscriptions, fall into the “want” category. They should not be paid for with emergency funds.

“You really want to make sure you keep your emergency fund for emergencies that must be addressed right now,” Wang says.

In fact, as you consider when to spend your emergency fund, you should be actively removing costly nice-to-haves from your life. Not sure what expenses to cut? Sort through your monthly statements and highlight anything that isn’t absolutely required. “While it may be hard to cut some subscriptions, just tell yourself that it’s only temporary and you can sign back up at a later time,” Wang says.

As you decide how to use your emergency fund, Wang advises against dipping into the fund for minor or non-essential expenses with the expectation to rebuild after another paycheck—especially during times of financial hardship or in the middle of a recession.

Make the Regulation D change work for you

In April 2020, the Federal Reserve Board suspended enforcement of the monthly six-transfer limit in Regulation D. While not a requirement, the interim rule gives financial institutions the option to waive the monthly limit. This could allow consumers more flexibility with the savings accounts containing their emergency funds. This was the first change to Regulation D transaction limits since 2009, during the financial crisis.

“You really want to make sure you keep your emergency fund for emergencies that must be addressed right now.”

– Jim Wang, personal finance expert

If you’ve ever transferred or withdrawn money from savings or money market accounts and received a warning that you’ve hit your transaction limit, you’re probably more familiar with Regulation D than you think.

“I ran into this myself a year ago,” Wang says. “It happened to be my seventh transaction and I received a warning from my bank.”

Prior to the change, certain types of withdrawals and transfers from savings and money market accounts were limited to a total of six times per calendar month per account.

With the limit temporarily suspended, consumers may now be allowed an “unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent,” according to the Federal Reserve Board.

If you’re considering when to use your emergency fund, this is great news if you keep your fund in a savings or money market account. If the monthly limit has been suspended by your financial institution, you may have the flexibility to use your emergency fund to ease financial stress and cover unexpected, high-priority expenses without having to worry about the fees or account closures that can sometimes come with an excessive number of withdrawals.

To decide how best to use your emergency fund, be sure to check with your financial institution to confirm whether the monthly transaction limit on your savings or money market account has been suspended.

To provide easier access to funds during the crisis, Discover is not currently enforcing the monthly transaction limit on the number of certain types of withdrawals and transfers out of a Discover Online Savings Account or a Discover Money Market Account. You can rest assured knowing that your account won’t be at risk of closure due to excessive limited transfers out of your account.

Keep in mind that there is no set timeframe on if (or when) the transaction limit may be enforced again.

Keep saving during a recession if you can

When dealing with a financial emergency, it’s only natural to wonder if you should pull from investments, retirement funds or savings accounts not designated for emergencies.

But while it might be tempting to dip into investments and cash out, it’s important to focus on the long term as you decide when to use your emergency fund. After all, you alone can’t keep the market from going up, down or sideways, but you can keep your investments on an upward trajectory. “Think about your investment as a time capsule,” Wang says. “You can put stuff in, but you can’t take anything out.”

Opting to use your emergency fund instead of dipping into other high-priority, often long-term savings or investment vehicles will allow the accounts to grow over time without disruption.

As you decide how to use your emergency fund, you may want to dip into it, rather than long-term investment vehicles, to deal with a financial emergency.

“I have a rollover IRA that I won’t access until I’m in my 60s—that’s over 20 years away,” Wang says. “If I look back 20 years, we’ve had the dot-com bubble bursting, the financial crisis and the Great Recession, and we’re currently going through the coronavirus pandemic, but [my] IRA is still up because of the massive bull market between the Great Recession and this year. It’s best to leave it be because trying to time everything is going to be a lot of stress you don’t need at a time when you’re already dealing with other stresses.”

Recession-proof your budget

As you determine when to spend your emergency fund and how, you’ll also want to rework your budget to reflect your new normal—especially if you’ve experienced a change in your income. To extend the life of your emergency fund and determine how to use your emergency fund more effectively, seek money-saving alternatives or work to earn short-term, supplementary income.

In addition to cutting back on expenses, try to find ways to save money in your daily life. Maybe you can cook at home instead of ordering delivery, or you can finally tame your online impulse buying. If your financial situation gets more severe, you can also seek out community resources, like a local food pantry, to offset essential expenses that may be difficult to cover at the moment.

As you plan when to spend your emergency fund, you should also rework your budget to reflect your new normal, especially if your income has changed.

If you’re employed and have some extra time to spare, a side hustle can turn things you already do, whether at home or at work, into extra money. This option is a great way to supplement your current income and keep up with minor expenses without having to spend your emergency fund or dip into your savings accounts.

“After you’ve cut your expenses, you can look for ways to earn a little extra income, which may take the form of odd jobs, like walking dogs or delivering food,” Wang says. “You can also try to find jobs that are strictly online, like transcription or becoming a virtual assistant. If you’re willing to do a little extra digging, there are plenty of opportunities.”

Rebuild your emergency fund

After you’ve determined when to spend your emergency fund, you’ll likely be motivated to get it back to the state it was in before the emergency. The approach to replenishing lost funds is no different than building your funds, Wang says, and it starts by establishing a financial plan that helps you reach your goal in a sustainable time period.

“Experts say you should aim to get six to 12 months of expenses into an emergency fund, but you can’t be expected to get that [amount] within a month,” says Wang.

“Think about your investment as a time capsule. You can put stuff in, but you can’t take anything out.”

– Jim Wang, personal finance expert

If your budget has $100 of surplus each month after you’ve cut back on expenses, found money-saving alternatives or explored a side hustle, you can save your first $1,000 in 10 months. During that same time frame, if you can, try to find ways to cut expenses further so that you can reach that amount sooner or put your money-saving alternatives or extra income to use.

Start an emergency fund from zero

Forty-one percent of U.S. adults report that they would tap into their savings to cover an unexpected $1,000 expense—and the higher the household income is, the more likely they are to use savings to pay for unanticipated costs, according to a January 2020 Bankrate survey.

While the task may seem daunting, especially during rough times, you should consider building your emergency fund now.

Start with a goal that makes sense for your financial situation and don’t force yourself into saving up your entire emergency fund amount immediately, Wang advises. “It comes down to treating it like a savings goal and building a surplus into your budget so you can put it in an emergency fund.”

If you’re deciding when to use your emergency fund, but starting from zero, you may be able to build one by selling unused items.

If you don’t have a surplus, make one. Do you have a winter coat you haven’t worn in years or an old computer, coffee machine or television that still works but you don’t use? Sell them and reap the rewards of extra cash and a roomier closet.

Your emergency fund: There when you need it

Ultimately, an emergency fund offers an important financial cushion. Not only does it help cover unexpected expenses, it can also keep you afloat during rocky times. No matter the situation, if you’ve found yourself in a financial position where you need to act now, then now may be the right time to spend your emergency fund.

Now that you know how to use your emergency fund during a recession, you may want to master some more recession-proof strategies. Keep reading to find out how parents can learn how to protect their retirement savings from a recession.

1 The Associated Press-NORC Center for Public Affairs Research. May 2020. Economic Attitudes as the Country Starts to Reopen. https://apnorc.org/projects/economic-attitudes-as-the-country-starts-to-reopen/

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The Baby Steps Explained, And Why They Work!

This post may contain affiliate links. Please read my disclosure for more information.

These are the steps that introduced me and my husband to what financial independence is and for that I am eternally grateful. But a lot of important considerations get looked over if you just find a list of the steps and start crackin. The articles circulating the web are from two camps: Dave Ramsey people, who are relentlessly devoted to the man, and people on the other side, who do math. My goal is to neutrally answer the question: What are The Baby Steps?

The Baby Steps, outlined in the book The Total Money Makeover, are the foundation of personal finance guru Dave Ramsey’s debt free empire. And as with anything popular, they don’t come without their critics. I’ll be the first to say that The Baby Steps are not the right financial plan for everyone but I am 100% passionately convinced that anyone can do them, and they work 100% of the time.

1. $1,000 in a Starter Emergency Fund

The foundation to your financial house is your emergency fund. It’s in place to allow you to make rational financial decisions in an emergency. It also keeps you from going into more debt. It can’t be emphasized enough that anything you have to spend your emergency fun on should pain you. This money isn’t for a flash sale or unexpected gift, it’s for ER visits, car breakdowns, and job loss. If it doesn’t physically pain you to hand over the cash for it, it’s not for this fund.

2. Pay off all Debt Except Your House

This is the one DR get’s a lot of flack on. But good for him, if you’re not being criticized then you’re not changing anything. There is no such thing as good debt. Owing someone money strains a relationship right? But owing to a bank cuts out that relationship so we don’t feel bad about saying “you’ll always have debt.”

Owing money to anyone/thing is a liability and prevents you from becoming financially secure. Unfortunately, most people have settled for stable. But we all know boat rocks from time to time. That’s why becoming debt free is important. If your goal is to just get by then you definitely do not need to get out of debt. 80% of American have some form of debt and 69% see nonmortgage debt as a necessity.

If you want to be financially successful you need to get out of debt. What are the baby steps without The Debt Snowball: paying off your debts smallest to largest at a ridiculously fast past. I’m talking unsustainably fast, like when you’re done you won’t just be tired, you’ll be almost dead. The math will not make sense but don’t give yourself too much credit, if you were thinking about math you wouldn’t have taken out the loan in the first place.

Dave’s method is rooted in psychology. Little and more frequent wins upfront motivate people to keep persevering. By the end, when the wins are fewer and farther between, the habits you’ve built will push you through. Think of it like training a puppy, you use treats in the beginning but you’re not giving your 2-year-old dog a biscuit for peeing outside.

This is the hardest baby step but the rest are significantly less effective if you don’t finish this one. Anything is survivable for two years, that’s how long the average household takes to pay off all their debt (minus the mortgage.)

Learn how to budget to find extra money to throw at debt.

3. 3 to 6 Months of Expenses in Savings

This is where you can slow down, quit one of your extra jobs, take a vacation, or sleep for a week (or all of the above.) Once paid off all your debt you build your full emergency fund. 3 to 6 months is a good amount, enough for major illnesses but not anything your retirement account will miss. For most people it’s $10,000-$15,000. This amount will depend on your age, job volatility, and family size. Read my Emergency Fund Guide if you need help figuring this out.

4. Invest 15% of Household Income Into Retirement

15% is the minimum you’ll be investing until you retire, it will only increase from here. If you’re company has a 401K match start with that, then set up and max out a Roth IRA then go back to the 401K and throw the rest in there. Most people will be done for now but if you have more (first, be my friend) then you can invest in non-retirement related regular ol’ mutual funds.

Whether this is 15% of your gross or net pay depends on how much you want in retirement. If you have multimillion dollar dreams you’re definitely gonna go gross, but if you live a simple life then you’re fine with net. The point is not “how little can I put in?” (Fear not, you should be cured of that mentality in step 2) but “what do I need to put it?” Check out this tool from Chris Hogan that calculates how much you’ll need in retirement based on your goals.

5. College Funding for Children

There’s no rule for this one but Dave just recommends a 529 or ESA for this one. Maybe it’s because I don’t have kids or because 90% of our debt is student loans but I am not sweating this one. I’m not going to save $100,000 for my kid to go wherever they want for an education. I do plan on saving to match whatever scholarships they get and what they make in their paycheck. (We both worked through college why shouldn’t they?)

This financial journey we’ve taken has shaped our marriage and us as individuals. I’m not going to take away the difficulty of some financial lessons because I look forward to talking about those decisions with my children one day. As much as I wish I’d had a free ride in college (without working for my scholarships) I’m a smarter person for having done the hard work, and who doesn’t want smart kids?

6. Pay off Home Early

Baby steps 4, 5, and 6 are done simultaneously. By the time you get here DR says it takes an average of 5-7 years for people to pay off their mortgage. Sounds impossible on a 30-year mortgage? Not when you consider that this step comes roughly three years into the program. By this time you know how to save, be frugal, work hard, and you owe nobody anything so every penny you make is yours. Sounds doable for someone like that right?
Some people will point out the tax benefit that a mortgage gives you but again, don’t call yourself a mathematician just yet. The $2500 or so you save on taxes still costs you $7500 more than if you were mortgage free! You can see the actual math here.

Also read: Are you Ready to Buy a House?

7. Build Wealth and Give

This is the one we’re all trying to get to. At this point everything your own, you actually own. You don’t owe a cent to any bank, school, or store out there. Now every dollar that comes in you bank account goes only where you want it to go! This is the time to be generous, have fun, and look forward to retiring early. This is financial security; your money is no longer at the mercy of your obligations.

Why do the Baby Steps Work?

These steps break down the basic principles of personal finance into bite-sized tasks that anyone can accomplish. Most people don’t question whether they work numerically but they don’t believe it’ll work for their situation or lifestyle. The glaring truth is that just because these steps are “baby” sized doesn’t mean they’re easy.

These steps are accomplishable by any adult with the ability to say the word “no.”

So to anyone interested in Dave Ramsey’s rationale on the baby steps and success stories I highly recommend getting his book The Total Money Makeover. Otherwise, you have everything you need to start a new direction on your financial journey. The power is your hands and your bank account. What are the baby steps doing for you right now?

Disclaimer: This post contains affiliate links. Making purchases through these links gets me closer to Baby Step 7. Cheers!

The Baby Steps

The Baby Steps

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If you want to payoff debt fast, read this. Dave Ramsey’s baby steps helped my family pay off over $78,000 in 2 years. #debtpayofftips #babysteps #daveramseybabysteps #moneytipsformillennials

” data-medium-file=”https://i1.wp.com/www.modernfrugality.com/wp-content/uploads/2016/12/MF-Baby-Steps-Infographic.jpg?fit=120%2C300&ssl=1″ data-large-file=”https://i1.wp.com/www.modernfrugality.com/wp-content/uploads/2016/12/MF-Baby-Steps-Infographic.jpg?fit=240%2C600&ssl=1″ loading=”lazy” width=”240″ height=”600″ data-pin-title=”Want to payoff debt fast?” data-pin-description=”If you want to payoff debt fast, read this. Dave Ramsey’s baby steps helped my family pay off over $78,000 in 2 years. #debtpayofftips #babysteps #daveramseybabysteps #moneytipsformillennials” src=”http://www.homeadditionla.com/wp-content/uploads/2021/01/the-baby-steps-explained-and-why-they-work.jpg” alt class=”wp-image-5000″ srcset=”http://www.homeadditionla.com/wp-content/uploads/2021/01/the-baby-steps-explained-and-why-they-work.jpg 240w, https://i1.wp.com/www.modernfrugality.com/wp-content/uploads/2016/12/MF-Baby-Steps-Infographic.jpg?resize=120%2C300&ssl=1 120w, https://i1.wp.com/www.modernfrugality.com/wp-content/uploads/2016/12/MF-Baby-Steps-Infographic.jpg?resize=768%2C1920&ssl=1 768w, https://i1.wp.com/www.modernfrugality.com/wp-content/uploads/2016/12/MF-Baby-Steps-Infographic.jpg?resize=614%2C1536&ssl=1 614w, https://i1.wp.com/www.modernfrugality.com/wp-content/uploads/2016/12/MF-Baby-Steps-Infographic.jpg?w=800&ssl=1 800w” sizes=”(max-width: 240px) 100vw, 240px” data-recalc-dims=”1″>

Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.

Source: modernfrugality.com

What You Should Know About the Right of Redemption

  • Get Out of Debt

If you are a homeowner with a mortgage, you might have heard about your right to redemption. For those who have been struggling to make their house payments, this is one route that can be taken to avoid foreclosure.  

What is the Right of Redemption?

If you own real estate, making mortgage payments can be hard, but foreclosure is something that most people want to avoid. The right of redemption is basically a last chance to reclaim your property in order to prevent a foreclosure from happening. If mortgagors can manage to pay off their back taxes or any liens on their property, they can save their property. Usually, real estate owners will have to pay the total amount that they owe plus any additional costs that may have accrued during the foreclosure process. 

In some states, you can exercise your right to redemption after a foreclosure sale or auction on the property has already taken place, but it can end up being more expensive. If you wait until after the foreclosure sale, you will need to come up with the full amount that you already owe as well as the purchase price.  

How the right of redemption works

In contrast to the right of redemption, exists the right of foreclosure, which is a lender’s ability to legally possess a property when a mortgager defaults on their payments. Generally, when you are in the process of purchasing a home, the terms of agreement will discuss the circumstances in which a foreclosure may take place. The foreclosure process can mean something different depending on what state you are in, as state laws do regulate the right of foreclosure. Before taking ownership of the property through this process, lenders must notify real estate owner and go through a specific process. 

Typically, they have to provide the homeowner with a default notice, letting them know that their mortgage loan is in default due to a lack of payments. At this point, the homeowner then has an amount of time, known as a redemption period, to try to get their home back. The homeowner may have reason to believe that the lender does not have the right to a foreclosure process, in which case they have a right to fight it. 

The right of redemption can be carried out in two different ways:

  • You can redeem your home by paying off the full amount of the debt along with interest rates and costs related to the foreclosure before the foreclosure sale OR
  • You can reimburse the new owner of the property in the full amount of the purchase price if you are redeeming after the sale date. 

No matter what state you live in, you always have the right to redemption before a foreclosure sale, however there are only certain states that allow a redemption period after a foreclosure sale has already taken place. 

Redemption before the foreclosure sale 

It’s easy to get behind on mortgage payments, so it’s a good thing that our government believes in second chances. All homeowners have redemption rights precluding a foreclosure sale. When you exercise your right of redemption before a foreclosure sale, you will have to come up with enough money to pay off the mortgage debt. It’s important that you ask for a payoff statement from your loan servicer that will inform you of the exact amount you will need to pay in order save your property. 

Redemption laws allow the debtor to redeem their property within the timeframe where the notice begins and the foreclosure sale ends. Redemption occurring before a foreclosure sale is rare, since it’s usually difficult for people to come up with such a large amount of money in such a short period of time. 

The Statutory Right of Redemption after a foreclosure sale 

While all states have redemption rights that allow homeowners to buy back their home before a foreclosure sale, only some states allow you to get your home back following a foreclosure sale. Known as a “statutory” right of redemption, this right as well as the amount of time given to exercise it, has come directly from statutes of individual states. 

In the case of a statutory right of redemption, real estate owners have a certain amount of time following a foreclosure in which they are able to redeem their property. In order to do this, the former owner must pay the full amount of the foreclosure sale price or the full amount that is owed to the bank on top of additional charges. Statutory redemption laws allow for the homeowners to have more time to get their homes back. 

Depending on what state you live in, the fees and costs of what it takes to exercise redemption may vary. In many cases during a foreclosure sale, real estate will actually sell for a price lower than the fair market value. When this happens, the former owner has a slightly higher chance of being able to redeem the home. 

Source: pocketyourdollars.com