Layer Savings To Reach Long-Term Goals with Strategic Planning

Debt is something that everyone has these days. Some have less amount of it and find it well manageable while other carry large amounts in multiple loan accounts losing their sleep and money over it.

  • These people who have large amounts of debt cannot save money for their better future or even for an emergency situation.
  • On the contrary, people who have little debts can reach to both their savings for retirements as well as paying off debts quickly very easily.

It all depends on your current cash flow, in and out. If you earn well and have fewer amounts to repay, you will save. On the other hand, if your earning is less but your debt payments are more, you will have less or no savings but will surely stay in debt more a longer time, if not always and forever!

In such situations, on useful approach that you can take is to pay your debts off more aggressively. You may assume that your savings will increase in the future as and when your income increases. This will help you to pay off your debts as well.

Layering savings

Assume that you can save up to $30,000 per year for the next couple of years by paying off your debts continually. This same figure may increase to $40,000 per year when you pay off a second mortgage.Such savings layering can transform a marginally successful looking plan into one that has a high very rate of possibility of success.

The primary aspect of layering savings is to evade lifestyle sidle. This is a situation when you suddenly realize that you have more expensive tastes in you as and when your income increases.

However, paying off debt is a longterm project for most of the people. In order to achieve this, you will have to do two things namely:

  • Prioritize your debts to find out which needs to be paid down before and faster and
  • Strike a perfect balance between retiring in debt and saving.

This will help you to pay off your debts to achieve your financial goals within its longterm context.

However, both of these are not easy tasks. You will need to make a perfect decision to find out whether or not you should use any extra cash to pay off your debt or stick to the normal way of repaying it so that you can maintain steady and free cash follow. There are a few other things to consider for this such as:

  • How much of cash flow you have
  • How comfortable you are with your debt or debts and
  • How you weigh debt payments, savings and investments.

This will help you to see which best option will work for or against you. This will also help you to avoid debt stress and the hassles of looking for debt relief options at NationaldebtRelief.com or any other for that matter.

Tips to make a choice

Especially, when you have enough money in hand left over and thing turn out to be going very well and as expected at the end of every month, it may be very difficult to make the right choice of options. To help you choose the right option, here are a few tips to follow:

  • First, you will need to have a general sense of the number that will determine your cash flow is good enough to pay your debt off and save.
  • Second, you will need to have design a detailed budget to arrive at the final number of your cash flow.
  • Third, you will need to prioritize your debts in order to manage it well as per your present economic situation.

Next up, you must find out your comfort level while carrying debt with you. Yes, it is true that most of the people in today’s society are comfortable in carrying debt but it may not be the case for you. It is all about the money you earn and have in hand for disposal.

You may be like the handful of people who simply do not like any debt amount against their name. Even if they incur any, such as while making a purchase using their credit card, they tend to pay it off as soon as possible regardless of what the numbers may imply.

Therefore, making a choice between saving and repaying debts off is a matter of:

  • Personal choice
  • Amount of money available at a particular moment to pay off the debt
  • The comfort level with or without debt and
  • The long term and short term benefits and consequences.

However, if you choose to pay your debts off quickly and then save, make sure that amount of decrease in savings associated with in in the short term is logical enough and will not threaten your ability with unbeatable challenges to meet your ultimate financial goals.

Concept of ‘carry’

You may have come across the term ‘carry’ when people speak about debt. You may have come across it a couple of times in this article as well but you may not know what ‘carry’ actually means.

The term ‘carry’ actually refers to the difference of the amount you pay in the form of interest on your loan and the amount that you could have earned as an interest on that amount saved if you invested on something else that yields. That is why debt is also considered as a ‘burden’ or ‘load.’

For example, if you have a credit card debt that charges 19.5% interest.You know that you will pay more as interest on the credit card debt than you can earn in a money market by investing the same amount. In such a case it is unwise to ‘carry’ the debt for inexplicable reasons.

Therefore, the last and probably the most important step for layering savings is to determine how much debt you should carry, and this is not a very difficult task. All you have to do is consider the rate of interest and the tenure of the loan.

 

Buying A House VS Renting It – Which One Is More Profitable?

There’s a widely held belief that buying a home is preferable to renting. You’ve probably heard your parents or even friends say that as long as you are renting, you just throw the money away, into a landlord’s pockets. Contrary to this popular belief, fewer and fewer Americans decide to own a house, claiming it is a liability at best, and a problem at worst.

Which one then is a better, safer, and more profitable option? This article examines the benefits of both buying and renting and tries to determine the answer to this question.

Benefits of Buying

You can Make Money from your Home

When you own your home, you can make money from it in a variety of ways. Renting out a room or even just car parking space could deliver a steady stream of income.

And if you have the right kind of mortgage, you can rent your house out whilst living somewhere else. Check out this rental property calculator to find out how much you’d stand to make.

House Value May Increase

When you buy a home, particularly if you have a considerable deposit, you can look at it as an investment. As long as you’re not planning to move any time soon, chances are its value will increase by the time you come to sell.

This, of course, depends upon the area in which you buy and the general economic climate. But if you sell your home 20 or 30 years down the line, you probably stand to make a profit.

Making Home Improvements Usually Reaps Rewards

When it comes to putting your home back on the market, you could find that improvements you’ve made to the property have increased your home’s value.

Often, well-executed home improvements pay for themselves and then some at the time of a sale.

Benefits of Renting

No Additional Costs

People like to say that renting a property is just like throwing money away. But whilst buying a home can be an investment, there are plenty of other costs involved.

If you buy a home with a mortgage, you’re spending a huge amount of money on interest payments over the course of that mortgage.

And that’s before you even get started on maintenance costs, insurance, the fees associated with buying and your utilities. By renting you avoid all of these additional costs.

The Current Economic Climate is Less Relevant

The economic climate has much less impact on your rental than it would on a bought home. Whilst rental prices may rise and fall, chances are they generally stay in line with wage patterns.

However, buy a home with a large mortgage and you’re more susceptible to changes in the economy and the housing market. 23% of Americans owe more on their mortgages than their home is actually worth.

This is called negative equity and unless house prices increase dramatically or these people hold on to their homes for a long time, they’ll struggle to sell their homes any kind of profit.

You Won’t Be Stuck Paying a Rate you Can’t Afford

Sometimes landlords choose to raise the rent. If this happens and you can’t afford the new figure, you have the opportunity to give your notice, pack up and find somewhere new.

When you have a mortgage, payments can rise with interest rates. But if your mortgage suddenly becomes unaffordable, you don’t have the same flexibility to reduce costs. You may end up having to organise a costly move to downsize or even lose your home if you fail to make mortgage payments.

Renting Frees Up Money for Other Investments

You may find that renting is actually a cheaper option for the moment. But that doesn’t mean you can’t invest in your future. The money you save renting rather than buying can be used to make investments in areas other than property.

Time to Ask Yourself Some Questions

Whether you choose to rent or buy will depend largely on your current circumstances. Ask yourself a few questions.

  • Do you like the flexibility of renting? Or would you like to settle down in one place to raise a family?
  • Do you have a big enough deposit to buy a home? And are current interest rates favourable?
  • How much are monthly rental costs? How do they compare to the costs of buying a home, maintaining it and paying a mortgage?

Predicting how much profit you stand to make from buying a home is impossible. It’s always something of a gamble. What you can do is work out the current affordability of both renting and buying and decide which option fits best with your life.

 

Sienna’s bio:

Sienna Walker is a self-growth and lifelong-learning enthusiast who enjoys seeking out new and unique ways of saving and earning money. She is also an active blogger and might often be found online, sharing her tips with others and participating in online discussions.

 

 

5 Signs Your Current Lifestyle Will Lead to Your Financial Demise

Your lifestyle is very closely tied to your finances, as it often indicates how much you spend. Living frugally or spending with abandon are two very different lifestyle experiences, and the results of each will clearly show in your bank balance.

Here are five signs that mean you are heading for a cliff edge in terms of your financial situation.

1. You’re not saving 5%

Advice from experts suggests that you should be putting aside at least 10% of your income each month, if not 15%. But if you aren’t even managing to put 5% in your savings, then you are definitely living beyond your means. It’s even worse if you haven’t been able to put any savings aside at all.

If you feel like you can’t save that much each month, then you may need to cut back on your spending. Maybe that means not going out to dinner, limiting yourself to non-luxury items when shopping for groceries, or cutting back on some of your subscriptions. If you’re already living as frugally as possible and still not making savings, then the truth of the matter is that you’re simply not earning enough. Downsizing your home and looking for another source of income could be the solution in this case.

2. You don’t have an emergency fund

Everyone should have an emergency fund – again, experts recommend that you have around nine months’ worth of living expenses set aside, the minimum amount of money you would need to live during that time if you didn’t have any income at all. Why? Because life happens. You might find yourself unable to work, or suddenly lose your job – even if you have been an exemplary employee so far. You could crash your car and have your insurance fail to pay out, or lose your home in an accident which is not covered by your policy.

Vet bills, medical bills, legal fees, a broken-down car or boiler – these are all expenses which can come up from time to time and really knock you for six. You need to be prepared for these situations. If you aren’t, then you could have a nasty surprise waiting around the corner which could leave you bankrupt or in heavy debt.

3. You’re paying overdraft fees (or credit card fees)

It came to the end of the month, and you didn’t have quite enough to get you through to the next payday. Now you’ve got overdraft charges on your account – or you might even have credit card fees to pay until you pay them off. This is a bad situation, as it is the beginning of a spiral into debt. In both situations, you are being charged extra money because of the fact that you didn’t have enough to begin with.

When this happens, you should see it as a huge red flag and stop spending right away. Don’t be tempted to put more things on a credit card.

An interesting technique you can use is to stop paying with your card at all, and instead use a cash envelope system. Withdraw your money for the week or the month, and divide it into envelopes for specific purposes: groceries, shopping, going out, and so on. When the envelope is empty, you just have to stop spending in that category – simple as that.

4. You don’t have a budget

Not having a budget in place might seem fine when you have enough money to make ends meet easily. However, it’s a problematic situation to be in when one of those emergency situations strikes. Suddenly, you are spending far more than you can afford, and you have to suddenly put on the brakes to try and learn how to budget for the first time.

Set a budget now, and learn how to stick to it, as well as what constitutes a realistic budget based on your spending habits. This will help you a lot when changes in your situation occur.

5. You spend out of fear

Fear of missing out, or FOMO, is something that can drive us to spend money on crazy things. Do you really need that new piece of Victorian furniture, or are you just scared that you’ll never get another chance like that again? Don’t let fear dictate your spending. Don’t overspend on going out just to keep up with your friends, or buy a house you can’t afford the payments on because you want people to be impressed. It’s a road to nowhere.

By recognizing these signs and making changes now, you might be able to turn things around. Don’t let the worst happen – get in control of your lifestyle now, and stop your finances from suffering.

About Alana: Alana Downer is a personal finance expert and an avid blogger, who often shares her money tips and tricks online. Alana is also a part of the team behind Learn to Trade – a useful resource for all those who wish to start trading and investing. Should you have comments or questions, feel free to contact Alana on her Twitter.

Saving Money The Victorian Way

header1Now we’ve rung in the New Year, many of us will be looking at our bank balances and feeling twinges of regret about our overspending during the holiday period.  According to Forbes Magazine, consumers who took on additional debt this holiday season added an average of $1,003 to their balances. The burden of debt can have a huge impact on both our emotional and physical wellbeing, leading to stress, anxiety, and sleepless night.

If you’re struggling with debt, or have simply overspent and would like to tighten your belt in order to get your budget back under control, then why not look to our Victorian past for a huge wealth of fun ideas on how to save money? Frugality and resourcefulness are both key buzzwords for describing the lifestyles of most Victorians, regardless of their class and social status. Victorian people made do with what they had and were incredibly resourceful when it came to finding what they needed without expense.  Here are some ideas on how you can adopt this philosophy to suit your own lifestyle:

Repair Rather Than Replace

Victorians didn’t have wardrobes overflowing with clothes in the way that so many of us do: they certainly didn’t feel the need to wear a new outfit for every social occasion they attended. Clothes were not purchased off the rack: each gown worn by a woman, for example, would be made either by a professional seamstress or (if finances didn’t allow) hand sewn at home. As a result, dresses were often repurposed and updated to suit changing fashions, and repaired when they were showing signs of wear, rather than simply discarded. Modern money savers can learn a lot from this Victorian model: why not learn some simple sewing techniques? It is much more cost effective to replace a button than buy a new coat, and small holes in garments can be repaired very simply with minimal skill and technique. By repairing rather than replacing clothes, and other items around the home, you’ll be amazed at how much money you can save: that money would be much better spend on removing the burden of your debt and living a debt free life than on continued consumerism and things you don’t really need .

Ditch Your Car

Very few Victorians had their own personal transportation: the Victorian era was the era in which public transport became more easy and convenient to use than ever. Regular buses, trams, and even a rudimentary underground railway system (which would later become the subway) were all established during the Victorian era. Taking public transport is easy, cost effective, and what’s more it’s also great for the environment. Contrary to popular belief, nearly all forms of public transport pose less of a cost to the average commuter than driving and, thanks to increasing congestion and traffic, you can often reach your destination much faster if you are travelling by public transport too. Why not ditch the car (at least for a couple of months) and see how much money you could save on gas, parking, and car maintenance expenses? You might even find that taking public transport is so convenient that you never want to jump in your car for simple journeys again!

Grow Your Own Vegetables

Why not make like a Victorian and use your backyard space to grow something useful, such as vegetables? No matter how big or small their outdoor space, the Victorians often utilized this to grow vegetables in order to ensure they had access to a nutritious meal without having to spend any more. What’s more growing your own vegetables is a fun and inexpensive hobby that you can involve the whole family in, and it provides a great lesson for children about where food comes from, as well as encouraging them to spend more time outdoors. Carrots, tomatoes, potatoes and cucumbers are all very simple to grow for a beginner, and you will soon be able to eat and enjoy the fruits of your labour, whilst watching your grocery store bills decrease as a result. Have a large yard and enjoy the idea of growing your own food? Why not consider buying some chickens and a small chicken coop: much cheaper to own as a family pet than a cat or dog, when you own chickens of your own you will always have a ready supply of eggs for breakfast!

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Coin Saver

8e57299da59090f6055a656487234dd5a83a48e9Keep the slim tubes that you can buy M&M’s in (usually near the register) and use them in the car to keep your change in. Easy to save up the change and makes it easy to save up and bring into the house to put in a change jar.