Debt problems don’t happen overnight. They are the cumulative result of habits that build up over time. Often times, when people find themselves overwhelmed with debt they wish that they could just turn back the clock and change their ways. Instead of lamenting over past mistakes, why not identify problem-causing habits now and stop them in their tracks? Here are five bad habits that you can stop now and save yourself trouble later on.
Bad Habit #1- Trying to Manage Money without a Budget
Budgeting is one of those terms, like dieting, that makes people cringe. But establishing and working with a budget is one of the best ways to keep yourself out of debt. When you have a budget, you know exactly how much money you’ll be spending and where that spending is going. If you see a great sale or want to splurge on something extra, you’ll either know that you can’t or you’ll spend from an allotted amount. When you work without a budget, you may end up spending money that you should have used to buy groceries, get a hair transplant, or buy that new grandfather clock for your home you have been eyeing. In turn, you end up using a credit card and building up your debt.
Bad Habit #2- Relying on Credit Cards for Daily Expenses
When you use your credit card to buy gas or groceries, like in the above example, you’re actually paying more than you should for those daily expenses. Most people run up their credit cards and then only pay the minimum balance each month. Instead of only paying what you spent, you’ll end up paying up to twice as much.
Bad Habit #3- Making Late Payments on Your Credit Cards
If you’ve found a credit card with a low interest rate, you may be out of luck when you make a late payment. Most credit card companies switch to a penalty APR if you happen to be late on your payment. The penalty APR makes it more difficult to pay off your debts quickly, which can cause you to pay more on your credit cards than you actually owe. In addition, many credit card companies charge a late fee of $29 or more meaning that every time you are late you are digging yourself deeper into debt. Read the rest of this entry »
Your credit score is an important part of your financial future. If there have been blotches on your credit score in the past, you may want to start working on fixing them before they become stains. Take advantage of the Fair Credit Reporting Act (FCRA) to get a copy of your credit report (free!) so that you can see what your current credit situation is. Once you know your credit situation you can determine how to best fix it. Not sure how much your current credit cards are really costing you? Make sure you check out our free credit card payment calculator to get an idea, then take the below steps to heart.
The following 5 steps will help you fix your credit - try them today:
- Pay Your Bills on Time: Paying your bills on time for even 1 month can raise your credit score by a number of points. Paying your bills on time for 12 concurrent months will raise it quite a bit higher. Putting together a written calendar or an on-line calendar can help you remember what days each bill is due. Some online banking systems will even allow you to set up reminds for when your bills are due, take advantage of these if you have trouble keeping track of the dates. Writing yourself reminds or setting up auto bill pay on your bank account or credit cards will also help, make sure that you will have enough balance in the account before the auto bill pay goes into affect so that you do not rack up unexpected fees for bounced checks or lack of funds.
- Keep Your Credit Cards in Check: The offer of 20% off at a local store to sign up for their credit card may be hurting your credit score. Opening these accounts to get the discount and then closing them does not always help, closed accounts stay on your credit report for a number of months and may affect your credit score. If you do use credit cards, manage them wisely. Having low balances will incur less fees, and will make you look more responsible. On the other hand, maxing out your credit cards can lower your score and make you look like more of a risk.
- Don’t rely on Bankruptcy: While bankruptcy will wipe away some debt, it does not wipe it all away and can actually cost you quite a bit to file. Filing for bankruptcy can cost you anywhere from $300-$1000, consider how much debt you will actually be wiping out before you file. Also, filing will be a bad hit on your credit score and in some cases can drop your score a few hundred points. Bankruptcy’s can be reported in some states on your credit report for up to 10 years, so think about your future as well as your current position before you file. Some lenders will not even touch applicants that have a bankruptcy on their file. Read the rest of this entry »