7 Ways to Save Money When You are Young and Naive
A lack of experience or knowledge shouldn’t stand in the way of smart money moves.
Just because you’re making payments, it doesn’t mean you’re financially stable!
Credit card debt has a way of creeping up and wreaking havoc with your budget. You think you’re fine, then suddenly you’re not. Unfortunately, most of us take too long to ask for the help we need. As a result, options to solve credit card debt can be limited by the time you ask for help. But if you can spot a credit card debt problem early, then you can cut the head off the financial hardship snake before it bites you.
It can be tough to recognize when you’re in trouble with debt. And finding the best way to deal with credit card debt isn’t always easy.
It can be a short leap from financial stability to financial distress thanks to things like your credit cards.
Credit cards and other lending tools, such as payday loans can seem like the right solutions for debt relief. But at a certain point, those tools that were helping you tread water are suddenly weighing you down. And you can sink fast.
So it’s critical to identify a debt problem early and find the best way to get control of credit card debt and find debt relief.
One way to maintain control is to check your debt-to-income ratio. This measures the amount of debt you have compared to your income. A good debt to income ratio is between 40-35 percent or less.
If you’re using credit cards to pay other bills, taking out payday loans to meet obligations, or borrowing money from family and friends these are sure signs of trouble. Putting off expenses, like doctors’ visits or home and car repairs is a bad sign, too.
Once you see your finances are in jeopardy, you need to take action. Procrastinating or acting like nothing is wrong is a recipe for disaster. The longer you wait – the number of options you have are less. So it’s in your best interest to start looking for debt relief at the first sign of trouble.
If you need help, get in touch with Debt.com so we can assess your situation and find the best way to get debt relief.
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To get started, simply fill out our form or better yet, call us now, and we’ll match you with the best solution for your situation, for free.
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This includes things like putting off going to the dentist or taking your car in for an oil change. If you have an expense that you’d normally be able to cover, but you can’t, it’s a sign you’re headed for trouble.
Credit cards are revolving debts. That means that your bills increase as you charge more. Eventually, they start to take up so much of your budget that you can’t afford other things.
Credit card minimum payment requirements should never use up more than 10% of your income. If you spend more than 10% of what you take home covering minimum payments, you have too much debt. You need to consolidate or explore options for debt relief.
Running credit cards up to their limit is a sure sign of trouble. It’s also really bad for your credit score. Credit utilization is the second biggest factor used to calculate your credit score. It compares total credit balance to the total available credit limit. It’s never supposed to be higher than 30% or it hurts your score.
It’s worth noting that your creditor increasing your limit doesn’t solve the situation either. If you max out a card and the creditor increases the limit, it’s like they’re giving you a license for debt problems. If you run up to the limit, the solution isn’t more credit; it’s to pay off your debt.
One of the biggest problems with do-it-yourself debt consolidation is that you can end up with more debt. Solutions like balance transfers and consolidation loans zero out your credit card balances. As a result, you can keep right on charging, even before you pay off the consolidated debt.
If you already tried debt consolidation but you kept charging, it’s probably only made a bad situation worse. This is how you end up with debt in the tens of thousands. Stop charging immediately and call a consumer credit counselor!
If you have a good budget, then savings is factored in as an expense. It’s basically like a bill you pay yourself every month. You should save about 5-10% of your income each month. This should be in addition to the free cash flow in your budget – i.e. the money left over at the end of the month.
If you’re not saving anything, it’s just a recipe for more debt. Every emergency expense will wind up on a credit card. And let’s face it, there are unexpected expenses all the time!
A balanced budget leaves free cash flow so you have some wiggle room. In a perfect world, you should only spend about 75% of what you take home each month. That 75% should include savings.
Savings plus free cash flow gives you extra padding for unexpected costs so your finances can handle hiccups. You can cover things like gifts for birthday and holidays, and insurance deductibles without batting an eye. So, if you are budgeted down to the last penny and just “getting by”, you’re probably headed for financial hardship.
Companies that provide debt relief services check consumer credit reports regularly. They do batch searches to find indebted customers, then send offers for relief in bulk. So, just receiving mail about your debt problem means you have a debt problem! For example, if you’re receiving offers for debt consolidation loans, it means a lender thinks you have enough debt that consolidation is worth your time.
Don’t just ignore the offers and continue paying your bills! Review each offer you receive, whether it’s through mail or emails. Compare rates and terms to see who’s offering the best deal to fit your budget. Make sure companies are legit instead of just spammers If you’re in doubt about which solution is right for you, use free credit counseling to compare them.
Again, it may sound silly to use snail mail as a barometer for life, but it’s true! Credit card companies want you to get new credit cards. And they’ll keep sending offers until you are no longer a good candidate for new cards. If and when that happens, it’s a bad sign. If even credit card companies believe you have too much debt, then you probably do.
So, once new credit card offers turn into offers for debt consolidation or balance transfers, beware! Take it as a sign you need to stop charging and find a solution.
This is how banks and lenders refer to any type of financing that charges high interest rates with no credit check. The best example is a payday loan. You can easily pay interest rates over 300% and finance charges often amount to $30 for every $100 financed.
If you have to turn to a solution that doesn’t require a credit check, that’s not a good sign. It means that you probably already know you won’t qualify for traditional financing. But AFS usually don’t solve debt problems; they make them worse.
Payday loans tend to have really strict terms for repayment that aren’t favorable to most people who use them. If you use a payday loan correctly, it can be a useful tool. If you pay the balance off within two weeks, then all those bad effects typically won’t apply. But most people who use payday loans can’t afford to pay them back that quickly. So, you end up in an endless cycle of automatic bank account charges and NSF fees.
Debt repayment should be a juggling act. You shouldn’t need to defer your student loans while you pay your credit cards. The same is true for tax debt if you’ve filed for Currently Not Collectible (CNC) Status. So, if you’re juggling debt payments, you have too much debt.
The good news is that you don’t have to solve debt problems one at a time. In fact, finding solutions for each type of debt you hold could balance your budget.
Article last modified on August 7, 2019. Published by Debt.com, LLC