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Financial Freedom Blog

  • How to Reduce Your Debt

    Debt can be overwhelming, especially when it constantly feels like there is more going out than coming in. Too often when paying the bills becomes overwhelming, people choose to hide with their head in the sand and continue spending. Only reigning in those spending habits and developing a plan to eliminate debt will take that weight off their shoulders. With a little hard work and determination it is more than possible to lower and eventually eliminate personal debt.

    Step 1: Get Honest

    When you ignore your financial failures, the only person you are really hurting is yourself. To become financially solvent, the first thing you have to do is be honest about the situation you are in. Make a list of all debts, recurrent bills like utilities, and living expenses like fuel and food. Make sure to include some entertainment, clothing, and emergency cash in your list. This needs to be an honest evaluation of your expenses, and serve as the groundwork of a budget you can live with long term.

    Step 2: Eliminate What You Can Live Without

    Look for things you can shave off of your budget so that there is more to go towards your debts. Consider a smaller cable bill, a more restrictive cell phone plan, eating out less, and other basic changes that will result in a lower monthly total.

    Step 3: Set Up a Strict Budget

    Set up a strict budget and hold yourself to it. One way to do this is to use your checking account only to pay bills, and operate the rest of the time on cash. This will force you to focus on how much you physically have in your wallet, and may help to curb impulse spending. It will also force you to learn that when the money is gone, it’s gone. Stop using credit cards and writing bad checks. These habits only make it harder to pay off debts.

    Step 4: Consolidate to Lower Interest Rates

    When paying off credit cards, cash advance loans, or other forms of high interest debt, you can save money and lower payments by consolidating multiple unsecured debts into a single loan. Look into debt consolidation loans, and apply for one that is large enough to pay off any debts that are accruing interest. If you cannot qualify for a consolidation loan, talk to a financial planner or counselor who can negotiate payments and interest rates down, and facilitate a non-loan based consolidation plan.

    Step 5: Snowball For Faster Repayment

    Anytime you come into a little extra money, apply it to the smallest debt. This will eliminate that bill faster. Then when that bill is paid off, you can apply the payment amount to the next smallest bill. For example, if you have two credit cards, one with a 300 dollar balance, and one with a 500 dollar balance, you would focus on paying off the 300 dollar balance first. Then when the 300 dollar debt was completely eliminated, you would begin applying the 40 dollar monthly payment you had been sending to the 300 dollar credit card, to the 500 dollar credit card debt. This allows you to double up payments, and will eliminate debt significantly faster.

    Step 6: Set Goals and a Timeline

    Have a plan, set goals for repayment, and work towards them. Plan for when you want to have each smaller debt paid off, and when you want to be completely debt free. Creating these goals and sticking them will ensure that, in time, you are completely financially solvent.

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  • 3 Great Budgeting Tools To Help Get Control of your Finances

    The popular phrase “there’s an app for that” has never been more true. It seems there is an app for everything, and understanding how to use your smartphone as a financial planning tool can make a significant difference when trying to get your finances under control. Use these three budgeting tools to gain greater control of your spending and brighten your financial outlook.

    1. Mint

    The Mint app, which is based on Mint.com’s financial planning scheme, makes it easy to organize your finances from your smartphone or tablet. The program has PIN entry, designed to protect your financial information from would be intruders, savings advisor software, investment tracking, goal setting, graphs to analyze spending and more. Mint is really a one stop shop for basic financial awareness, and financial goal setting. Mint’s app will also set up bill reminders that send you a push message when something falls due, to ensure you are never late to pay a bill again. Mint’s app is free, but be aware that it is paid for by those who advertise through it. Lenders, credit card companies, investment advisors and other financial companies will be recommended by Mint to assist with your financial needs only if they sponsor Mint’s software.

    2. Fresh Xpense

    Fresh Xpense is the fastest way to record and track spending with a smartphone. The app allows users to simply take a picture of receipts they wish to record, and enter a description to track who the expense was made out to, how much the expense was, and what the expense was for. Receipts can then be uploaded into the Xpense financial planner to deduct them from mobile banking, track spending habits, and more. This is especially useful for those trying to limit spending in a certain areas, or track spending for tax purposes. Users should be aware, however, that there is an annual maintenance fee for using this service, which may outweigh its benefits.

    3. Splash Money

    Splash Money helps you track spending, manage assets, and follow investments from a single smartphone platform. Splash money allows you to program your banking information for every credit card, savings account, checking account, and investment account into a single resource, so that you can get all your financial assets working together for you. This kind of synchronization greatly simplifies creating a budget, analyzing spending habits, and creating income and expense charts. The app can also be connected to a desktop version of the application, so that it can be used at home, at the office, as well as on the go. The app uses Blowfish encryption services to ensure that your personal information stays private. Scheduled transactions can be synchronized with your calendar, so that you receive regular reminders before funds are drafted from your bank.

    Using these, and other financial planning apps, are the best way to keep financial stability in the forefront of your mind, even when on the go. Use them to gain greater control of your financial future.

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  • How to Make a Budget

    One of the best tools available for managing money is an individualized budget that tracks both your income and expenses. While many people have a difficult time making a budget and even a harder time sticking to it, those who do budget tend to save more money than those who do not. Budgets are typically calculated on a monthly basis and can be kept on a simple spreadsheet, or even a basic notebook. Your budget should include a different category for each type of income and expense you have, but you can group certain types of expenses together. For example, you may have a vehicle expense category that will include car payments, car insurance, and car maintenance. It is important that when you make a budget, you consider all of your expenses, even anticipated expenses.

    Determine Monthly Income and Expenses

    The first step to creating a workable budget is to figure out all your income for the month. This includes every sources of income you have, including your paycheck, revenue from any business ventures, interests and dividends. Once you calculate your monthly income, you will know how much you have to spend each month. The next step is to figure out what your different expenses are each month. You should start by listing your fixed expenses, which are your expenses that occur on a regular basis and you have very little control over, such as rent or mortgage, utility bills, health insurance, car payment, credit card bills and loan payments (particularly fixed loan payments if you used retail installment credit financing to make a purchase). Next you should list your discretionary expenses, including gas, food, entertainment, gifts, and clothing. You also want to include a savings category at the end of you budget to estimate how much you would like to save each month. Most financial experts suggest that you save at least 10% of your income each month.

    Adjust Budget to Meet Goals

    Now that you have made a list of all your income and expenses, it is time to compare your results and make some adjustments. Ideally, you want your income to match your expenses exactly. If you have more income than expenses, the adjustment is fairly simple. Just make sure that you did not miss any expense categories, and then add the extra to your savings or create a miscellaneous category for unexpected costs. If, however, like many people, your expenses exceed your income, you have to take a closer look at your budget. Since the fixed expenses cannot quickly be adjusted, you will have to look at your discretionary expenses and see where you can cut back. Some common areas that people decrease their spending is in entertainment, clothing and dining-out expenses.

    For many people, creating a budget, especially if it is their first time, can be an eye-opening experience that can reveal some unpleasant spending habits. Without a system for tracking your money, it is easy to spend too much money on things you do not really need and run out of money for things you do need, like rent and food. The good thing is that you are taking the first step to making yourself accountable to how you spend your money, which will help you create healthy spending habits. Budgeting also helps you prepare for future expenses and make better purchasing decisions, while saving for an education, a house or retirement.

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  • 5 Tips for Building Your Credit Score

    Everyone who has ever tried to get a loan, or a credit card understands the importance of their credit score number. A higher credit score not only improves your chances of getting approved for a loan but will lower your interest rates as well. A credit score is a designated number that is mathematically calculated based on information from your credit reports. Items such as how much credit you have available and if you pay your bills on time are considered when determining the score. This number is used by lenders to determine your creditworthiness, and helps them decide if they should lend you money and at what interest rate. While any score over 700 is consider good, a score of 740 or higher will help you get the loan you need at the best interest rate. Below is a list of five tips to help you build your credit score.

    1. Obtain a Copy of Your Credit Reports

    The first step to building your credit score is to look at the credit reports that play a vital role in calculating your score. One time per year you are permitted to receive a free copy of the three major credit reports, including Experian, Equifax, and Transunion. Once you receive these reports you need to examine them closely and make sure that everything on the list is correct. If you find any inaccuracies, you should immediately file a dispute to have the information removed. If you are past due on any debts listing on your credit report, you must contact the lender immediately and make arrangements to settle the balance.

    2. Sign Up for Automatic Payments

    Paying your bills on time is another important statistic used to calculate your credit score. If you want to have a higher credit score, it is crucial that you keep any late payments to a bare minimum. Typically, one late payment will not cause any major drop in your score, but if you have two or more late payments your score may take a substantial dip. To avoid late payments, it is a good idea to sign up for automatic payment whenever possible. This means that each payment will automatically come out of your bank account on the due date, ensuring you make your payment on time, every time. If you are in the military, setting up an allotment payment is similar and allows for automatic payment. For bills where automatic payments are not available, mark the due date on your calendar and always make payment a few days early.

    3. Set Up Payment Arrangements Before a Bill Goes to Collection

    Past due debt owed is another major issue that will lower your credit score instantly. The best thing to do to build your credit score is to stop any past due debt from being reported on your credit report. The way to do this is to contact any lender or business you owe and make arrangement to settle the balance. For example, if you have an unpaid medical bill, but you simply cannot afford to pay the entire total by the due date, contact them, and make monthly payment arrangement until the bill is paid in full. Many businesses and lenders will work with you to create a payment plan that you can afford. After all, they prefer to get small, regular payments rather than no payment at all.

    4. Keep Your Credit Utilization Low

    Credit utilization is another important factor that influences your credit score. This basically is the amount of credit you are currently using versus the amount of credit you have available. Most financial experts advise clients to keep their credit utilization amount between 10% and 30% if possible. Most people believe that it is best to have one or two major credit card even if you use them to the maximum allowance. This habit actually hurts your credit score because it increase your credit utilization amount. It is better to have several credit cards with small amounts of debt on each card than to only use one card for everything.

    5. Carefully Choose Your Credit Options

    You can improve your credit score greatly by being careful about your credit options. Try to build your credit over time instead of all at once. If lenders notice that you have applied for many loans or credit cards at one time, it can lower your credit score. You also should not close credit card accounts unless its unavoidable. You can stop using the account, but to close it completely will lower your score. The most important thing to consider when applying for a loan or credit card is to make sure that you will be able to make the necessary payments. Nothing hurts your credit more than overdue bills.

    Want to learn more? Here are a few links to some additional information:

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