Debt is the money borrowed with the intention of repaying with interest. When you can’t pay your debt, you can be sure to be in trouble in many cases. Debt management is, therefore, very necessary. Basic finance handling strategies can help you take better care of your money and expenses for a lifetime.
If you have accumulated debt over time, you will need debt counseling to free yourself from the financial trouble you are in. Following are some of the things to look out for that suggest that you have an accumulated debt:
- You have little to no monthly savings.
- You pay for food and gas and other basic necessities using a credit card because you are left with very little money after paying your bill.
- You pay for a credit card using the cash advance you get from another.
- You get a lot of calls from lenders.
- You fear that you won’t be able to make the minimum required monthly payments on your debt.
What is a Debt to Income Ratio?
Debt to Income (DTI) Ratio is a number calculated by dividing your monthly payments on the debt by your monthly income. You can assess your debt situation by calculating the debt to income ratio. When you are looking to get more debt, debt to income ratio is basically what lenders will use to assess your ability to repay the money that you are borrowing and manage repayments every month.
How Can You Calculate Your Debt To Income Ratio?
The calculation of the debt to income ratio is pretty simple and can be completed in three steps.
Step 1: Calculate the total minimum monthly payments on your debts
While figuring out the total amount you need to pay each month on your debts, take account of all your recurring debts, such as:
- Mortgage or rent
- Home equity loan payments
- Auto loans
- Student loans
- Furniture loans
- Minimum payments on credit cards
- Child support payments or alimony
- Any other debt
Exclude your basic expenses like gas, food, and utilities from the list.
Step 2: Calculate the total monthly income of your household
At this step, you simply have to add up all the money you receive each month. The money may include:
- Gross income (excluding taxes and deductions)
- Child support
- Bonuses or overtime
- Other income
Step 3: Finally, calculate your DTI ratio
Debt to income ratio can finally be calculated by dividing the total amount of monthly payments on your debts with your gross monthly household income and expressing it as a percentage.
For example, if the total monthly debt payments are $1800 and the monthly income is $3900, your DTI ratio will be 1800 divided by 3900, which is 0.46 or 46%.
How much is a healthy DTI ratio?
A debt to income ratio of 36% or less is considered healthy, meaning you can easily settle your monthly debts. However, you should avoid acquiring more debt.
If that number exceeds 43%, you should consider yourself in trouble. And you must seek professional help if your debt to income ratio is more than 50%. Legal financial advisors can help you come out of that financial crisis.
Getting up after you have fallen is relatively easy than getting back up after you have gone bankrupt. It is the accumulation of all your bad credit habits and mismanagement over the time that has finally come alive to eat you up – and it did. The only way out is to file for bankruptcy, which is not an easy way out. However, it is not a difficult situation to stay at, only if you understand the process and have enough patience to let it all pass. It may seem overwhelming and daunting to re-establish your credit profile all over again, to attain a good credit rating and to regain your lost confidence.
If you know how to see the wisdom behind all the happenings, you would see bankruptcy as a fresh start, a second chance to avoid repeating the same mistakes and to prove yourself in front of the credit world. Your second chance can be very rewarding if you plan and strategist what your next step would be. You do not want to go wrong now. Which is why there are 3 steps that you need to take after filing bankruptcy.
Stop letting your mistakes haunt you
This is the first and the most important step before you go any further. You cannot allow your mistakes, even blunders, to keep haunting you and mocking you back. It will only eat away your confidence and you will feel stuck in the place you have landed. It clouds the way ahead and does not let you see the opportunities that you seize. The right attitude here will as your armor. You need it.
A lifestyle change
The next step is obvious; you cannot keep living the way you did before. Your lifestyle must change to accommodate your current financial situation, a situation that will take time to get better. Cut down your unnecessary expenses. Identify your necessities and essential expenditures. Cut down on luxuries to save money in order to pay off your debts. If you have filed for chapter 13 bankruptcy, you will have to do this at all costs. The authorities will ask you to reorganize your expenses, and until you have paid all of your debt off, it will stay this way. If you have filed for chapter 7, then you will be asked to use your money carefully, No credit will be given to you at any circumstance until your case has been discharged.
Reestablish your credit rating
Once your case has been discharged, the next step is to build your credit profile. It is a misconception that you cannot get any credit, once you have gotten the word “bankrupt” on your credit report. What you need to do to improve your credit report. For this, start paying all your bills on time. If you have a house, then do not miss out on any of the mortgage payments.
After that, get a secured credit card. It is not as same as the regular credit cards, but it is the stepping-stone you need to cross. It allows you to deposit a certain amount and that amount becomes your limit. They will see how you are repaying your loans, and according to that, will up your limit whenever they feel you are finally learning from your mistakes.
Online Shopaholics – Read This to Save Money!
As if being a conventional shopaholic wasn’t enough.
Online shopping has made shopping ‘cool’. This is an industry that is booming like no other. The idea is simple – why go to a mall to buy things when you can shop from the convenience of your home using your credit card? The convenience online shopping offers is commendable. There are countless shopping websites surfacing every day. Some are legit, some not. And they all contain a large variety of products for you to choose from.
However, convenience comes with a problem. People who were not so much into shopping are buying stuff regularly and those who loved shopping are turning into online shopaholics. The funny thing is that most online buyers are also the biggest critic of the system, as some products don’t turn out how they looked on the website, especially the clothing products.
Nevertheless, the craze is real and so is the compulsive spending of online shopaholics. If you are one of those people, you probably know that the craving for shopping costs you a great deal of money and when there is a mess-up (which is usual in case of online shopping), you end up losing money for no benefit.
That is where our guide will help you. Since your grandma probably won’t be able to give you some tips to save money while shopping online, let us do that for you. Here we go:
Know your battleground.
Not every online shopping website has your best interests in mind. Some of these websites are absolute scams and they tempt you with attractive packages. Online shopaholics sometimes tend to shop on whatever website they come across for a particular product. If the website is a scam, you will not only lose the money you have invested in that product, you can also face severe financial fraud as your credit card details and personal info you entered can be used against you.
Do not rush, do some research.
This one is among the most effective tips to save money – and even your grandma might have told you this. Compare the prices of the same product on different websites before putting it on the cart. There are some websites that only use the fancy portal to lure you into buying expensive stuff, while some other retail websites offer the same product at a cheaper rate. Some amount of research is only going to benefit online shopaholics.
Discount coupons are your best friend.
Look for the best discount coupons available and opt for a store that offers sale. This is among the most valuable tips to save money for online shopaholics. You are more likely to find sales on reliable online stores than actual retail shops in the mall. Still, make sure that the discount does not compromise the service or quality of the product.
Review your buys.
A lot of people check out from an online store in a hasty manner and then end up paying more for it. There is no lack of horror stories of people who received the wrong size or they clicked on “2” instead of “1” in the quantity section. Always be thorough with your review of the purchases.
Online shopaholics can cater to their shopping desires while also being smart. The above-mentioned tips to save money can be really useful. Happy (smart) shopping!
Budgeting For Holidays – Why it’s Important and How to Do It
Holidays are a great time to relax, retract and rejuvenate. These three R’s play a key role in anyone’s life and keep their sanity alive. That’s why the holiday season is considered as the happiest time of the year all over the world.
People leave no stone unturned while planning for the holidays. What they will do, what they will eat, where they will go, what they will buy and most importantly, what they will do to make these holidays different from last year’s. While all this seems pretty straightforward, it’s not all fun and games. Holidays come with a lot of expenses and no matter how strict you are with your money, you end up spending a little more than you would have liked.
Buying gifts, going for dinners, outings, picnics, and other things, all require you to spend a good amount of money. If you don’t have a plan to monitor your expenses during the holiday season, you will surely regret it later. That’s why budgeting for holidays is important.
Budgeting for holidays will require you to thoroughly assess your financial standing, including your debts if any, and your future expenses. If you are already going through a tough time financially, you should think about tossing the list of gifts out of your window.
Here are some effective steps that will help you in budgeting for holidays and be sticking to that budget.
1. Make a list of all expenses
The first thing you should do is make a list of all your likely expenses in this holiday season. This list will include all the gifts, traveling expenses, wrapping papers, donations, decorations, and holiday cards. You can also add the outings you have planned. This is a crucial first step in budgeting for holidays because it gives you an idea of what things you need to cover.
2. Set a spending limit
At this step, you need to determine how much money you can afford to spend on these holidays, especially Christmas. While budgeting for holidays, it’s important that you consider only the amount that you had as “extra savings” or the amount you had already set aside for Christmas.
3. Allocate money to each category of expenses
Once you know how much you have in hand, you can start dividing and assigning that money to different categories. For example, traveling can be counted as a separate category and the same goes for dining, gifts, and decorations, etc.
4. Make a shopping list
The next step in budgeting for holidays includes making a list of your holiday shopping. You must have some ideas in your mind about what gifts you want to give to specific people. The price range of these gifts should strictly not exceed your budget. Look for gift stores that offer sales.
5. Finally, monitor your spending
It’s time for you to shop according to that list and while you are at it, track your spending. You should carry your budget sheet with you, cross off the things as you buy them, and makes sure you are not exceeding your budget. This will also help you make adjustments if needed. Also, keep an eye on your budget sheet as you go about other expenses throughout the season.
Budgeting for holidays will help you a lot in keeping your finances in control while having the fun that you deserve this holiday season.
5 Tips on Avoiding Fraud with Better Financial Awareness
Every day, countless people around the globe fall victim to fraud. Identity theft, data breaches, online scams, and other financial frauds have unfortunately become quite mainstream. While new and improved technology has made things easier for consumers, it has also opened doors for fraudsters to design new ways to penetrate people’s financial details and rob them.
The fraud prevention authorities keep on working towards building a fraud-proof system, but they still haven’t been able to completely eradicate the scam mafia and frauds. To be fair to them, complete prevention doesn’t seem practically possible considering the growing reliance on money in today’s world.
However, even under these circumstances, better financial awareness and a sense of responsibility can protect people from becoming victims of fraud.
Following are some essential tips to avoid fraud and practice financial awareness:
1. Keep your financial information to yourself.
‘Phishing’ is a very common scam where fraudsters contact you via email or text claiming they are some retailers or government agencies and try to extract financial details from you. No matter what happens, you must not give out your sensitive financial information to anyone or any organization you don’t know. Your bank or a genuine credit card company will never contact you in this manner and ask for your information.
2. Don’t reveal your Social Security number.
One of the most crucial and yet less discussed tips to avoid fraud is this. A lot of people get emails or texts asking for their Social Security number for whatever pretended reasons. Some websites even ask you to enter that information. Don’t do it. These are mostly scams. An effective financial awareness involves the understanding of what information is confidential and what is the right place to use it.
3. Shred your ATM receipts.
One common mistake people do that puts them at risk of fraud is that they don’t shred their ATM receipts. Some people don’t even take the receipt out and some only discard it on the floor at the same ATM. Fraudsters can use these discarded receipts to carry out identity theft or account fraud.
4. Create strong passwords and change them frequently.
“12345” or “fluffy” is not going to do anymore. Today, when people are required to set passwords on a lot of websites and accounts, they usually go for a simple password and use the same everywhere. Cracking a simple password has become a lot easier and even the repeated passwords are easy to extract. Therefore, one important thing that shows financial awareness is keeping strong passwords that include a combination of letters, numbers, and special characters. Try to keep different passwords everywhere and also, change them often. This can be considered as one of the basic tips to avoid fraud.
5. Double-check the authenticity of an online shopping website.
Online shopping has become prevalent. Massive traffic on these websites has allowed scams to take advantage of it. There are a lot of fake shopping websites. Always opt for a reliable and well-established shopping website and before entering your personal information, check if the website is legit. No list of effective tips to avoid fraud can be completed without this point.
Scams will continue to operate and fraud will continue to affect people. But, you can still use your financial awareness to protect yourself. The above-mentioned tips to avoid fraud are surely going to help you.