The Pros And Cons Of Borrowing Money

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There will be a time in everyone’s life when you want or need to buy something, but don’t have enough cash to do so. When this time comes, you usually have two options; You can either not buy the thing that you wanted/needed to buy (or buy it later, when you have the money spare), or borrow the money from someone. If it’s an emergency or you’re really impatient then borrowing, whether it be from a loved one, the bank, or an online lender, will probably seem like a great idea. However, there is a lot to take into consideration before you borrow money from anywhere. Here are some pros and cons that you should know about.

+ Covers Emergencies

There is always a chance that something can go wrong in life, and sometimes, money is required to fix this problem. It doesn’t matter if you’re boiler has just broken, you get an unexpected bill, or you’ve just run out of money if you need money quickly then applying for cash loans online is usually the first thing that you think of.

– It’s Not Free

Everything comes at a cost, and borrowed money is no exception. When you borrow money, the interest rates can get incredibly high, with the late payment fees being even higher, so you need to be sure to make payments when they’re due and read all of the small print before applying. Even loved ones sometimes add interest to money you’ve borrowed, but, even if they don’t, if you can’t afford to pay the money back, the strain on the relationship is a high cost to pay.

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+ You Can Make Large Purchases

Unless you have a large amount of money saved, there are some purchases that you simply can’t make unless you borrow money. A house, a car, and business premises are the biggest examples. Your regular income wouldn’t be able to cover the cost of these things, but you can still buy them if you borrow money.

– You Might Not Be Able To Pay It Back

As I’ve already mentioned, there is always the chance that something can go wrong. Unfortunately, if there is an emergency, or you got paid less one month, you might not be able to make a payment, which means that a late payment fee might be added to the loan. If this happens a few times, the debt could get so big that you just can’t pay it back.

+ Opens Doors And Opportunities

Borrowing money isn’t always ideal, but sometimes, it is exactly what you need to improve your life one way or another. Buying a car would mean that you can travel further for work, which means that you might be able to get a better job. You could even take out a loan to start your own business, which could prove to be incredibly successful.

People borrow money for all sorts of reasons, but you should always make sure that you’re borrowing for the right reasons, and that you have the cash to make the repayments.

Credit Card Debt – Are You Paying Thousands in Extra Interest?

Millions of people around the world use credit cards and despite our best intentions of clearing the balance very month, most of us will carry a balance. In fact the average outstanding credit card balance is $5700 in the USA (source ValuePenguin) and is over £2500 in the UK.

Chances are when you take out a new credit card you will be offered the opportunity to pay via direct debit either the full balance or the minimum amount every month. Since most people use credit cards as flexible spending for emergencies or contingencies it can be difficult to commit to paying off the full amount. This is especially true when transferring a balance from another card.

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Statistics show that over 65% over credit card holders carry a balance from month to month

Did you know that if you opt to pay the minimum balance you could take over 20 years to pay off the card? It is far better to agree a fixed monetary amount each month than the percentage which is often suggested by the credit card company.

The video below explains in more detail and you can prove it for yourself by using a credit card calculator

For more financial education tips and videos visit The Personal Finance Academy

Skip The Rut & Avoid Debt

When it comes to money, people often find themselves stuck in a financial rut because of bad management. The best way that anyone can avoid getting themselves into a mess is to be proactive about how money is managed and spent. The trouble is, money is such a tempting thing and getting into debt is far easier than it should be. Many people fall into the trap of short-term satisfaction with credit cards and loans and then have to suffer the long-term difficulties of making repayments.

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It can be very easy to run up a mountain of debt through credit cards as they are so very easily available. Trying to avoid being in a rut means a lot of self-control and willpower, and only paying for things as you can afford them. The trap happens where you need to borrow and repay money on time to build an efficient credit rating, and that can spiral out of control. There are companies that are out there like creditrepair.co that can assist with fixing your credit rating as you need it, but it sometimes can be better to avoid the bad credit in the first place. There are some ways you can manage your money and not get stuck in a rut of debt, and we’ve got some of those below for you:

Keep Employed. Okay, so it’s not always possible, but maintaining a secure level of employment is a great way to minimise debt. Secure income means not having to turn to other means to get things paid, as you have a regular amount coming in each month. By ensuring you don’t lose your job, you can keep things smooth and ticking over correctly. Losing a job can happen randomly and sometimes this can be without fault, and you want to avoid this happening as much as possible. Maintain a network with your colleagues and clients so that if recession hits and you are made redundant, you have contacts in your field to fall back on.

Pay Taxes. Taxes are one of those bills that you must pay no matter what happens. Owing money is hard enough but owing the IRS is a whole other ball game. Make your tax payments a priority as early as possible in the year, and be vigilant about keeping money aside each month to pay for your taxes. Contacting the IRS and enquiring about extensions or making part payments is going to help if you feel like you can’t manage your usual tax bill, but if you don’t call them that’s where the issues begin. Avoid that debt by being organised.

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Ultimately, you have to be savvy. When it comes to buying the things that you want, only get the things you can afford. If you can’t afford what you want, then it’s time to save up and wait. Don’t just move onto the credit cards or tap into your savings as you will likely need your savings! Be financially smart and you can reap the reward as you go!

Are You Setting A Good Example For Your Kids In How You Handle Debt?

Teaching your children about looking after their finances is something that every parent needs to think about to make sure that they are giving their children the best attitude towards money. But when it comes to teaching our children about the importance of every aspect of finance, including debt, are we, as parents, the best example? The amount of debt that we all tend to have now is mounting, from credit cards to essentials like a mortgage, and so we can all benefit from learning, not just how to speak to your children about debt, but also to set a good example about how we handle financial struggles. So how can you do this?

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Communicating The Effects Of Debt

This is the best place to start, depending on the ages of your children, you may want to sit them down and very simply give them a little bit of handy advice about the effects of debt. You may remember yourself, as a child, seeing your parents discussing bills and the atmosphere getting quite heated, so to avoid these kinds of scenarios, you would be better off speaking about the effects of debt to your children. It can be a difficult line to tread, but many debt advisory companies talk about the impact of things like bankruptcy on families, and they say the best approach is to be open and honest. You never know, they may be more understanding about why you have to do an extra shift at work.

Show Them You Are Taking Positive Steps To Get Out Of Debt

Another way of setting that example is to try and get out of the hole that you dug for yourself. If your children can see that you are making valid attempts to redress the balance, this will teach them a very valuable lesson about money, the fact that you’ve made a financial mistake and are trying to rectify the problem speaks volumes. Not that debt should be something that is okay for your child to get into when they are older, but understanding that there are resources out there to help you get out of financial problems, like various websites such as debtrelief.xyz, and debt consolidation companies. But rather than teach your children the lesson that it’s okay to get into debt because there are things around to help you, it’s more important to teach them proper habits about spending money.

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Practice What You Preach

Setting a good example for any child, regardless of their age, is something you need to think about. Many parents talk the talk, but when it comes down to walking the walk, it never happens. Again, this may be something you remember from your childhood, your parents telling you not to do something but they did it anyway. And while hindsight is a wonderful thing, if you really want to set a good example for your children in how you handle money, you need to make sure that they see you handle money in the right way. From paying bills promptly to being methodical with your finances, these are all things to think about.

Being more methodical with your money will benefit you anyway, so why don’t you start to do this now? With infinite financial resources online and even financial calculators like thecalculatorsite.com, setting an example for your children in how you handle it is an excellent life lesson for them to learn as soon as possible.

40 Tips To Avoid (And Manage) Being In Debt

40 Tips To Avoid (And Manage) Being In Debt - debt prison image

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If you find yourself in debt, or are heading in that direction – it’s not a nice feeling. The stress of debt can have a huge impact on your daily life and how you live it.

Luckily, there are plenty of tips that you can add to your lifestyle that will prevent this from happening. Some may be better suited to you than others, so have a read through and see what works best for you.

  1. Use cash for all your purchases instead of your credit card. Leave that to pay for your house and your car.
  2. When you get paid every month, put away 60% of your earnings into a savings account, and keep the 40% to do with what you wish.
  3. Make a proper spreadsheet with all your monthly payments including your bills, grocery shopping, interest amounts, etc., and make a total of all your balance. Then you can see exactly what you owe, what you have, and what you need.

Update it every month as you start paying off more and more.

  1. Every time you get a little extra money coming in, put it into your emergency fund so you can use it to pay off debt.
  2. Speak to a credit counselor and look at websites like DebtSolutionsReviewed’s review for more information and advice. You may learn how to make a plan of action (and stick to it!)
  3. Don’t use your credit card to get through the next month’s paycheck. If you do this, you will just get further into debt.
  4. Don’t pay off too much of your debt at one time. Make sure that you still have enough for your weekly expenses without starving yourself.
  5. Don’t eat out in fancy restaurants, or order takeout. Cook your own meals with the food that’s in your cupboards, fridge, and freezer.
  6. If you’re bored, invite friends over or go to their house and entertain yourself that way. You don’t have to splash the cash on nights out to have fun.
  7. Don’t ever use your emergency account to pay off your credit cards – that defeats the whole point of having one. – Pretend like it’s not there.

 

  1. If you know you have expenses coming up in the near future, make a note of them on a calendar so you won’t be surprised when you need to pay for them.
  2. Give yourself a budget to live off every week. Try your best at paying the absolute minimum on everything you purchase, like the brand of chips you by – get the stores own instead.
  3. If you’re living with your other half, make sure you’re both on the same page when it comes to money.
  4. If you know you have bad spending habits, find a way to manage them. Don’t go cold turkey – that will most likely make you splurge even harder. Instead, give yourself a limit.
  5. Stay focused, no one said it was going to be easy. Paying off debt is very stressful, especially when you realize it isn’t going to happen overnight. But as long as you know that it won’t last forever, and pay attention to the number going down – you will get through it.

 

  1. Stop it! If you find a good enough excuse to buy the new iPhone, even if the phone you have now works perfectly fine, and you’re $30,000 in debt – question what your goal really is.
  2. If one technique isn’t working for you, don’t use that as an excuse to give up – find a new technique! There are so many out there.
  3. Change your behavior and attitude if you know that it is the thing causing you to overspend. One way to do this is to distract yourself by something other than spending – like playing music or working out.
  4. If you’ve been in debt for the last three years, be realistic when it comes to paying it all off. It will most likely take you longer than three years to pay it all back.
  5. Although you need to budget your lifestyle, it is still important to have a social life and get out of the house once in a while to decompress a little. You don’t want to end up not enjoying life just because of your financial situation.
  6. What is necessary? Do you need the sports channel? Do you need all that data on your cell phone? Do you have to buy the expensive brand of ice cream?

If it’s not a necessity – get rid of it for now. You’re just wasting precious money.

  1. Get creative when it comes to doing things around the house and in your personal life. If you feel like you need some new clothes for the summer for example, don’t go out and buy a new wardrobe, instead find creative ways to cut up and sew your clothes, turning them into something awesome.
  2. Don’t keep borrowing money – that’s how you got in this situation to begin with. Stop the credit cards, stop the car loans, stop the home equity lines, and so on. If you know you can’t afford something with the cash that you have in your wallet – you can’t afford it at all.
  3. If there’s something that you really want, save up the money like everyone has to do, and when you have it, buy it with cash. By the time you have actually saved up for what you wanted, it will feel so much more gratifying when you buy it. Or, you may not even want it anymore.
  4. Use an app or download a software specifically designed to track your spendings, and split everything up into different categories. Not only is this efficient, but it will make it easier to see where your problem areas are.
  5. Give yourself some wiggle room, as you never know what life is going to throw at you. Always be prepared for the minor setbacks.
  6. Unsubscribe from all the alerts and notifications you get sent about your favorite online stores. They will only persuade you to pay for things you don’t need – all while making you think it’s okay because it’s on offer. – Don’t fall for it.

 

  1. Downsize where you’re living. If it’s bigger than what you need, you may be paying more than you should, so move into somewhere smaller.
  2. Figure out what drives you to save up. This may be your children or your passion. Whatever it may be, think about that whenever times get hard to remind yourself of why you’re doing this.
  3. If you know you have a raise coming up, make a note of it and use all of the extra earnings to pay off your debt.
  4. Don’t see money as something that is for spending. For example, if you plan to buy a brand new flat screen tv, calculate how many hours it took you to work for the amount of money it is. You may realize that a tv isn’t worth all of that hard work you’ve been doing over the last few weeks.
  5. Learn about the alternatives instead of assuming that we have to pay the asking price – 90% of the time, it’s not the only option you have. Get a second-hand oven, shop at charity shops and cycle to work.
  6. Figure out whether you’re buying things because you actually need them, or if you’re just paying for them because everyone else is.
  7. Don’t think about your debt – think about your wealth. Don’t tell yourself you are trying to get out of debt. Instead, think of it as your current financial situation that is contributing to your overall wealth. Now you’ll see it as a positive, rather than a negative.
  8. Start by paying off the smallest debt first, that way you get the ball rolling, and it may be the ‘pick me up’ you need to show you that it is possible to do it.

 

  1. Understand that you will have to make sacrifices if you want to pay your debt off – it’s just part of the game. As long as you’re willing to do so, you will get through it.
  2. Write yourself a note that says “DO I ABSOLUTELY NEEEEED THIS???!!!!! And stick it in your wallet next to your cash.
  3. Get supermarket fliers with all the offers on, and use that to plan your weekly grocery shop. Look at all the things that are on promotion, and use them to make your meals.
  4. Plant seeds in your garden and use them to grow your own tomatoes, peas, potatoes, herbs and more. You will, in time, be able to use what you have to live a sustainable life. If you don’t have a garden, you can keep some pots by your windowsill in the kitchen.
  5. Just think about the feeling you will get when you have paid everything off. – Freedom! Just imagine it.

 

So as you can see, there are tons of tips and tricks to avoid, (or manage) being in debt. Put as many in use as you can, and see what works best for you. Keep trying until you find your ‘way’.