You’re wanting to save money, you’re looking for better habits of money management, then you should always pay yourself first. Most recommend that you stash away 10% percent of your income every paycheck, this regardless of all circumstances. Treat it like it’s an additional tax burden.
Never spend it, even for any emergencies you may have. Keep this money in a high interest savings account. This money is dedicated towards all your fixed expenses such as insurance, income tax, Christmas gifts, etc.
Also have an “Emergency Fund” account and deposit whenever excess cash you have, such as getting money as a gift. With this account, you’ll be able to avoid any upcoming or unforeseen financial disasters which you may face, that will save you from borrowing money from high-interest lenders.
Borrowing From Institutions
It’s not recommended you borrow money unless you know you’re willing and able to pay it back, afford the payments. What failing to pay debts on time does is it causes severe emotional distress, not to mention it damages your credit.
If you do need to borrow, make sure that it’s not for wants, but for needs only, or on things which will increase in value. Some lenders prey on loaning money you can’t afford to pay back, especially the high-interest lenders.
Always Compare APR
If you really need to borrow, then decide who to borrow from beforehand by shopping for the best rates and compare. Search and find out who’s offering the best deals at that time, look for the loans which are offering the lowest Annual Percentage Rate or (APR).
Avoid Co-signing
Never co-sign on a loan unless you’re able and willing to pay it back yourself. At times, co-signers will end up paying off loans that they’re unprepared for, and then the obvious financial hardships follow.
There are a number of co-signors who now have negative credit ratings as a result, this because the primary borrower paid late. Most lenders won’t notify the co-signor before they report a repossession or delinquency to the credit bureau first.
Consolidation Loans
Consolidation loans can result in great savings if the new interest rate is lower, and if you don’t rack up any additional debts which are similar to what’s just been consolidated.
But buyer beware however, since consolidation loans can result in substantially more money being paid to the lenders. For instance, mortgage loans will usually involve closing costs, which increases the total debt.
Many refinances will involve reducing the monthly payment, but will increase the length of term, which then substantially increases the total interest that’s paid.
Borrowers, who refinances unsecured debt such as credit cards into a mortgage, also increases the risk of they losing their homes. Also, make sure that you keep your payments current until the older debts are paid off.
Most damage their credit rating or will fall into a bad financial situation because they counted on money that didn’t arrive as expected, and never spend this money before you receive it.
Establishing A Good Credit Rating
Avoid the trap of bad credit, never borrow more that you can afford to pay, and always pay all your bills on time. Know the ways on how you can establish a good credit rating, which includes:
• Get the lowest rate credit card that you can find, and then purchase something. Once you charge it, make sure that you pay off the entire balance that month, on time, never pay interest by allowing the balance to carry forward
• Establish a revolving line of credit such as overdraft protection against any checks which can bounce, but never use or consider it as a loan
• Get a small loan to purchase furniture or to buy a computer, and then pay it off as quick as possible, ideally within a few months
Use all of these steps to improve your credit rating.
Pay More Principal And Less Interest
In order to pay as less interest on loans as possible, begin paying more than the minimum monthly payment that’s required. Even just small amounts of principal that’s paid off can reduce the total amount of interest that you’d otherwise need to pay over the duration of the loan.
But before doing this, you need to make sure that your lender will accept these principal payments, and also find out what procedures are required, this to ensure that your additional principal payments are properly applied.
Making Bi-weekly Payments Instead
Since most get paid every two weeks, making bi-weekly payments on loans is an extremely convenient and a less painless way of reducing the term of your loan and interest.
For instance, if you make one half of your required monthly payment every two weeks, a bi-weekly period, what you’re doing is paying the equivalent of 13.052 payments yearly.
If you don’t get paid every two weeks, or if your lender doesn’t accept biweekly payments, you can instead pay the equivalent amount by making monthly installments. If you pay one twelfth 1/12 of the sum of 13.05 each month, you’ll meet the same bi-weekly advantage.
Some think that increasing the frequency of their payments to bi-weekly doesn’t accomplish much, but the advantage is that it pays off extra principal, which in effect reduces the term as well as the interest paid.
If you’re thinking of a bi-weekly program, pay attention to its fee if there is one. Some lenders will have larger set-up and transaction costs associated with these plans, which in effect doesn’t turn out to be much of an advantage at all.