Avoiding Financial Pitfalls

Times are tough. And it will come as no surprise, that we are in a period of profound economic instability. Even for the more wealthy and affluent among us, the financial problems of today can be disconcerting. So when it comes to attaining significant financial goals – buying a home, owning a car or educating your children – setbacks such as major credit card debt tend to stand in the way of your peace of mind and financial security. But however traumatic, none of these problems is without a solution.

Alternative Education Funding

"Personal Debt Meter" by Stuart MilesNaturally, every good parent wants the best for their children in terms of educational and employment opportunities. And when the cost of higher education is on the increase, it is understandable that parents are worried about what the future holds for their children. However there are alternatives to conventional college funding. If you’ve not been able to raise enough money yourself, there is still the distinct possibility that your child may be able to attain a scholarship or if necessary a student loan. But these days online education is driving down the costs of alternatives even while traditional education costs soar.

Work Off That Credit Card Debt

This is a big one, for credit card debts and loans are a large part of why the world is in the position it is in at the moment, financially speaking. The first thing you need to do though is “stop the bleeding”. First, stop using your credit cards completely. Don’t make a single new charge. Doing this will enable you to grasp the concept of only living off what you are actually earning. Once you have begun to live within your means, you can then think about paying off the debt on the card with the highest interest rate. Put every spare cent toward knocking that balance down. Once you’ve managed to pay it off entirely, your benefits begin to snowball because the saved interest makes it easier to pay off the card with the second highest rate.

Another method that is a bit more controversial but has some adherents is to pay off the card with the smallest balance (no matter what the interest rate). If you only owe a few hundred dollars on a gas credit card pay it all off. It will help build momentum as you see one bill entirely gone. The good feeling will help motivate you to tackle the next bigger bill. Although you may pay a bit more interest this way, you will feel better about it and may stick with it because you are seeing progress.

Another  way to reduce your credit balance that may seem counter intuitive is to get a Low Interest Rate Credit Card preferably a zero percent card if you qualify and then transfer your balance to that card and do absolutely everything you can to get it paid off before the grace period runs out. That way you not only save on the interest but you have a deadline to motivate you. Often these cards offer zero percent for a year or even 18 months giving you quite a bit of time to get the balance paid off. You do need to be aware that some cards only offer zero percent on new purchases and charge a fee or a different interest rate on balance transfers. But there is a simple trick to get around this. Simply charge absolutely everything you normally would buy i.e. gas, food, clothes and even rent if possible on the new card and only pay the minimum on this card while paying the maximum you can on the higher rate card. This will reduce the balance on the high rate card while gradually shifting the balance to the new card. Once you have the old card paid off, dedicate yourself to paying off the new one.

Reduce the Cost of Your Vehicle

Vehicles are one of the biggest ongoing costs, but there are still ways to save money on them. Insurance is a killer, so look absolutely everywhere to ensure that you are getting the best deal possible. If you need specialist insurance, say for a courier vehicle, or even a Yacht, the process is the same. Shopping around for the cheapest gas seems like a small thing but apps like Gas Buddy allow you to know where the cheapest gas is without wasting gas looking for it! Assuming you can save 10 cents a gallon and the average tank holds 12 gallons you would save $1.20 on every fill-up. If you fill up twice a week that is about $125 a year more in your pocket that can go toward paying off your credit card debt. If you can improve your gas mileage through careful driving, tune-ups, proper tire pressure, etc. you can save even more. Shopping around for prices on car repairs or learning how to do the basics yourself can save you hundreds of dollars. For instance, changing spark-plugs and wires yourself might save you $100, while changing brake-pads yourself could easily save you $300. Sometimes you don’t even need to do the work yourself. Some auto parts stores will install some parts like batteries, windshield wipers, headlights etc. for free. They may also have a tool loan program if you need specialized tools to do a job.

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Image courtesy of Stuart Miles / FreeDigitalPhotos.net

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