debt

11 Ways To Save Money

11 Ways To Save Money

11 Ways for Saving Money

Are you new at budgeting your finances? Do you really need to start saving up for a new vehicle, plan a vacation, save for retirement, pay on some medical bills? Here are some thoughts of how you can say for these items.

1. Make a total of all your monthly bills. Monthly bills are ones that occur every month, usually on the same day. Insurances, house payments, cell phone bills, and car/school loans are all considered routine monthly expenses. Don’t include things like grocery shopping, clothing, or eating out, these are flexible and can change from month to month.

2. Make a list of net income after taxes you receive each month. This would also include rental income, child support, interest you receive from investment, and etc.

3. Subtract your monthly bills from your income and what is left over is your true free income.

4. Take a look at your credit cards. Put your highest interest cards at the top of the list to pay off first. We need to get rid of these first and only keep the one with the lowest interest rate in your wallet. The ones in your wallet should only be used for emergencies only, like car repairs, medical emergencies, and home repairs that are a must!

5. Think about all the money you need to spend to SURVIVE. Not on dinners out, new toys, or clothing. Things you need to keep your family fed and healthy. Subtract this money from your free income, it should only be half or less of your free income money.

6. Use the rest of your free income to start paying down your credit cards. If you just pay the minimum each month you will not see your credit card debt drop. You must make a diligent effort to pay more than the minimum.

7. Repeat these steps until your credit card debt is under control. This doesn’t mean having absolutely no debt, but I would recommend an amount you can pay off in 3 months or less.

8. Congratulations on making it to step eight and getting your debt somewhat under control! Now let’s start saving. If you like to see what you need to save to retire, here is a free retirement calculator for helping figure our what you may need. Retirement Calculator

9. If your company has a 401k and they offer any sort of match (any percentage), start the 401k. This is free money that your company is giving you, if you do not take advantage of this you are losing out.

10. With you car loans, mortgage companies, and credit cards you may want to try and connect with the lenders and ask if they would consider lowering your interest rates. Even if you only get one yes, it is better than not asking at all and continue to pay high interest rates.

11. If your employer directly deposits money into your bank account, set up an extra account to add money into. Since you don’t ever see it, you won’t think about it. If you deposit your checks yourself, take advantage of a savings account or do what I did and set up an account at another bank and then on my bill pay each month I automatically transfer funds from my working account to my other bank account, what do they say, out of sight out of mind.

As hard as it sounds, try not to indulge. Cut back your cable package, go out to eat once a month, and instead of seeing movies on the big screen with your entire family, wait until you can rent the movie. Chances are you can rent movies through red box for less than $2.00! You can save a lot of money if you just put some effort into it. Our family had to make adjustments, but now we can sleep at night and don’t have get scared if the phone rings thinking what collection agency is after me now.

Posted by Tom in Budgeting
Mistakes To Avoid When Trying To Get Out Of Debt

Mistakes To Avoid When Trying To Get Out Of Debt

Getting out of debt

Everyone has horror stories when it comes to debt, for me paying off debt is like losing weight. We all have great enthusiasm to get out of debt and to lose weight but most of us never follow through and succeed at either. We all make mistakes, and I have my story book full of mistakes that I made while trying to get out of debt. The one good thing about mistakes is that you learn some valuable lessons that you can share with others so they do not get into the same trap.

Mistake number one

This mistake is always number one with everyone I talk to about getting out of debt, and that is having a plan. Just like losing weight you must have a plan and you must stick to the plan. If you have a spouse both you and your spouse need to follow the plan and don’t deviate from it.

Mistake number two

Do not try to get out of debt without goals or have goals that are impossible to accomplish. Here is what you will want to do instead. First put together a plan with your spouse you both need to establish some creative goals for the family. First you need to setup small goals. These goals need to be something that you feel you can accomplish in a month or two. Then setup some medium goals that might take six to eight months to accomplish and then you need to setup some long range goals that will take one to five years to accomplish. An example of long range goals would be like paying off your mortgage early.

Mistake number three

Do not try to get out of debt without a solid documented budget in place. Most people hate budgeting, but this is a must when you’re trying to pay off debt and become debt free. Again just like losing weight, if you do not plan and setup meals correctly you will not lose the weight. Same with budgeting, if you do not have a detailed budget then you will spend money on items that don’t fit into a budget category and you will find yourself getting deeper into debt. You must have a budget no question about it.

Mistake number four

This mistake I really kick myself over, I took my bonus and raise from work and wasted the money on foolishness instead of paying down my debt. When coming into money either by work or other means you must apply this extra income toward your debt and not increase your spending lifestyle. Take the extra money and apply it towards your mortgage principle or your principle on your high interest credit cards. By doing this it will drive down your debt ratio.

Mistake number five

I kept charging on my high interest credit cards even though I knew I shouldn’t. Some families make the mistake of paying their bills with their credit cards in order to earn points from the credit card companies. This is fine if you are dedicated in paying off the credit cards when the bill comes do. I find a lot of people take the spare cash that they have in their account because they paid their bills with a credit card and they blow the cash. When the credit card bill comes in they do not have any money left to pay off the credit card then you start racking up high interest charges and getting yourself deeper into debt. Be extremely careful of falling into this trap with credit card points.

Mistake number six

I did not setup an emergency fund, this was a huge mistake that took me years to recover from. Every household needs to have an emergency fund for those unexpected home or car repairs or life changing disasters. A family should have six months’ salary set aside in a special account that you do not touch. One never know when disaster is going to hit, disaster could be illness, getting fired, your main source of transportation dies, or you have a major home repair that has to be done. Without an emergency fund you could find yourself in a world of hurt. Start today if you do not have one and keep building to it.

Mistake number seven

Do not keep the same lifestyle you are living today. I tried this and found myself not making any headway in getting out of debt. You must change your lifestyle and cut foolish spending. There are many ways to do this, here are just a few that I found I had to change. Stop going out to eat, wash your car at home instead of spending ten plus dollars taking it to a car wash, drink your coffee at home or work instead of stopping at expensive coffee shops. The list can go but I think you get the picture.

Conclusion

As you read this you will see that most of this is common sense items and mistakes. I just learnt over the years of what to do and what not to do. If someone would have shared these with me I probably would not have stayed over my head in debt as long as I did.

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Posted by Tom in Budgeting
Ideas To Help Pay Off Your Mortgage Early

Ideas To Help Pay Off Your Mortgage Early

Mortgage and automobile debt

For many people that are trying to homestead the one problem that many people have is debt. Two of the largest debt’s that families have hanging over their heads are mortgage debt and automobile financing. Today let’s take a look at ways to help pay off your mortgage and get this number one debt off your back. In future post we will talk about ways to pay off your auto loans and work on ways to be debt free.

Tip number one

Automate an extra payment to your principle along with your regular monthly mortgage payment. What I mean by this is when making your regular monthly mortgage payment add an extra $25 a month towards your mortgage principle. The reason I pick $25 a month is this is a nice low dollar amount that I am sure most people can find just by cutting back a few bad habits. If you set this up to automatically come out of your account and go straight to your principle you more than likely will not even notice the money being gone. After you are comfortable with $25 dollars a month then step out and increase it to $50 dollars a month. You will not believe how many years you will cut off your mortgage by paying the principle down monthly with just a few added dollars.

Tip number two

Many Americans are paid on a bi-weekly paycheck principle. If you were to set-up your mortgage payment to be paid bi-weekly instead of monthly. By paying half of your monthly mortgage payment ever two weeks you will shave off many years off the term of your mortgage. The reason for this is when you pay bi-weekly you will be making an additional monthly mortgage payment which will go directly towards your principle thus reducing the loan amount of the mortgage and saving you years of mortgage payments.

Tip number three

The whole idea of paying off your mortgage early is by cutting years off of the term of your loan and the easiest way to do this is reduce the principle. What my family and I have done is to deposit large chunks of money periodically towards the principle. Some ways that we have come up with these deposits is by thinking outside the box. A couple ways that we came up with the extra money to put towards the principle was to have a garage sale twice a year. Instead of taking the profits from the sale we took the money and put it towards the principle on the mortgage. Another suggestion that we did was to take our tax return and put this towards the principle. Whatever way you can find to take extra money and apply it towards the principle, do it! You will save thousands of dollars in interest by lowering the principle of your mortgage.

Tip number four

Most people have no clue about tip number four.  I love tip number four since we use credit cards that offers points for all our purchases. Disclaimer – we pay off the credit card at the end of the month so we do not add up debt.

Many people like us use our credit cards to pay for everything in order earn points for vacations or other frilly things. But there are some cards that you can have the points convert automatically to mortgage interest payments. So every time use this type of credit card you earn points which automatically get converted over to paying down your mortgage principle. This is a great tool that takes the guess work out of paying off your mortgage early.

Tip number five

Pretty much everybody can think of a way to adjust your lifestyle in order to save money to put towards your mortgage principle but tip number five is near and dear to my heart which is starting a side income. Making money on the side either by having a hobby or offering a service for people that you can do in your spare time is very rewarding and there is no limit how much money you can earn. There are many ways to earn extra income without taking on a second job that you may hate and regret. Just keep your eye on the goal and that is to pay off your mortgage and get out of debt in order to free up your income in order to be a happy homesteader.

Here are some resources for guidance on earning extra income

 

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Posted by Tom in Budgeting, Homestead