Categories
Debt Management Financial Fitness Tax Debt Loans & Relief

Debt Reduction: How to Stop Spending Impulsively

Debt can be annoying and stressful. Trying to enjoy life whilst juggling a whole lot of debt, can however become overwhelming. Now throw in nasty shopping addiction and your plans to get out of debt can seem practically impossible. So how do you avoid overspending whilst reducing your debt? Is it even possible?

Introducing debt reduction tips

Debt reduction is all about making mental and lifestyle changes which can affect your spending habits. For some people, this may be kicking an addiction, and for others, it may simply involve setting a budget. Regardless of your personal situation, our debt reduction tips are here to help you stay on top of your messy finances.

Don’t buy things unless you need them

Have you walked past that designer clothes store to notice a fashionable pair of sneakers? You tell yourself ‘no, no I don’t need them’. Ten minutes later you find yourself sitting down trying them on. Five minutes later you’re in $500 debt to overpay.  People who are in debt tend to purchase everything they want, regardless of whether they can actually afford it or not. This craze is very common and it is otherwise known as impulse buying.

The trick to battling impulse buying is to stop and wait. Give yourself some time to decide whether you really need it or not. The best trick to dealing with impulse buying is to question your purchase decision. Ask yourself the following questions.

  • Do I really need this?
  • Do I already have a similar item?
  • What will I use it for?
  • How much is this going to set me back?
  • Can I actually afford it?
  • What can I do with the money if I don’t buy it?

You will quickly find that when you give yourself time to stop and reflect upon your purchase decision, you will realise that it is not a need. If however, it is a matter of necessity, consider if it is the best option available.

Think of loss as an opportunity

Before you make that big-ticket purchase, consider one thing. The loss of a certain thing you didn’t need but you really wanted is an opportunity. What we mean by this is that whilst you lose out on not buying that designer pair of shoes, you have gained the opportunity to pay off your debts sooner. At the same time, you have gained the opportunity to reduce your debt. Remember, debt reduction should be your ultimate goal. The sooner you remove unwanted debt, the quicker you can get on with your life.

When you’ve settled that, you’ll think twice before paying for trinkets. It will automatically become your instinct. As a consequence, you’ll be less impulsive.

Make a monthly budget

“This month, I’ll spend x dollars on food and expenses.” If we could suggest one main debt reduction strategy, it would be budgeting. A budget is the best way to reduce your debt and develop positive long term money habits. Luckily, there are many online calculators that can help you to evaluate your debt and set an appropriate budget.

Now, by all means, we don’t want you to starve yourself, but the goal of budgeting is to plan out your finances. Assess how much money is coming in and how much is going out. From here you can determine your saving capabilities(if any) and how long it will take to pay off your debt. To do so, you must refrain from overspending. Budgeting requires strict mental discipline.

If you don’t have many places to cut from, then consider additional income. This may include side jobs such as becoming a ridesharing driver or using your skills on upwork. This will help you reduce your debt quicker.

Don’t shop without a list

When you go shopping without a clear knowledge of what you need, you’ll always end up buying the stuff you didn’t even think about in the first place. Write everything down. Assess what you need before you go to the shop down the street. It will make it easier to stick to the basics. All the debt reduction tips you’ll ever find will include this one.

Avoid online shopping

More often than not, the prices you see on the Internet for the same products that you can find in any store are considerably lower. Because of this, you start adding stuff to your cart thinking “Boy, I’m so lucky!” Unfortunately, you’re not. You’re going to spend even more than you would’ve spent at the store. Everything’s so cheap that you just got to have all of it. If your debt is therefore out of control and is a result of online shopping, stay right away.

Don’t be pressured by the end of year promotions, or the large red banner that says “Sale, 50% off everything”. This will send you down a path of uncontrollable debt. The last thing that you want is a bad credit score which can arise from failing to meet your debt obligations.

Conclusion:

Debt is painful. It’s hard to splurge on big-ticket items. Unfortunately, you are in a situation that requires lifestyle changes. Debt reduction will only benefit you in the long run. For this reason, you must avoid overspending at all costs. You’ll push the deadline further away and, at the same time, you’ll amass more penalties. Implement these simple debt management tips, and your debt will dissolve faster. If you continue buying impulsively, you’ll only hurt yourself and your family.

Categories
News

Factors to Consider before Signing a Debt Agreement

A debt agreement is a contract that is legally binding between you and the parties concerned – the creditor, debt collection company or third persons involved. Consequently, each party can legally enforce the terms of the agreement against you if you don’t comply with your contract. Learn about the things to keep in mind before signing a contract that can make or break your finances. Always take serious consideration before signing a debt agreement.

The debt agreement process

When entering into a debt settlement, you have to understand that the creditor expects you to be ready to pay your debts. So, prepare to negotiate a certain sum of money or asset to pay for a percentage of your combined debt. Make sure that you can afford to pay it over a limited period of time. In debt settlement, you don’t pay your creditors directly. Instead, you make repayments to the administrator of your debt agreement.

Negotiation takes a little bit of patience and persistence because creditors also know that once they agree to a particular amount, they cannot recover the full amount of debt anymore. Knowing that they cannot get back the full amount you owe, they may give you a hard time during the negotiation process.

Legalities of your debt agreement

A valid contract is an agreement where all the parties agree to it. Meaning, there is mutual consent between you and your creditor. It must state the object of the contract—or the consideration which is typically a sum of money, or asset paid by the debtor to the creditor. The agreement must not allow you to do something illegal in return of debt forgiveness or reduction of penalties. It is also important to be mentally capacitated to enter into an agreement. You must be mentally sound and at least 18 years old to ensure that you are competent enough to enter into a binding agreement.

negotiations

It is important to note that the object of the contract or the “consideration” must be something to be negotiated upon. An agreement is impartial. It gives you the perfect opportunity to discuss and compromise on the terms of the debt agreement before reaching a final contract that is acceptable to you and your creditor. But, take note that there are non-negotiable contracts, but you can still look for ways to ensure that the terms will be satisfactory not only to your creditor, but to you as well.

The agreement must not contain provisions that disagree with the contract laws in your state. You can talk to an attorney to verify the terms of your contract before signing it. Or, you can educate yourself and check whether there are illegal terms in the contract that will jeopardize not only your finances but your reputation as well.

Negotiation points

Write down your objectives for entering into an agreement. What is your desired outcome? Do you want to pay your debts in full while paying for it at a lower rate? Or, do you intend to let go of your assets to finally eliminate your debt? Before you negotiate a contract, have a specific outcome in mind. For example, if you want to extend the loan term, then you should know exactly how long you would like the loan extension to be.

Before beginning negotiations, you should know where you stand. Are you financially capacitated to respect the terms of the contract? Take note of your financial standing and the surrounding circumstances that may prevent you from abiding by your agreement. It is also important to determine your bottom line. Know the highest repayment amount you can make and the lowest one that you think the creditor can accept.

check-options

Check other options

Do you think it’s time to give up and take up bankruptcy instead? If you have no income, and you’re not in any way capable of making even the minimum repayments because of unemployment, and you can’t meet your daily needs, maybe bankruptcy is a better idea. But, it will definitely ruin your credit score, take away your assets—and probably leave you on the streets. The only upside is that your debts will be eliminated.

If you think you can still get a job, improve your business or get any additional source of money to keep up with a minimum payment each month, debt agreement is a better idea.

It is important to note that debt agreement does not refer to debt consolidation. When you consolidate loans you simply roll your existing debts to a new loan; with lesser monthly repayment, lower interest rates and fees and in one easy payment method each month. While debt consolidation companies sometimes negotiate with creditors to lower the repayment each month, there are companies that simply pay off all the loans and charges a new rate to their customers.

Is debt agreement the right solution to your financial situation right now? Talk to us today!

Categories
Debt Management

Tips for Erasing Debt

Feeling discouraged and overwhelmed by debt is a feeling that many Australians experience. And things don’t get by any chance easier when you want to make ends meet, and your income is limited. Unfortunately, there’s always the temptation of agreeing to high-interest loans, assuming that it’s a temporary solution. But, in the long term, making rushed financial decisions will jeopardise your chances of accumulating savings. So, if your question is how to erase debt, keep on reading.

Prioritise your payment plan

Considering that you have limited income, you should start by prioritising your expenses. Bear in mind that necessities such as utilities, unpaid federal taxes, student loans and others should be in your focus. As for credit card debt, this is a common concern for many Aussies as well.

First of all, target the card that has the highest interest, and focus on that if your debt enables you. But, most importantly, you should start budgeting and distinguishing between urgent debt and the debt that can wait.

Consider Debt Negotiation

Our next tip on how to erase debt is to embrace debt negotiation. Of course, you know how much you owe your creditors. But it wouldn’t kill you to try discussing with them about lowering the interest rate. Many times, lenders are more than willing to negotiate; it’s up to you to try.

Factor in debt consolidation

Taking on debt consolidation can be the right strategy if you have multiple credit cards and loan bills that confuse you. Instead of having numerous bills and payments on your mind, you could pay a single, tidy bill.

The most considerable advantage to debt consolidation is that, if you have fewer creditors to pay, you’ll manage to make repayments in time. That is crucial for improving your credit score. Plus, it might simplify your finances, on the whole.

There are cases in which lenders or brokers provide you with attractive interest rates. Nonetheless, do bear in mind that if you’re paying less than the total amount of bills combined, you might have exceeded the repayment timeframe. Make sure you don’t agree to that unless it’s what you want.

So, debt consolidation can be the answer to how to erase debt.

Avoid taking on other loans

Did it ever occur to you that the reason why you’re in debt is that you depend on credit cards on a regular basis? So, if you want to learn how to erase debt, it makes sense to analyse your spending habits and see where most of your finances go. If you reckon that your weakness is utilising credit cards on a whim, you should acknowledge the downsides of such cards and try to address the problem.

We hope that you found our tips on how to erase debt handy. Bear in mind that after you have managed to become debt-free, you should be mindful so that this doesn’t change overnight. One thing is for sure: debt can be managed even with limited income, it is up to you to embrace the right tactics.Save