Ten Tips To Stay Debt Free

How To Stay Debt Free

It all starts with a small amount. At first sight, you think this is nothing – you will be able to manage it, and will get rid of it shortly. However, the further you go, the harder it becomes. And this small, manageable amount starts becoming unmanageable. It takes over your life. Yes, I am talking about debts.

Want “The Best Advice” on avoiding debt? The answer is: not to    have any debt at all from the beginning. Follow these simple tips to stay out of debt:

·   Pay cash. Paying cash forces you to spend only the money you have. If you don’t have the money – it means you can’t afford it. Don’t buy things you can’t afford.

·   Use credit card only if you are able to pay in full each month. Beware of credit cards. Most of us fall into debt trap because of credit cards. If you aren’t able to control credit cards, get rid of it.

·   Avoid falling behind on your payments for your bills. If you start falling behind even only once, it will be hard to catch up.

·   Know your monthly income and expenses from all sources. To live debt free, income has to be greater than expenses. Maintain this ratio by cutting expenses.

·   Use personal finance software to track your income and expenses. When you visualize your spending pattern, it’s a lot easier to analyze and comprehend where your money is going.

·   Spend within your limits. Don’t buy stuff just because they are on sale. If you don’t need it, sale is not going to do any good.

·   Always buy on sale. If you are certain that you will be using items on sale over and over, buy them when they are on sale and stock up. Avoid paying full price.

·   If you already have accumulated credit card or other consumer debts, pay them off ASAP. Always pay over the minimum. Start paying off the smaller debts and move to the larger ones.

·   Set long-term and short-term realistic, doable goals. For example, short-term goals can be paying off smaller debts and long-term goals can be paying off larger debts and start saving money.

·   Be realistic. Set attainable and achievable goals. If your spending is more than your income, cut down on spending. However, if this is not possible for you, increase your income and stay in debt-free positive territory.

What Is a FICO® score?

What Is a FICO® score?

The FICO® score is a number (a credit score) between 300-850®. FICO® score is the most widely used credit scoring system in the world. Most of the financial institutions in North America use FICO® score to determine an applicant’s credit risk. Fair Isaac Corporation – the pioneer in credit scoring, developed the FICO® score. Engineer Bill Fair and mathematician Earl founded this corporation in 1965.

A high FICO® score is considered a good score for consumer. Most consumers score in the 600 score and 700 score. Above 700 score mean you are in good financial position and lenders will most likely approve your credit request. Below 600 score indicate you are a high-risk client and lenders will most likely decline your credit request or will approve with much higher interest rates. Lenders buy your FICO® score from credit reporting agencies such as Equifax, TransUnion.

Five Parts

FICO® score is based on the five general categories:

·   Payment History = 35% – Paying bills on time helps. Avoid late  payments.

·   Amounts Owed = 30% – If you owe a lot of money, it lowers your score.

·   Length of Credit history = 15% – A longer history increases your score.

·   New credit = 10% – Too many credit inquiries will lower your score. Lenders consider you a high-risk client when you actively seek credit.

·   Type of Credit = 10% – If you use a combination of different types of credits such as credit cards, mortgage, car loans etc, and have good paying history – it may increase your score.

How To Obtain FICO® score

A regular credit bureau report does not provide FICO® score. For example, regular Equifax Credit Report costs $15.50; however, it will not show your FICO® score. To see you FICO® score, you can purchase Score Power Credit Report – it costs about $24. Or there are free providers such as Mogo, Borrowell, Credit Karma who provide FICO® score for free. Your banks may provide this for free as well. Check your online banking portal.

Credit Card Debt Can Cause Depression

You May Be Getting More than High Interest Charges from Your Credit Cards

First Published Date : May 14, 2015 ADawnJournal.com

You may be getting more than what you are paying for with those balances from your credit cards. A recent study done by the University of Wisconsin-Madison found out that high levels of credit card debt and overdue bills are likely to cause depression.

Based on data collected from 8500 working-age adults, researchers found out that there are significant links between overdue bills, credit card debt and symptoms of depression. Also, depression seems to increase when short-term debt increases. Unmarried people, near-retirement people, and those who are less educated showed the strongest link between depression and debt.

However, mid- to long-term debt and depression had no direct link. The report suggests it is possible that as long-term debts are considered as investments in the future, or people get experienced handling these debts, they will not cause depression like short-term debt.

Another research project mirrored similar findings in 2013 by the University of Southampton and Kingston University in the U.K. A direct link was found between high debt and poor mental health. They found 3 times more mental health problems in people in high debt than those who weren’t in high debt.

What I can tell is that it’s simply common sense that debt can cause health problems. Anyone can realise, even without any researches, that people are still getting into more and more debt.

If you are in debt and have been ignoring your debt problem, it is time to take a closer look and get help. Admitting that you have problem is the first step to get rid of debt and stepping on the path to a better future, both financially and health-wise.

Your Debt Won’t Go Away Unless

First Steps to Get Rid of Debt

First Published: Published Date : June 11, 2016 ADawnJournal.com

Debt is like a never-ending vicious cycle that’s just hard to terminate. Most people who are in debt failed to realize two simple and basic things that make it impossible to get out of debt. Today, I will talk about what you need to realize first, even before applying other debt-relief strategies.

Accept You Have a Debt Problem – This is the number one thing you need to admit or accept: that you have a problem. Most people failed to realize that they had a problem and that led them to not take any actions to work towards eliminating their debt. Think of an alcoholic who does not admit he is an alcoholic and declines to get any help. The same applies with debt. If you don’t admit it, you will never get help or take steps to be debt free.

Stop Borrowing More – This is another big problem that makes it hard to get rid of debt. If you are in debt and paying your balances slowly every month, it should be OK, right? That’s right. However, the problem is when you are paying your balances, but at the same time borrowing more. It’s like you are paying $200 per month towards you loans, but taking out $300 per month. The end result is you are sinking more into debt.

Obviously there are more steps you need to take to get rid of debt. Paying more towards debt, earning more, consolidating debt, and seeking professional help are only a few to mention. All these will happen as long as you go through the first two most important things I mentioned above.

Free Credit Monitoring for Canadians

Credit Monitoring After Equifax Data Breach

Credit monitoring should a part of your routine to protect your information and stay safe, especially after the Equifax data breach. The good news is there are 2 financial services companies who are already providing this for Canadians for free.

Credit Karma provides a free TransUnion credit score for Canadians and recently this financial services provider started providing free credit monitoring. When important changes happen on your TransUnion credit report, such as an address change, a hard inquiry, or opening a new account, Credit Karma will notify you via email.

Another financial services provider, Mogo.ca, recently mentioned that they are working on a new alert feature on Equifax credit score that will let its members know when a new inquiry occurs. Mogo already provides a free Equifax credit score for its members. However, it is not clear from the email I received from Mogo whether this feature is currently active or if they are still working on it.

Use all the tools and features to keep an eye on your credit files and take steps to protect yourself should someone try to use your information fraudulently. I regularly publish brief videos of this nature, so to keep updated subscribe to my YouTube channel here: www.youtube.com/adawn. Also, I have a video on the same article you just read and you can watch this here: Free Credit Monitoring After Equifax Data Breach