You have probably heard about or seen advertisements about how consolidating your credit card debt can help you by reducing your monthly repayments. Therefore, you will be better off, right? Personal finance basics, that is a basic knowledge of personal finance, will tell you – maybe. It works for some but it will not work for others. So to benefit you have to know which is which. And even if you realize consolidating your debt is not for you, then you will benefit. Because you now know more than you did before about your personal finance and you did not allow yourself to get into a worse situation.
The whole principle of consolidation your credit card debt is to have all your debt in one place to take advantage of lower premiums. Lower premiums because you can take advantage of better interest rates.
But consider this; often you will have to take out a personal loan to consolidate your debt. But, because of the nature of personal loans, there will be a definitive term for the loan, unlike credit cards, where, if you make minimum payments, you can extend the loan term in exchange for smaller monthly payments.
It is usually a bad policy to always make minimum payments on your credit card debt. But, there are situations where it can be beneficial to you. Perhaps your budget shows you can increase your payments after a couple of months. So, as a short term measure, short term means months not years, this facility could be very useful.
Remember that lower rates may not mean lower monthly payments. If you consolidate your debt through a personal loan you will have a definite term to pay off the loan. So, it could mean your monthly payments are increased even though you are taking advantage of lower interest rates.
An advantage, not to be overlooked, of consolidating your credit cards debts, is the fact that you will have only one repayment for your debts each month. This does make budgeting a lot easier and will reduce the chance of you forgetting about a payment and thinking you have more money to spend than you should.
One other thing you must remember is consolidating your debts is a method of improving your financial position. It most definitely is not a method of having more money to spend each month. You must strongly resist taking any additional money you get and spending it. You must use this money to repay your loans faster.
You should always be looking for ways of improving your personal finance basics. Make sure you understand how your credit cards work and make sure you have a budget you can work to.
Did you know that the credit companies can make mistakes? Sometimes you can be refused credit because of a bad credit score that is just plain wrong. Somehow or other they have the wrong information about your credit history and this is being passed throughout the industry. It could be a mistake on their part or a misunderstanding but it really does not matter at the moment because it is there and is affecting you. Your personal finance basics knowledge should have a default position, which is to check your score regularly.
Checking your score regularly will also let you know if your financial activities are affecting your score. In either case you should check out any instance of your score lowering. Checking your score regularly enables you to deal with any problems as they start to appear and not when they affect your finances.
People have different ideas about how often you should check your score. It depends on your circumstances and whether or not your finances are changing. But, as a minimum, I recommend you check your score at least annually. The vast majority of people do not do this.
The main bureaus operate independently so some could have different information than others. If you check your score regularly you could find misleading or false information about you that could affect your ability to borrow money when you need it. Now you need to check this out and get it dealt with before it becomes a bigger concern.
Most of the time, any discrepancy will be a mistake on their part. Communicating with the bureau concerned and talking to them about it can correct this.
Unfortunately, sometimes an ‘error’ you find could be identity theft. Here it is imperative you contact all the bureaus concerned and the fraud squad immediately.
An alert will be placed on your file, which lets anyone checking your score know you have been a fraud victim. This alert will also inform you when lenders are looking at your files. If you are not requiring any financial transactions then it could be the identity thief is trying to obtain a loan in your name.
An alert will usually last between 90 to 180 days. But you can get this extended if you request it. With the alert in place a lender can tell that the person trying to obtain the loan is not you and will decline it.
If you do not regularly check out your credit score you are placing yourself at risk. Your personal finance basics knowledge should be used to remove this risk.
There are plenty of simple tips to save money when dealing with personal finance basics. Some are slightly more time consuming than others but despite that fact it is completely worth what time it might take. If you only follow one or two of the following tips you could save hundreds of dollars each year.
REQUEST FREE SAMPLES:
There are plenty of websites that offer free samples for every day products. Even the huge stores such as K-Mart or Petsmart have great opportunities for everyday people to get free items. These items range from skin moisturizers and shampoos to frozen food or bathroom products. Another option is to visit a manufacturer’s website to find those free samples on brand new items. If you need something, type ‘free sample’ into Google before you go to the store to purchase it. This is the beginning of mastering personal finance basics.
CHANGE CREDIT CARD SPENDING AND HABITS:
Credit cards can be wonderful but can be dangerous. With high interest rates and monthly fees, credit cards may wind up costing you a lot more in the future than you expected.
My rules of thumb:
- always use cash unless its for a major purchase
- be certain you are able to pay for the item before you use a credit card
- be sure you can pay the balance of your credit card
AVOID IMPULSE BUYS:
Everyone has had to push a shopping cart through the aisles of the grocery store and the moment we get to the check out we have double the amount we planned to get. Always, always, always create a shopping list, follow it and never purchase anything that’s not on that list. This should include any type of shopping like wardrobe, food or entertainment. Retail outlets are mapped out specifically for impulse buys with candy racks and gum within easy reach. Make your list, check it twice, and follow it.
SHOP THE SALE RACK:
This is another personal finance basics rule but don’t confuse this with an impulse buy. You have your list and know what you need, so check the sale display before you shop. Chances are you will locate that said item on sale and pay half the usual price. Food stores operate the same way. They usually over order products and are forced to run unadvertised specials on overstock items. Just make sure the item is on your list.
SAVE YOUR HARD EARNED MONEY:
This may be the hardest thing you have to do when money is tight, but it just might be the most critical step to take. According to the book ‘The Wealthy Barber’ you should save ten per cent of your paycheck every month. That may not sound like much but it will add up rather quickly and if wisely invested it will assist your retirement down the road.
SAVE YOUR CHANGE:
This may sound a little silly but this little tip is a great one. How? Because in some way’s it’s like found cash. After you come home from the store put any loose change into a jar. Each month or every couple of months count up the change, roll it up and deposit it into your bank account or reward yourself to a well deserved evening out. These are the personal finance basics you learned when you were very young.
BUY IN BULK:
We’ve already touched on shopping but I have another shopping tip that mostly applies to buying grocery’s. Buy in bulk. If you drink a lot of fruit juice and you see that it is on sale at half price, buy four rather than two or purchase the 24 pack of water instead of the smaller 12 pack. This may seem easy but plenty of people do not make bulk buys on every day products.
I know this might make you feel like your grand parent but this is another great way to save plenty of cash. It only takes a few minutes every week and you can end up saving hundreds of dollars each year on items you were already going to buy. Go through your local newspaper or check online for some amazing coupons.
RECYCLE PLASTIC BAGS:
This is a wonderful way to ‘Go Green’ and it will save you money too! Lots of stores are now making you pay as much as 10 cents for plastic bags. Chances are you have about 1,000 hidden away in your closest already. Couldn’t you just bring them to the store and use them again? Another way to recycle and save money is to use those plastic bags from the store in your garbage under your kitchen sink or in the bathroom. You don’t have to spend $5 each month on a box of kitchen garbage bags when you already have them at home.
These easy tips will save you lots of money and they are simple and might even be fun. It’s always rewarding to know that you have started to take the first steps to becoming free from debt. By carefully following these tips to save money you are one your way to understanding the personal finance basics all of us should know.
This post will focus on your electric bill. Electricity can be one of the biggest expenses that you will discover as a home owner. Here are a couple of tips that will help you be more energy efficient in your home. I will go over the personal finance basics regarding one of your larger utility bills. Hydro bills can be very high in the summer, with air conditioners raging. If you’re in the north and use baseboard heaters, you will discover that hydro bills skyrocket in the winter as well. Here’s 3 tips to help reduce your hydro bill.
Are You Using that Computer? – I work at a place where the computers are always on. They don’t even get turned off on the weekends. A little research in personal finance basics will reveal that a computer uses as much electricity per hour than a 14 watt compact fluorescent lamp for a full day. My work’s last hydro bill was $700 for one month. They could lower their expenses by at least 27% by switching the computers off for evenings and weekends.
Is Your Home Energy Efficient? – Easy tasks like putting a plastic heat barrier on your windows in the winter can significantly lower heat waste, and for goodness’ sake, keep your door shut. Ever heard your parents say “I’m not paying to heat the outside?” Sounds like they understood a common sense thought to personal finance basics. find other ways to make your home more energy efficient. You’ll not only leave less of an environmental footprint, but you’ll save tons on hydro.
Sometimes I Swear We Live in the North Pole – When you are looking to further your practical skills in personal finance basics one way is to look at how much energy your air conditioner consumes and reduce it if you can. For instance, try to use a fan instead of the air conditioner. Another excellent way to reduce consumption is by setting the thermostat up by 2 degrees. With heating for example, if you lower the heat by 2 degrees you can reduce the home heating costs by 5%.
I hope you’ve found these tips useful. I’ll mention it again, that as a financial consultant I teach a lot of personal finance basics to people looking to reduce living expenses. It’s important to maintain a comprehensive budget so you know where your living expenses are and to motivate you on ways to reduce those costs. If you haven’t searched Google for budget tools yet, you can now, or try the one in our resource link. See you in Part – 4.