6 Signs Your Debt Has Become a Problem

6-Sign-Your-Debt-Has-Become-a-ProblemIt can be really tricky to tell when exactly debt crosses the line from manageable to problematic. One week you’re plugging along, as usual, the next you realize you’ve gotten in over your head.

Everyone’s financial situation looks different, so there’s not necessarily a universal way to determine whether the debt has become a problem. However, there are six warning signs worth considering. If any of these apply to you, it’s time to make some financial changes that will allow you to work toward becoming debt-free.

Falling Behind on Payments

Probably the biggest red flag is falling behind on payments, whether that means paying late or missing them entirely. There’s a big difference between missing a due date by a few days because you’ve been busy and missing a due date because you’re scrambling to come up with the funds.

If your payment record has been patchy lately, take a look at why — and figure out your options for getting caught up before your credit score begins dropping and collectors start calling. 

Paying the Minimum or Less

Paying the minimum amount due on debts may seem like a perfectly fine way to keep your head above water when funds are low. But interest-only keeps accumulating, which means the amount you owe is growing in the background. This can put you in an even more difficult spot down the line — you’ll end up paying more toward those debts and for much longer. Debt settlement through a program like Freedom Debt Relief is one option for people struggling to make minimum payments.

Maxing Out One or More Credit Cards

There’s a big difference between can and should when it comes to maxing out a credit card. Technically you’re allowed to spend up to the credit limit. But you should avoid doing so. Credit utilization, or the percentage of your total available credit you’re using factors into your credit score. Maxing out a card can lower your credit rating because it gives the appearance you’re struggling financially.

If you’re finding yourself in the position of having to max out one or more credit cards just to keep up with living expenses, that’s a sign you need to figure out how to address your debt head-on.

Losing Track of Your Debts

Unsure how much you owe — either because you’ve fallen behind on bookkeeping or you’re experiencing application denials? While it can be daunting at first, it’s important to keep close tabs on all your debts large and small. You can only come up with an effective plan if you know what you owe. 

Using Cash Advances or Payday Loans

Sources of quick cash — like advances on credit cards and payday loans — tend to come at a price. Credit cards are well-known for having high-interest rates on average, sometimes upwards of 20 percent. Payday loans are even more expensive. Those short-term loans carry an average interest rate of around 400 percent.

Trying to Maintain an Aspirational Lifestyle

Debt can bring feelings of shame. This can drive people to live as if they’re not in debt, especially for the benefit of appearing like all is well to outsiders. Have you ever said yes to an expense you can’t afford — like dinner out with friends, a holiday gift exchange, a vacation or a luxury car — because you felt it was important to live up to a certain image? If so, consider it a wake-up call. Come up with a spending plan to help you reduce your expenditures and increase how much you’re devoting toward debt repayment.

If your debt has become a problem somewhere along the way, take this as an opportunity to reevaluate your approach to spending and saving so you can get your finances back under control.
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6 Signs Your Debt Has Become a Problem
How Many Debt Management Options Do You Have?

Pros and Cons of Owning a Credit Card

Owning-a-credit-card-is-a-responsibility-and-you-can-either-build-your-credit-or-damage-it.-Paying-it-off-month-is-what-helps-build-your-creditCredit cards are everywhere. The little pieces of plastic that allow us to spend money we don’t possess have taken over.

As an adult, you have a whole range of options available to you, depending on your needs. If you are a bit short before payday or you need to fund a large purchase, there are credit cards geared to your needs everywhere.

Used correctly, they can be excellent tools for different reasons, used wrongly, and they can cause long term debt and financial problems.

Make sure you do your research on your credit card provider, some of them are more trustworthy than others. As made clear by the Wells Fargo class action suit

We are going to go through the advantages and disadvantages of owning a credit card that way, you can make an informed decision as to whether you should get one.

Advantages

We will start with the advantages of owning a credit card.

Credit Building

Your credit file tells potential banks lenders and businesses your history of money lending and how you did when it came to paying on time. If you use your credit card only when necessary and payback before the deadline, you will increase your credit rating. This is a great way to build up credit if you have no credit history.

Simply borrow small amounts with your credit card every month and then pay it off.

Make sure you pay it off on time, though or this advantage will become a disadvantage, missed payments or late payments can harm your credit score.

Safety Net

Having a credit card works a bit like a safety net. Everyone faces unexpected pitfalls now and again. If your car breaks down at the same time your rent is due and you have unexpected medical bills, you may not have enough to cover the cost.

A credit card can be a protective safety net for when this happens, allowing you to pay off your costs, then pay it back in your own time.

Dis-Advantages

Now we will go through the disadvantages.

High Interest

Credit cards typically come with a higher APR than a traditional loan. If you are using the card sensibly, then this should not be a problem.

Many cards will also let you take cash out in advance, this usually has a very high fee attached to it.

Misuse Leads To Debt and Bad Credit

If you don’t use your credit card sensibly, there can be a whole myriad of problems. Asides from the fact you will pay heavily through missed payment fees and interest, you can also ruin your credit score.

This means that lenders in the future may not want to lend to you due to your bad credit card history.

This can affect you in a whole host of ways, from mortgages on houses to mobile phone contracts and car finance. With a bad credit score, you will suffer to get any of these.

Conclusion

We hope we have helped you in your decision with this article. Credit cards can be a massive help, but they need to be treated with caution. Make sure you pay back on time!
[…]
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How Well Do Your Kids Understand Finances?

Making kids understand finances should be one of the priorities for every parent. The earlier you introduce the topic, the more comfortable they will be to handle their finances as they grow up.

How often do you discuss finances with your kids? Simple budgeting tips? Or involve them in financial decisions that directly affect them? Some parents feel it is not vital yet almost every decision they make will be influenced by their ability to handle finances; from credit cards to student loans.

Making-kids-understand-finances-should-be-one-of-the-priorities-for-every-parent
Source: Pexels

As parents, finances are not always gratifying as sometimes you may find your credit score rating has gone down. You probably want to buy a house but don’t know if you can get some of the Best Mortgage Loans for Bad Credit. It is okay to make your kids see that you are not perfect and sometimes it is not as rosy as it seems.

The significant question here is, do your kids understand finances? How do you prepare them for the future?

1.    Talk openly about money

As a family, it may sound awkward talking about money when your kids are around. However, money should be an open discussion so that they can learn a thing or two.

At times, you can even talk about salary negotiation when they are around. Their age should not be a barrier. They may not understand every money term you talk, but that should not be an obstacle. They understand with time.

Talking about money does not necessarily mean it’s only positive, talk about even the challenges and struggles.

2.    Distinguish between needs and wants

As you know, there is a clear difference between needs and wants. Needs are primary and things you can’t do without such as food. Wants, on the other hand, are things that are not a necessity, you can do without them.

For children, you need to help them distinguish the two. Insist that needs are a must-do, but wants are optional.

3.    Live by example

Children’s financial habits are formed at a young age. There are claims by a study by Cambridge University that the habits start taking effect at age 7. Most of these habits are ‘borrowed’ from their parents.

As a parent, live by example. Most children will grow up looking up to their parents who act as role models. As such, if you impulse buy, they will take the same trait as that is what they know best. You may not see it, but your children are watching closely, they quickly pick up habits.

Lead a life that you’d want your children to take after. Avoid impulse buying, draft budgets and keep your expenses on the low.

4.    Introduce chores they can do to earn a small commission

Introduce the art of money when they are old enough to do tasks. Some simple house chores such as making their bed, cleaning the house or arranging the laundry area would be a great start. Give them weekly commissions depending on how much ‘work’ they have done.

Once children understand the art of earning money, they will ensure they work even harder to get more money. Such actions make them understand that money does not come in easily as they think.

5.    Saving Money
Children as early as five can do simple chores as discussed above. Where do they take the money they receive? Introduce a piggy bank or most preferably a transparent jar. The clear jar acts as motivation for them. If they put in $1 today, they’ll want to put in more so that they see the jar getting filled.

As the kids grow up, they understand the benefits of saving. Sometimes, they will need some toys, and they will take out a few of their savings to purchase them instead of asking you for money.

Also, teach them about credit. For example, your child comes and asks you to buy them some new dress they saw; however, instead of directly purchasing the dress, you agree to loan them, and they can always return with some interest.

Children learning about credit is important because they will understand that borrowing comes with a cost but stress on the importance of credit.

6.    Make them save for their future

As parents, we want to save for a secure education for our children. However, when they are in their teens, make them apply for summer jobs and save part of their money towards their college funds. Make them responsible for their education so that they can learn the value of saving for their future. Take them through retirement saving as well.

Parents will always want what is best for their children. If it means teaching them on financial freedom at a young age, it will be worthwhile. Challenges will be there along the way but how you handle your finances will determine the future of your kids. Instill financial values and see the positive results you get.

Kids as young as 6 and 8 can learn to start a business, read more at Business for Little Kids – How We Got Started

How have you helped your kids learn about economics, finances and saving money?

Related:
How To Manage And Regain Control Of Your Family Finances
How to Teach Your Children the Value of Saving Money

4 Ways a Life Coach Can Help You & Your Family

Everyone needs a bit of guidance in life to direct themselves on the right path. Emotional and financial worries can be a huge setback for anyone trying to live a healthy life. Not everyone is strong enough to deal with all the adversities of life which can cause a lot of stress and anxiety. There comes a time when you must seek someone who can guide you and your family through tough situations and will help you to cope with the fast pace of today’s life. If you are serious about you and your families well-being, it may be time to find a coach who can guide you through tough decisions as well as make sure that you are progressing in all areas of your life.   4 Ways a Life Coach Can Help You & Your Family

  1. Financial Guidance

A life coach will help you to manage your finances by allowing you to prioritize your needs and spending. Many families who are trying to save money for their children education while also making ends meet struggle when they lack proper planning and need someone who can help them manage their budget efficiently.

They will guide the family about the insurance plans regarding the future planning such as education expenses of the kids. These plans will allow you to save a little money side by side which will be an aid for the future. Keeping the money for health can also be a useful aid in times of distress.

  1. Define & Achieve Goals

As every family member has a different personality, so everyone needs different types of counseling that will help them to get a right direction for their future. As most of the families are concerned about dealing with the relationships and children behavior and their future, life coaching will allow them to set their goals for the future and work hard for that goal.

  1. Stay Positive

Life coaching will allow the families who are suffering from any setback and trauma to look at life with a new positive perspective. The counseling and guidance will refresh the minds allowing them to have a positive outlook on life. Having a financial setback can disturb a family, but a life coach can guide the family to head into a more safe and risk-free finance option. This will allow them to stabilize them, emotionally and financially as well. Such counseling will enable them to excel in life.

  1. Family Communication

Some families tend to communicate a little less as most of the members are busy with their lives. In such cases, a family is vulnerable to any type of conflict by the closest of the relatives. Family bonding and communication will allow the members to diminish the miscommunication, misunderstandings and generation gaps between the parents and children. All of this is possible by the life coaching expert who will stay in touch with them through the times of distress. He is a companion of your happy and sad times, and he will guide you through these times with ease and comfort.

Other Important Financial Information
How To Manage And Regain Control Of Your Family Finances
Live A Limitless Life on a Limited Budget
Saving Money When on A Family Budget

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