Do you find that you constantly encounter more debt than what you’re able to repay? These five tips that will help to avoid over-leveraging your personal finances:
Create a budget and stick to it
This might seem like trite and simplistic information, but there’s a reason why this tip is one of the first that’s always advised to those who wish to get a handle on their finances.
When consumers are willing to take a hard look at how much money they realistically generate through employment or other sources, they’re forced with adjusting their lifestyle to the boundaries of their income.
If you wish to avoid generating more debt than you can afford to pay back, then take a moment to create a realistic spending budget. But while you’re taking a look at your spending habits vs. your income, you might consider whether or not your employment revenue is enough to fund your lifestyle, especially a budgeted lifestyle.
Create cash reserves
When consumers sit down to figure out all of their bills and living expenses, the thought of tucking a bit of “rainy day” money might not seem terribly realistic on the one hand, while seeming trite on the other hand.
But along with budgeting, there’s a reason why creating cash reserves is also one of the most advised tips, too. Creating and maintaining cash reserves in an easy-to-access vehicle such as a savings account or a simple money market allows you to avoid debt that you can’t afford.
Specifically, you’ll be able to literally throw money at your problems! The more cash you have in reserves, the more you’ll be prepared for those inevitable, unexpected emergencies. It’s a great feeling to know that you can call a repair person, pay for your dental emergencies, re-stock your groceries, or take care of any number of issues that might arise when you have money on hand to handle your business.
Don’t use more than 30 percent of your credit card limit
This is a tip that takes a bit of discipline, but you’ll be glad that you followed it, and here’s why:
Creditors assign your credit score by looking at what’s called your debt-to-income ratio. In layman’s terms, they want to see that the debt that you’re carrying isn’t equal or more than the income you’re currently generating. Ideally, carrying less debt means that you have plenty of available income to handle your finances, including, paying your credit card bills every month.
On the other hand, carrying a heavy debt load signals to creditors that you’re either not generating enough income to pay your debts, or you’re not handling your credit responsibly. This makes creditors take action, such as increasing your interest rates, denying your requests for credit line increases, and most drastically, lowering your consumer credit score.
Pay your revolving lines of credit on time
Speaking of increases to your interest rates and decreases of your credit scores, one way that you can avoid both outcomes is to pay your revolving lines of credit on time. Not only does this include credit cards and department store charge cards, this also includes bills such as your monthly utilities!
That’s right – up to 35% of your credit score is determined by how well you pay your monthly bills. When you pay on time, every time, then you’ll notice an increase of your consumer credit score. This equates to lowered interest rates, and this brings your debt ratio down to figures that you can easily afford to pay without digging too deeply into your reserves.
Don’t tie up all your liquid assets
Some consumers believe that placing all of their savings into financial products such as stocks and other investments is the wise thing to do. It’s easy to understand why some would avoid traditional savings accounts – the current interest rates on a savings account is so pathetic, consumers find that they aren’t earning anything in interest.
But here’s the problem with tying up all of your cash in investments – they’re not easy to liquidate. There’re steps that you’ll need to take in order to liquidate investments, and you could find yourself losing money due to the volatile nature of investments. So while placing your money in investments isn’t a bad idea, it’s a good idea to keep some of your funds liquidated for emergency purposes.
But what if you truly need a loan?
While it’s great to take steps to avoid financial difficulties in the first place, there will be inevitable instances when you just don’t have the cash on hand to handle an issue. Or you might find that the issue on hand will cost you more than what you have available in your cash reserves.
These are instances when applying for a loan makes sense. While you’re in the process of looking for a lender, you should reach out to larger, traditional lenders such as banks. But if you don’t want to work with a bank, then there are options available to you such as smaller financial lenders. Smaller lenders such as Gladiator Lending might be able to offer you assistance that a traditional bank wouldn’t offer.
Whether you apply for a loan through Gladiator Lending or elsewhere, be mindful that loan terms and rates differ depending upon the lender’s terms. Do your research so that you can be approved for the best loan you can afford to repay.
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