finance Archives - Painter Mommy

Car Trouble

Most people make use of their vehicle for their daily commute. A large segment of the population also relies on them for their very livelihood. But if that car were to break down suddenly and public transport wasn’t a viable option, a small loan would be a great solution in a tight situation. Likewise, if your car is totaled or you’re purchasing your first car, low-interest microcredit is likely what you need.

Home Improvements

Our homes can be a significant drain on our resources. Investing in energy efficient improvements can save you a lot of money over the mid and long-term. By simply replacing the five most frequently used light fixtures around the house with energy efficient light bulbs, you can save $75 per year. Plant several trees on the sunny side of your home, and you can reduce your annual air conditioning costs by as much as 50%. Alternatively, when things go wrong, repairs and maintenance can put a horrific dent in an already tight budget. Access to a ready source of cash can ensure that you can keep your home in shape without plunging yourself into unmanageable debt.

Life Cycle

The US, like most of the rest of the world, is experiencing an all-time low in the number of marriages per year. Primary amongst the reasons cited for couples delaying or deciding not to embark on marriage altogether is the spiralling costs, coupled with stagnant or shrinking real wages. Even modest weddings can still cost thousands that young couples simply don’t have. Accessing a small loan can allow you to have that wedding about which you’ve been dreaming.

Education Expenses

Spending money on your education is always a sound investment, no matter the age. Statistics show that the average college graduate with a 4-year bachelor’s degree earns twice as much money throughout his or her life as someone with a high school diploma alone. However, starting school does require some initial financial investment which can be prohibitive. This is one of those times when microcredit might just come in handy by helping to get you into the system so that you can pursue your goals and achieve your potential through higher education.

Unforeseen Expenses

Just like your car breaking down in the middle of the road, or a mind-numbing toothache in the middle of the night, or even a pipe bursting when you’re not at home, all can bring on some unforeseen expenses for which you might not have planned. And if you don’t have a rainy-day fund put aside, like 78% of all working Americans, then something seemingly as insignificant as a twisted ankle or a broken fridge can turn into a financial struggle.

Microfinance has been around for a very long time and with good reason too. Many are nonprofit organizations looking to help out the little guy wherever he may need some assistance. Do your research, and you may find that you qualify for that leg up that will help get you on financial track without trapping you in the high-interest debt cycle.

Today, consumer spending and household debt have reached levels never before seen. Even adjusted for inflation, today these figures are startling. Residents of developed nations around the world are spending more and more to support a lifestyle that, frankly, they can’t truly afford. As a result, this spending has become financed with debt in the form of credit cards, student loans, car loans, and even personal loans and home mortgages.

For many, the debt has become daunting. The bind in which they find themselves now, having realized that they need to adjust their lifestyle, they desperately want to trim or eliminate personal debts. They no longer want to shoulder these burdens. Many are undertaking this noble goal while already living on low incomes, making the challenge that much greater.

If you find yourself in this category, there are a number of steps that you can take to help reduce your debts more effectively, even while living on a low income. Below are a few suggestions.

Track your finances in detail. The first step in reducing debt is to first ensure you are well-aware of the details of your own situation. You may decide to use bookkeeping software like Quicken or QuickBooks however a simple spreadsheet or notebook will suffice. Keep track of all income and expenses, broken down into categories with as much detail as possible. Also be sure to list all debts that you have, and to make note of any monthly payments that you’re making.
Cut expenses wherever you can. Once you have compiled detail records of your finances, look for areas where you can cut back. This may mean forgoing meals or nights out – as entertainment can comprise a surprisingly large portion of monthly expenses. Depending on your situation, perhaps you can look into cheaper housing options. If you own a car but make payments, might you be able to sell the car and instead utilize public transportation until you have paid down your debts?

Use the savings to start paying down debt. It’s critical, in this step, that you pay down debts in the proper order – that being the highest-interest debts first. Credit card debts, unsecured lines of credit, and other personal loans should be addressed first. Later, you can move on to student loans, car loans, secured lines of credit or home mortgages. You’ll find those lower-interest items much easier to pay down once the higher-interest debts have been eliminated, as their relative carrying costs are much lower. It’s also critical during this step to make sure you don’t fall behind with one debt while aggressively paying down another. All minimum monthly payments need to be made before you start making extra payments toward one or more liabilities.

Immediately direct any windfall towards debt reduction. If you happen to receive an inheritance, a bonus at work, or other cash gifts including for holidays or birthdays, it can be tempting to spend this unexpected cash or otherwise treat yourself. If your goal is to reduce or eliminate debt, though, then that’s exactly how these funds should be used. These unanticipated funds probably won’t have been built into your spending budget – they certainly shouldn’t have been – so you shouldn’t be sacrificing anything to use those funds for paying down debt. These kinds of windfalls, if used properly, can help you to become debt-free much faster.

Add new revenue streams, even if they’re small. For some, this may mean getting a second job. For others, whose skills are always in demand – it can mean freelance or consulting work. Even babysitting, mowing lawns, Uber or other odd jobs can help you earn some extra cash to pay down debts.

Stop borrowing immediately. A wise man once said that, if you find yourself in a hole, the first thing to do is quit digging. Nowhere is this truer than in the area of debt reduction. It is well-nigh impossible to get out of debt if you keep adding to the total. So, whatever you do, once you’ve decided that you want to reduce your debts, first make sure that you are through building them up. Make whatever cuts are necessary to your spending, or sell whatever you must in order to insure you stop accumulating any new debt.

In personal finance, few objectives are more difficult than reducing debt. This is only made more complicated when it is attempted on a low income. Still, it is a noble goal which, for many, is the best way to set right their personal balance sheets and gain all-important peace of mind. If you find yourself in such a predicament, make sure to follow the tips above as first steps toward putting yourself on more solid financial footing.

Guest Post Author: Steven McMeechan

Steven McMeechan is a strategic marketing and communications specialist with over twenty years’ experience in senior marketing management roles across a range of industries including Information Technology and Financial Services. He works for Capstone Financial Planning and lives in Melbourne Australia.