In our last post, we discussed money habits that can hurt your finances. We hope our tips didn’t scare you too much because we have a few more below. Don’t fret, these tips aren’t meant to send chills down your spine. If anything, they’re just tidbits of advice from us to help you save and be more responsible with your finances.
Excessive Lifestyle Spending
As you get older, you might expect to start earning more income and achieve a better financial status compared to where you stood at a younger age. A better job, economic inflation and a raise in income can all have an effect on how you manage money. However, the big difference between those who stay in debt and those who control their spending is staying within one’s means.
We know it’s tempting to go on a vacation or purchase a car or house if you have a moderate income, but you can end up in deep debt if you aren’t careful in balancing your earnings and spending. For example, if Person A earns $25,000 annually and spends $3,000 on a vacation and Person B earns $70,000 and spends the same amount, who is in a better financial situation? It’s important not to spend beyond your means.
As soon as you start spending more than what you earn just to live a certain way, that’s when you run into problems. Part of the problem is also not knowing how much is in your back account. Our mobile app can help you stay up-to-date on your finances.
Face Your Debt
Keeping debt out of sight and out of mind is a sure way to engage in risky behavior that could send you spiraling into deeper financial disaster. Those who ignore their debt usually engage in the following behaviors:
- Avoid paper bills or email reminders that a payment is overdue
- Become angry when debt is brought up by friends or family
- Not answering calls from collection agencies or creditors
- Not knowing how much debt is owed
Avoiding debt is a dangerous behavior that can have long-lasting repercussions. For example, one’s credit score will be significantly harmed and may take years to repair. None of us like debt, but in order to rise above it, we have to acknowledge it. The good news is that many debt collection agencies offer payment plans that reflect your income, so inquire how you can repay your debts in a financially comfortable manner.
Avoid Interest-Free Deals
Retail stores that offer no-interest (especially during the holidays) are simply luring people and enticing them to spend outside of their budget. When the no-interest period ends, customers are slammed with high interest fees. When shopping, don’t get too excited about offers. Like the old idiom goes, “If it’s too good to be true, it probably is”.
Don’t Pay the Minimum Amount
Paying the minimum every month on a bill isn’t getting you out of debt. If anything, it’s really just keeping you on life support, and paying the minimum is usually about 4% to 6% of your balance, which means you might be accruing more interest. Always remember, when you open up your credit card statement, what you owe is the balance and not the minimum payment.
VFCU Can Help with Your Finances
The solutions we’ve provided obviously vary from person to person. But, as with all bad habits, the most important step is to recognize what the issue is and accept that it needs to change. If your finances are poor, our credit union in Harlingen can definitely help. Contact us today to learn what we can do for you.