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High Debt Exposure? Here’s How To Fix It

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Everyone at one point or the other have found themselves in either small or big debts. It’s not uncommon.

Companies or business owners borrow constantly to  finance their business; students borrow to finance education; and people borrow when unforeseen expenses arise.

It becomes a burden when it piles up so much that it becomes hard to get out of, or to payback, leading to financial setback.

Call Your Creditors

The worst decision we can make when in debt is to hide.

The longer we do this, the more difficult it would be to resolve our issue. I think the first step we should take is to call our creditors to explain our present situation.

Creditors could be commercial or micro-finance banks, fellow business partners or even friends. They might be aggressive or furious, but they’ll be informed, at the very least.

  • Have a clearly stated payback plan before calling.
  • Do not make promises you cannot keep.

Following this step might result in the following:

  • Creditors might reduce the payment.
  • Might extend the period of payment
  • Might reduce the interest rate on the money borrowed.
  • Or charge debtor to court or jail.

This approach might not lead to a positive end result for everyone, but once in debt, we owe creditors a trail of information that assures them that they’ll get their money back.

Cut Spending And Make A Realistic Budget

A quick approach to getting out of debt is to cut our spending. This seems really hard but it’s inevitable.

A way to do this efficiently is to save, make a realistic budget weekly or monthly and stick to it.

Stick to it!

I am repeating this again because it is easy to prepare a realistic budget, but carrying it out and following it is the hardest part.

When doing this, we can take note of the following:

Review what you spend money on the most and try to cut down cost.

For example, I spend a lot on data subscription and I’m presently cutting it down.

Cut down wants (luxury items) and focus more on needs.

Allocate spending ratios to expenses e.g 15% to food, 7% to clothes, 20% to transport etc.

Make sure after preparation, you have enough left to pay installments of your loans/debt.
Doing all these, would help save towards paying back the debt.

This article originally appeared on Piggybank.ng. Follow them on Facebook , Twitter , and Instagram.

Personal Finance

6 Money Saving Tips For Millennials

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Millennials make up approximately 25% of the total population in the United States and they are now larger than the Baby Boomer generation.

This has welcomed a new trendincreased spending. The spending power of Millennials is estimated to reach a whopping $3.39 trillion by the end of 2018. A higher education level and more spending power haven’t yet translated into financial literacy.

As financial literacy is not taught in schools, most individuals grow up having no idea of investing and saving options. Most millennials will soon have to start making life decisionswhether it is to buy a home or start a family.

They need to find a way to overcome mounting student debt, skyrocketing rents, a saturated job market, and stagnant wages, while saving enough for retirement.

Sounds tough? Sure. But you need not worry. Here are six financial tips that will help millennials save a few bucks—all the while maintaining financial discipline.

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Getting Plenty Of Financial Advice? 5 Money Rules You Can Ignore

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Today’s millennials aren’t big fans of debt. Unlike the baby boomers, young adults today are straddling massive financial pressure – be it heavy student loans or home prices reaching unaffordable highs. While all of this welcomes plenty of financial advice, most of them are wrong. Here are five pieces of money rules you can afford to ignore.

1. Buy A House ASAP (And Not Rent)

With home prices almost doubling and trumping inflation and pay, buying a house could lead to a nightmare if you’re taking out a mortgage before your income allows you to afford one. A better option would be to rent until you have enough funding to put down 20%, while taking care to not make payments that are more than 30% of your total income.

2. Ditch Your Credit Card

While this might be popular financial advice from the older folks, getting a credit card that comes with a low annual fee can help you immensely – if used right. What’s more, it comes packed with perks like reward points, cashback, mileage for travel, and can help you meet a large unexpected cost.

3. Pay Down Debts With The Highest Rates

It might be tempting to tackle the biggest debt of the lot and let the smaller ones slip down your priority list. The trick here is to focus instead on paying off your smallest of debts with every dollar you can afford – once it’s paid off, roll over to paying off the next one, until you’re debt-free.

4. Start Saving For Your Retirement (Right Now)

Despite the upside to saving for your retirement now, millennials might often find money too tight. For folks who are just out of university, a wiser option would be to aggressively pay off your debts instead. Although, here’s a caveat – IF your employer offers a retirement contribution match, invest just enough to get that perk (It’s free money!).

5. Buy Yourself A Car

With the shared economy on overdrive, there are plenty of options ranging from car rentals to ride-hailing services. Pumping your money into buying your car could also demand more of your savings for repairs and maintenance – funds you can use to pay off other expenses with. The opportunity cost isn’t worth it if you haven’t got enough financial cushion to meet your important expenses.

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Why You Need To Bag Muni Bonds For High-Yield Tax-Free Returns

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With many investors taking to the stock market or making do with scraping a meagre 2% yield off their 10-year Treasury bills, most miss out on including a far better option to their investment portfolio – municipal bonds. What’s exciting about this asset class? They come packed with significant tax advantages, and yield returns that are over 6% to the investor. Here’s a short, somewhat helpful video on how municipal bonds work:

Muni bonds have been the safest bet when investing in bonds – their default rates at 0.2% for years are almost miniscule when compared to the volatility that the equity market flirts with. Earlier this year, a new federal tax law enabled improved tax deductions on federal returns. This drew many to bank on municipal bonds since it fit the tax-free bill. The interest income you receive on muni bonds is not subject to federal taxes, plus it is exempt from local taxes if it was issued within your state. The cascading gains you make can be dramatic.

The best way to tap into muni bonds are through a bond fund. Within a regular bond fund, you get to pick amongst mutual funds, closed-end funds and exchange-traded funds (ETFs). Beyond these classes, you would also have to consider factors such as your investment horizon and cash flow requirements. Here’s a post that explains the calculations that go into muni bonds and other considerations to look at when making the investment. Better yet are the projections – nearly $51 billion in reinvestment demand is expected this month, which would sweeten the deal for municipal bond holders.

 

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