A credit card extravagantly used during the holidays is sufficient to rack up a debt that can be paid “leisurely” over your lifetime, but why is it that we find it so difficult to rein in our expenses and make good our debts and live to tell the tale? Let’s take a close look at our behavior and decide for ourselves how the situation can be improved.
Money flows in as income and flows out through various expenses and the manner in which you handle this cash flow determines the quality of your life. Gradually as you gain experience in handling cash you will understand that bigger things like a home or car can’t be bought with your money alone, you need additional funds. This was how the concept of credit was born.
A major reason why people accumulated debt was their inability to distinguish between short term lending and long term lending and between essential purchasing and frivolous spending. Somewhere the lines separating these concepts got blurred and indebtedness grew. Credit cards were the worst culprits. Low interest rates and minimum balances enticed people to postpone payments and many got saddled with balances that doubled and tripled in a short time running back to back on high APRs.
What frequently lets us down is our habit of mismatching the term of the loan with the purpose for availing the loan. A credit card is basically a short term loan taken to fuel a small purchase that has to be repaid quickly, but we make matters worse by extending repayments over a longer term piling more debt. In a similar vein the car is a fast depreciating asset yet we rake up huge car loans payable over a longer term instead of saving up for bigger down payments. These are live examples of our desire for an object overwhelming our better judgment in taking on unnecessary debt.
At this juncture credit card companies offer to transfer balances to lower interest cards, affording a temporary lull while you get your act together. This actually does very little to clear your debt unless you take the initiative to clear the dues. The best strategy is to ask yourself if what you are purchasing is a need or a want, and follow what your conscience dictates.
Undeniably, a budget is your best weapon to tackle debt. You can give yourself a psychological boost by saying that you are “permitting” yourself certain things while postponing other purchases for the moment! You can make the task easier through the following tips.
- The APR levied by the credit card.
- The minimum payments you are required to make on the average purchase.
- What you can afford to pay monthly to the credit card company.
- Pay always more than the minimum requirement.
- Focus on the cards balances that charge higher interest.
This process can be time consuming but it pays to maintain oodles of patience and keep reminding yourself that you are “rewarding” yourself by shelling out more money to service your debts, and improving the quality of your existence. Use the 60/30/10 rule in budgeting all expenses where 10% is what you save, 30% is the limit you set for servicing all your debts and 60% is what you use for meeting all other expenses.
….And title loans help when the chips are down!
Life is never an extended purple patch and circumstances, especially financial blues can hit you hard unless you mobilize cash quickly. When savings dry up or emergency funds get depleted simply reach for a loan for vehicle title. The cash loan for title offers 60% of your vehicle’s commercial valuation, and the car title can be offered as collateral to secure the loans. The car equity loan has an interest rate approximating 25% APR which is leagues lower than expensive pawn and payday loans. The auto equity loan can be cleared in equal monthly installments that will not empty your wallet.