If you are stuck in debt, the immediate action you should take is to understand why you have fallen into that kind of situation. This is to acquire mental awareness which you can use to start battling and winning over your debt. In other words, you must know your enemy to succeed in defeating it before it can totally ruin your whole life.  Before it’s too late, you must do something to get out from debt. Thus, you must reflect on the following ten reasons which grab people’s feet into the credit trap.

1. Not building an emergency fund. Without an emergency fund, people are defenseless against debts and loans when emergency situations occur. This happen when they suddenly loss a job, suffer unforeseen business losses or incur unexpected medical expenses. Having no fund for these unanticipated events, they resort to borrowing. That is why it is always a must to save money and put up and emergency fund for rainy days.

2. Failure to stay fit. One of the main reasons why people are stuck in debt is their failure to maintain a healthy body and lifestyle. Sickness doesn’t only mean additional expenses, but it also means lessening of your productivity and income opportunity. Hence, doing regular exercises, maintaining the right diet and having enough rest are important ways to escape from being stuck in debt.

3. Being so material. Enjoying too much pleasure (drunkenness, gluttony, smoking and the likes) and preferring material over spiritual things causes poverty. Often, they become addiction and become the main reason why people get trapped in debt.

4. Failure to identify debt problems. Many people usually notice debt overload when it is already on its worst stage. This usually happens when they don’t monitor the movements of their borrowings. Here, they don’t have an early prevention schemes to cure the early symptoms of getting caught in debt.

5. Dishonesty. Another reason why debt becomes severe is people’s dishonesty. This includes reporting false statements about one’s financial condition and performance to different agencies and individuals. When people don’t report credit problems to loan agencies such as banks, they may get loans which are beyond their capacity to pay. Likewise, by submitting fraudulent tax returns, they eventually suffer civil and criminal liabilities.

6. Lack of financial planning and budgeting. To have a greater chance of not falling into the snare of debt, we must have a plan to avoid it. This is just like having a light to brighten our dark ways ahead. Personal finance planning, particularly budgeting, gives us guides and the right steps to smoothen our way to our financial journey. It can also be used for monitoring purposes by comparing actual to budgeted financial figures. Unfortunately, these tools are habitually ignored by most people.

7. Gambling. Gambling debt is not just a mere financial problem, but it is also an indication of addiction that causes personal problems. One of the major reasons why people fall into debt is their false hope, and gambling is one common example of this risky kind of hope. Often, gamblers rely on their winnings to settle their growing financial obligations. And because of the very tiny chance of earning from gambling, they eventually suffer from bulging debts.

8. Not acquiring professional growth. Our comfort zones do not always bring comfort to us, especially when it comes to winning against debts. If gambling is taking too much risk, not stepping outside one’s comfort zone is not taking any risk. Both of these behaviors will not help anyone get out of debt. Thus, we need to take extra courage, initiative and diligence to find rooms for improvements.  If you are an officer or an employee, you may acquire additional education, certifications, and skill enhancements to boost your professional market value and increase your worthiness to demand higher salary or wages.

9. Maintaining lot of credit cards. Unlike debit cards which use the bearer’s own money, credit cards are loan cards. This means that the more we use credit card, the more we owe money. Credit card debt is one of the common debts we can find in a person’s list of financial liabilities. Therefore, we must not overuse those cards, but instead use our cash as possible as we can.

10. Procrastinating payment of debt. A person’s negative habit affects his whole life. It can damage his professional, emotional and financial aspects. One of the bad habits that can cause such harm is procrastination. Many people are not focus and passionate in paying their debts and loans. That is why they loss the habit of settling their financial obligations on time. Consequently, they are permanently stuck in debt.

Conclusion:
Getting out of debt may require us to seek for additional knowledge and understanding of the facts. As listed above, we must formulate the right attitudes and values that will lead us to do the vigorous actions needed to achieve our financial freedom. We should also understand that personal finance is only one of our life’s aspects that can be affected by our negative habits, such as procrastination, dishonesty and lack of self-control. This means that we should concentrate on improving our entire personality to develop our life as a whole. If we can entirely develop ourselves, we can also develop our financial aspect, which is only a part of it.

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”Lazy hands make a man poor, but diligent hands bring wealth.” – Proverbs 10:4 (NIV)

Diligence is important as an action is important to accomplish every task or plan. Intelligence is good. Yes it is good because we need to be wise in making our financial planning and in designing our steps and procedures in managing our personal finances. However, this wit is inadequate without putting them into actions. Using our brain is good, but without using our hands, it can never be better. Even if we have the confidence in our hearts to succeed in our financial life, it will only come short if we will not walk the talk. Remember that faith without deed is dead.

Our financial program is composed of a good plan, nice goal and a series of effective steps to achieve that financial goal. In this program, the steps are very important – and we can only walk all the steps if we are constantly diligent. We need to do what we think. We need to realize what we feel. We need to work for the things we want to achieve. The debts we want to extinguished must be paid by our earnings. These earnings should be the fruits of our consistent labor. If we only think of repaying the money we owed, but never work for the money we will be using to pay off those debts, we will just find ourselves still slaves by lenders.

In saving money, our actions play a very important role. It is our hands that hold, make and or spend our money. In order that we can save money, we should increase our income by working more. We also need to control our hands not to spend excessively.

In investing money, especially when we invest it to our business, diligence is our key to success and prosperity. If you will refer to your financial statements (balance sheets or statement of financial position and statements of income), you will find in your balance sheet that equity increases when your income increases. If your equity increases, your asset may also increase, and your liability may be decreased. Take note that the statement of income, which is also known as the statement of performance and results of operation, reflect a company or an individual’s performance and results. This just means that the success of a business or financial activity indeed lies on our performance and results – which are the manifestation of our works and our diligence.

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Many people, although they have a good financial plan and procedures to achieve their financial goals, still fail. One mail reason is… they don’t perform their very best. They take those plans and steps slightly, and sometimes they take them for granted. This happen because they don’t stand on the things they have laid.

All plans must have a goal. This goal must be an important goal for someone not to take it insignificantly. Hence, in every plan and goal we make, we must always ask ourselves – why are we doing this plan? Why do we want to achieve those goals? How important it is to achieve them? By assuring that a plan and its goal are very important to our lives, we can also assure that we will do our best to execute that plan and achieve its goal.

In setting up our emergency fund, we should also put some value on this fund. Because if we won’t, we might just lose it. This must also apply to all the funds and allowances we build. We must hold them tight, protect them, and nurture them – as if they are very important to us. We can also think of some important things to become the reasons why we are doing these financial activities. These things can be the most important people in our lives. They can be our love ones, our children particularly. The educational fund you are building up can be very important to you, because you love your children. The emergency fund you keep can also be very significant to you because you don’t want your family to face financial troubles in the future.

One major personal financial goal you can desire can be your release from debts. This goal must also become very important to you. This means, you need to become serious in eliminating those amounts you owed. You need to pay them on time. This also means you need to do your best effort to find and earn money to repay those debts.

By putting pure value on everything we do, we can set ourselves on fire and attain success on those things. Remember that what we don’t hold firmly – can fall from our hands. Thus, we must stand on every plan we create, in every steps we make, and in every goal we want to achieve. We must place a great importance on them. We can do that by linking them to important things in our lives, like our love for our family and other loved ones.

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What are money market instruments?

Money market instruments are short-term low risk financial instruments which are involved in short-term borrowings and lending with original maturities of one year or shorter periods. These instruments are composed of financial institutions and dealers in money or credit who intend to either borrow or lend. The instruments are traded in the money market. Money market, as contrast to capital market, refers to the borrowing and lending for periods of a year or less. Capital market involves long-term funding. They are usually supplied by bonds and equity instruments.

Types of money market instrument:

The following are the common types and examples of money market instruments:

• Certificate of deposit or CD – This comes from insured time deposits offered to consumers by banks, thrift institutions, and credit unions.
• Repurchase agreements also know as Repo – These are short-term borrowings normally for less than two weeks and often for an overnight basis – arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.
• Commercial paper – These are unsecured short-term debt instruments with fixed maturity dates of one to 270 days, usually sold at a discount from face value.
• Eurodollar deposit – Deposits made in U.S. dollars at a bank or bank branch located outside the United States.
• Federal agency short-term securities – (in the U.S.). Short-term securities issued by government sponsored enterprises such as the Farm Credit System, the Federal Home Loan Banks and the Federal National Mortgage Association.
• Federal funds – (in the U.S.). Interest-bearing deposits held by banks and other depository institutions at the Federal Reserve; these are immediately available funds that institutions borrow or lend, usually on an overnight basis. They are lent for the federal funds rate.
• Municipal notes – (in the U.S.). Short-term notes issued by municipalities in anticipation of tax receipts or other revenues.
• Treasury bills or (T-Bills) – Short-term debt obligations of a national government that are issued to mature in three to twelve months. The returns generated from T-bills are in the form of appreciation of the bond rather than in the form of interest payments.
• Money funds – Pooled short maturity, high quality investments which buy money market securities on behalf of retail or institutional investors.
• Foreign Exchange Swaps – Exchanging a set of currencies in spot date and the reversal of the exchange of currencies at a predetermined time in the future.
• Short-lived mortgage-backed and asset-backed securities

Reference: Wikipedia and Investopedia

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1. Plan ahead
Make a budget of your monthly expenses. Establish your next month’s expenses now. Know and study what you will spend and what you will need to buy next month. Ask yourself – do you have enough current and future resources or income to cover those future expenses? Can you still save money if you will fill up those expenditures? Always remember to have your financial plan the S.M.A.R.T features. That is being specific, measurable, attainable, relevant and trackable. In planning ahead, you should also make a prioritization of your expenses. You will need this to determine what are those which are important are and what are those which can be eliminated. By thinking in advance, you can also anticipate sales with discounts that can give you significant savings. The goal here is simple – knowing in advance the financial troubles and deficiencies you will encounter and having advanced solutions to prevent them. Of course don’t forget that a plan is useless if not followed. Hence you need to have a lot of discipline and determination to achieve your plans and goals.

2. Cut the unnecessary expenses
In order to have the best solution in reducing your monthly expenses, you need to apply the process of elimination. This means you need to eradicate those expenses that are not really important to you and to your well-being. The best examples of these money wasters are the vices that are currently making you poor and unhealthy. These vices include drunkenness, gluttony, smoking, gambling, womanizing and other bad habits that can snatch your money in the pocket, as well as money in the banks. Your entrainment expenses should also be lessened because this is where extravagance starts. You can also try to become more physical and at the same time lower your expenses of paying other people to do the simple works that you can do-it-yourself. Example of this is walking your own dog, washing your own car, and other simple works that may give you time to relax and simultaneously save money.

3. Obey the rules, pay your debts and bills before their due date
The objective here is to avoid expenses that you should not have in the first place. These are penalties, surcharges and interests. Pay your water and electric bills before due date to avoid interests and penalties. Remit your taxes before deadline to avoid interest and surcharges. Settle your debts on time to avoid penalties. Obeying the rules can also prevent future obligations and extra payments. A simple defiance of traffic rules can cause you an additional cash outflow. Hence, it’s best to just live freely and have financial freedom.

4. Stay fit and healthy
This doesn’t need further explanation. We all know that medical bills are everyone’s worst financial nightmares. Moreover, you cannot work and earn money if you are sick. We also know that unhealthy foods are often the expensive foods. Choosing to eat health-friendly food can also lower our expenses and save us more money. Therefore, let us take care of our best physical asset – our body.

5. Action
It’s a one word to add in every steps and every ways for a successful mission. If you want to gain victory in reducing your monthly expenses, you don’t just need to think, plan, read, analyze and promise your self – you need to act on them. This article or any personal finance article, although well and intelligently written, will not become effective and helpful if not put into action.

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1. Honesty
Can honesty become one of the best policies in avoiding debts? Yes it is. The truth can set us free from future financial obligations. One of the reasons why we fall into the hands of creditors is our attitude to go beyond our financial reality. Have you ever promised your friends, wife or children something you cannot afford? Then because you don’t have the money to buy it, you resorted to owe some bucks from lenders? Sometimes people hide their true financial condition and ability to pay when they approach creditors. Consequently, they owe money they can’t afford to pay. Ultimately, these people are drowned into the depth of debts.

Another example of avoiding future debts is reporting truthfully and faithfully. Remember our income tax returns. Submitting false returns will lead us to penalties and charges that will add to our payables. That’s why to minimize our debts and future debts, let’s live by the truth.

2. Patience
Patience is a virtue. It’s also a virtue that will help us avoid debts. People sink into debts because they don’t usually have the patience to wait. When we find things that we really like (gadgets, cars, etc.,), sometimes we rush our selves to buy them. We grab it though we don’t have the cash to purchase them. As a result, our pockets become exhausted and we fall again in the hands of creditors.

3. Humility
People who are extravagant tend to spend more money than people who live in a humble life. A person who lives a simple life is not prone to debts. I believe I don’t need to explain this further.

4. Diligence
Debts are not only caused by spending, it also caused by earning less. However earning money is not as easy as 1…2…3. To earn an income that will cover our expenses, savings and funds, we need to work hard. If we do not work with diligence, expect your ship to be washed out by the waves of debts.

5. Preparedness
Prevention is the best cure. A financial plan can help us avoid excessive liabilities. Furthermore, planning is also the first function of management – a function that will help us manage our debts. This includes building of emergency funds, legal tax avoidance, budgeting and other ways to get rid of unpleasant payables. People who don’t have emergency funds are trapped in the debt cage when emergency expenses (e.g., hospital bills and repair expenses) come. Taxpayers who have not done tax planning are often surprised by their tax payables when due comes. Finally, people who don’t make a budget usually fall into a dark financial limbo.

6. Flexibility
Flexibility is the ability of a particular thing to adapt in its changing environment for its survival. Sometimes we make a plan, but our plan fails. For this reason, we should make our plan flexible. This means, we need to always have a “plan B” or “even a plan C” to backup our first plan. It’s never a bad move to amend something if that amendment will give us better and more appropriate results. Preparedness should always be teamed up with flexibility. That’s why we should always check out our solvency (the ability to pay obligations when they mature) and liquidity (the ability to convert assets in to cash).

7. Independence
One reason why a person becomes poor is the absence of his independence. Too much reliance to other people makes a person slothful. Although it can be beneficial to rely and depend on other people, this advantage is only temporal. What if those people will be gone in the wind? What will happen to the persons who live by depending on them? If we learn to stand in our own feet, we can stand alone even when the time comes that the people we depend on leave us. That’s why if I will choose between salary (employment) and capital (entrepreneurship) – I will choose capital. This is because salary depends on employers, while capital depends on ourselves.

8. Intelligence
Needless to explain lengthy, this virtue is our guide in making critical financial decisions. Planning is weak if it’s not strategic. Likewise, diligence is inefficient without intelligence. If we want to keep away from debts or get rid of them, we need to use our brain to analyze, learn and act what are the right things to do to achieve our financial goals.

9. Obedience
This simple attitude requires not much intelligence but only understanding. Simply, if we will follow the laws and the rules, we will not be liable for their penalties. If we follow our loan’s terms of payment, we will not incur any penalty or surcharges. If we will pay the right taxes, we will not be charged of interests, penalties or compromise payments. By just obeying the law we can legally escape from financial liabilities, as well as criminal liabilities.

10. Self-control
Last but not the least is the self-control or self discipline. Self-control is the ability of a person to resist from things that may ruin his goals. This attitude is the key to achieve our financial targets. Although this is probably the most effective attitude that will aid us to get rid of our debts, this is also the toughest virtue to have. However, through patience, determination, and constant training of self discipline, we can be a model of self-control. By being capable of refraining from habits like extravagance, laziness, procrastination, dependence, recklessness, boastfulness, ignorance and other bad habits that attract life’s financial obligations, we can all live and enjoy life without debts bothering us.

There you go the ten attitudes and habits that will help us get out from our debts. We can also add carefulness, thriftiness and resourcefulness. You don’t need to become financial experts or gurus to understand these values and manners. So what are you waiting for? Practice and enjoy them!

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Credit cards have plenty of advantages. One of its greatest advantages is the permission it extends to people in doing huge purchases such as expensive cars, jewelries, book, shopping, and even school tuition fees. The cards also help in paying emergency bills such as hospital or medical bills resulting from accidents. On the contrary, credit cards also have its disadvantages. If the credit card holder cannot control the temptation and gratification of using credit cards, he or she is likely to do continuous purchases, which eventually will turn into debts. Once the purchases are huge, the credit card holder may not be able to pay back the amount of money he spent, including the charges or fees of using the cards. Because of this, an individual may experience personal finance problems.

Although credit card is a great idea for many people, it still gets to ruin many people’s financial status. One reason for this is that people do not use the cards in the right manner. They often spend the entire balance of their credit cards as one time and then end up paying off the interests incurred. With this method, people barely made a dent on the overall principal balance of the credit card. This is not an effective way to manage money.

Aside from the great convenience that credit cards give, the cards also provide safety in dealing with actual cash. With credit cards, a person does not need to bring plenty of cash for his or her purchases. In some sense, credit cards are also very useful to people since most credit card companies offer protection act to consumers. The act covers money back guarantee to consumers once fraudulent purchases are made. Another advantage of using credit cards is that it entitles consumers for incentive benefits such as shopping points or air miles. In some cases, credit cards would often take a percentage of your purchases and give it to charities.

Having too many credit cards is not advisable. Aside from the temptation it brings, the great chances of being stolen are there. Keep in mind that your credit cards can also be used by other people when stolen. Other people would just have to forge your signature when making the purchases on your credit cards. As this happens, you will end up in mountain of debts that you have not made yourself. In addition, maintaining too many credit cards will not be easy as you will not be able to maintain the balances effectively as well as payments. On the contrary, credit cards can be your best buddy as long as you are using it the right way and you pay cash payments on time.

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Typically, a business would often find possible means to avoid declaration of bankruptcy. One of its solutions is to find a lending institution that will help them pay off its current creditors. However, this solution can be a very tough endeavor for the business since it is hard to search for a lender that provides considerable credit terms. Just the same, equity investors are not that willing enough to allow the combined capital to be consumed by the current creditors.

In most cases, creditors would often ask a business or company to present a restructuring plan that will show on how it will sustain its ongoing operation as well as its future. A review on the historical finances of the business is often done. Part of the review is the prepared projections of balance sheet, loss, profit, and cash flow. The projections must show that the business has enough cash flow to maintain its existing operations.

Hiring for a bankruptcy lawyer is another solution for business to avoid declaration of bankruptcy. This is usually done when the cash flow of the business is tightening and the creditors are starting to interfere with the operations of the business. A bankruptcy lawyer is a legal adviser specializes in business reorganizations. It is common that management does not have enough experience in handling a distressed business.

A bankruptcy lawyer must able to guide the business throughout the process of recovering. This person will act as the filter or barrier against dissatisfied creditors. He or she will also act as the medium to creditors that the business is doing everything to avoid declaring bankruptcy. Searching for a bankruptcy lawyer that is competent, reliable, and experienced can be tough. It would be a good idea to ask for referral from your trusted advisors, accountant, or company legal adviser. Most of the bankruptcy lawyers today undergo a certification process for their specialization, thus look for a lawyer that is certified for the job.

Aside from a bankruptcy lawyer, the business can also hire for a turnaround or financial consultant. This individual can assist the business during the workout process in implementing workout plan, negotiating, formulating plan, communicating with creditors, and preparing financial business projections. Essentially, a business should focus on improving or maintaining its financial performance and operations. Negotiating with the creditors is also an effective solution to avoid declaring business bankruptcy.

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A household can save cash money by paying through direct debit. According to studies, paying monthly bills through direct debit can help cut bills up to 10%. Another useful tip to cut bills is to have lunch before going to work. Every week try to prepare a work lunch in advanced so you can able to save money. Buying lunch or dinner from local supermarkets and bakeries every day is not advisable as this will only let you spend more on your monthly allowance for work.

If you are paying monthly for insurances, try to avoid it since it will not be cost effective in cutting household bills. Most of the insurances today have percentage premium for installment schemes. If you have enough cash or money, try to pay your insurances in advance for the entire year. This is a good move in cutting household bills and save money.

Going for cheaper groceries is another way to cut household bills and achieve savings. There are many local supermarkets and groceries that offer the cheapest deals on different consumer goods. Try to budget your expenses and don’t be so lavish in buying. The supermarkets are often filled with discounts. Just scroll around and search for short life products that are often placed at the shelves.

Buying clothes that are on sale is another great way to save money and cut bills. It is not wise to buy designer clothes at its finest prices. If you really want the designer clothes, wait for the discount sale so you can purchase the items with huge percentage discounts. Moreover, try buying clothes that are off the season and save it for the next appropriate season change. Clothes that are off season are often cheaper. You can try the Internet as best source of buying designer clothes at cheaper prices.

Credit card debts are one of the many reasons why people get high bills on their expenses. These debts do not allow people to save money. If you do not have the physical money, do not buy things that are unnecessary or less important in your daily lifestyle. Paying purchases in cash is the best idea as this will help people to create realism. Credit card debts represent the most incompetent form of borrowing. Unfortunately, still many people are into creating credit card debts nowadays.

Debt consolidation loans are best in cutting bills. However, in getting this kind of loan, it is important not to get longer terms. This kind of loan can be a great source of cash or asset once used correctly.

Other tips that can help cut bills and save money include spending less, establishing a personal budget, shopping in bulk, going for sale instead of expensive purchases, buying second hand items, avoiding excessive debts, and shopping wisely.

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Some months, even that is not possible. Unanticipated expenses arise or foolish spending on something that was not necessary to have leaves too little money to pay the bills. It’s a terrible way to live, but it is the existence that most people experience.

So … how do you overcome the trials and tribulations of living from month to month, pay check to pay check. It begins with a lifestyle change. You have to accept the fact that your income places spending limitations on you. Once you do, living within a realistic budget becomes much easier to accept. In short, spend money only when you have it to spend. And then, it must be part of your discretionary income, cash you can afford to lose. Never spend money that you’ve set aside for rent or mortgage payments, food, utility bills or other necessities. Once spent, it’s no longer available, but the bills still find their way to your mailbox.

Of course, there is a much better route to financial freedom than the one that involves spending within your means. You can also set aside part of your income for long term investments and financial growth. It really doesn’t matter how much money you have to invest. There are financial advisors who will work with you to put your money in sound investments that will grow and, over time, leave you a nest egg that leads to financial freedom.

There are all kinds of investments that can help grow your money – stocks … bonds … annuities … IRAs … 401k plans … real estate … the list is literally endless. Some investments, like common stock, carry a risk. You can lose money just as easily as earn money. But, that’s where the advice of a trusted financial advisor can help. His experience and knowledge can help him target your money where it will do you the most good.

And while paper investments can lead to financial freedom, investments in real estate have made more people rich in America than any other endeavor. Consider: real estate is finite. There is only so much land available. Homes, therefore, become very solid investments. Over time, they almost always increase in value.

If you have discretionary income now, you may consider buying a home as a rental property. The rent you collect will pay off the mortgage and, at some point you will own the home free and clear. It will be a very valuable asset.

Start thinking about your financial future today. Seek the advice and assistance of a professional financial advisor.

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