Money Release: Making, Saving, Investing and Debt Management » spending

Why You Have Too Much Debt

Vic — Tue, 12 Oct 2010 13:25:47 +0000

Except the children, most of us have debts. We might have incurred them because of financing our home, car, education, business and even our regular spending through credit cards. Having a debt to pay is just fine as long as you are really capable to pay it at the right amount and at the right time. It only becomes a financial problem when your debt exceeds you capacity to pay. Thus, we need to take time to determine if we are already having too much debt, identify the reasons why we sunk on that financial obligation, and find an effective solution to manage that kind of situation.

How much debt is too much?
To determine your debt burden or overload, you need to calculate you debt-to-income ratio (DTI). DTI is the percentage of our gross income that goes toward paying our debts. To know if your debt is acceptable or high, simply add up the amount you spend to pay your debts every month, and divide it by your monthly income before tax. Then, multiply the result by 100 to arrive at a percentage. For example, let’s assume you earn a monthly income before tax of $5,000. Let’s also imagine you spend $800 on your monthly house mortgage, $500 on your auto loan, and $400 on your monthly credit card payments. Your debt-to-income ratio will be computed as $1,700 / $5,000 = .34. Multiplying this by 100 will give you a debt-to-income ratio of 34%. This example means that you are spending more than one third of your monthly income in paying your debts. A ratio of less than 30% is ideal, while a ratio of more than 40% is a red flag for a potential financial disaster. Since our example arrives at a ratio of more than 30%, it already indicates a yellow flag and should be given some significant attention.

Why you have too much debt?
Debt overload arises when a person’s debt-to-income ratio exceeds the ideal ratio. Debts that are considered burden come from a person’s inability to manage his debts, which may include failure to make a personal financial planning, organizing and controlling. Debt-to-income ratio has two main factors: debt and income. Thus, the reasons of too much debt lie on these two elements. People incur overloaded debts because of unnecessary expenses as indicated by their excessive use of credit cards. They also don’t strive to increase their earnings to cover their fixed monthly obligations. This can be illustrated by our example above which shows an extra income not sufficient enough to absorb its home mortgage and auto loan monthly payments.

How to manage debt overload?
Managing your debt overload is a practice you should always practice overtime. It should be a continuous process from financial planning, to personal motivation, and to ensuring that the process is effectively executed. Home mortgage and car loan are fixed and basic loans we should pay regularly. However, credit card expenses are variable and can be controlled to reduce them and improve your debt-to-income ratio. There are also other personal expenses which we can trim down such as our entertainment and leisure expenses, traveling expense and other expenditures that are not necessary to our healthy living. To have a favorable ratio of our debt against our income, we also need to increase our earnings. As mentioned earlier, we cannot just control our long-term loans such as home mortgage and auto loan. Hence, we should focus on generating more revenue to warrant an increase in our income. An increase in income means an increase in our production (for businessmen) and increase in our work force (for professionals and employees). Lessening our monthly expenses requires a lot of self-control and patience, while increasing our income requires more hard work and diligence. Without these habits, we cannot get rid of those extra debt burdens.

How to Save Cash by Spending Money

Victorino — Wed, 29 Sep 2010 05:35:12 +0000

How to save cash by spending money? Is this question sounds absurd to you? I hope it doesn’t, because this is for real and it is one of the forgotten ways to save your cash and the money you have in the bank. To save cash, we don’t just think about money, we also need to consider time. Moreover, in considering time, we don’t just recognize the short-term outcome, but we also need to identify the long-term results. We should understand that not all cash savings we are doing now can save as money in the near future. On the other hand, we should also remember that not all cash spending we are doing today can exhaust our money in the long run.

Many people actually fail to save money because they are afraid to spend it. Some businessmen even become bankrupt because they keep so much money. Why are these events happening? Those people who are worried of cash outlay are the ones who don’t pay their dues and obligations on time, such as monthly bills and loan amortizations. This practice causes them additional fees, surcharges and penalties. The results are additional liabilities beyond their original payables. Those business owners who keep too much money out of greed are the ones who escape paying their actual income taxes and other financial obligations. This behavior results to audit investigations which cause big loss to the business not only in monetary terms, but also in terms of integrity.

To really save cash, not only in the short run but also in the long run, we need to spend money wisely. We should consider the permanent things rather than the temporary. Thus, we need to settle our financial obligations so that it may not bring us additional expenses that will dwindle our savings in the future. Who wants to be penalized, and who wants to pay money in excess of what is originally liable? Of course no one wants it.

We can also save more cash in the future if we will avoid becoming too frugal. This means we should avoid buying cheaper goods just to have instant and temporary savings today. Purchasing cheaper stuff can be meant acquiring low quality goods. The disadvantage of buying cheap and low-quality merchandises is that they don’t really serve us in the long run. Yes, we can save money by paying less, but we can become losers when it comes to their usability. Just think of buying an expensive brand-new car versus buying a cheap and secondhand car. Of course we can save money by acquiring the used vehicle because we will be paying a cheaper price. But will this help us save our money in the coming days? I don’t think so. The repairs and maintenance can be an expensive recurring expense if we will be riding in a secondhand car. On the other hand, buying a brand-new vehicle will require us to spend a larger amount of money now. However, it will save us more pennies by avoiding the hassle of continuous repairs expense. What it makes feel better is that we will be driving a new and a more comfortable car.

Money Bible Verses: On Saving and Emergency Fund

Victorino — Thu, 10 Jun 2010 04:48:50 +0000

Saving money seems to be an easy task. But the reality tells the other way around. The truth is… it is difficult to set aside money. This is because we do not only encounter controllable temptations to spend money, but also we often face uncontrollable circumstances that lead us to use them. These unmanageable circumstances include our routine necessity to buy our daily food, unexpected medical expenses, unanticipated repair expenses, and other expenditures we must not ignore. Thus, it is just wise to save money for these kinds of events we don’t expect to happen anytime in the future. We call this amount an emergency fund. This is a fund we set aside for the exclusive use of our emergency needs in an unpredicted future. There can be confusion whether saving money is wise and biblical, considering that saved money, which don’t earn interest, seems to be unwise. There are also claims that investing is far away better than saving. With these, let us find out what the Bible says about saving money. The following are passages from the Holy Scriptures pertaining to saving bucks and setting aside for an emergency fund:

1 Corinthians 16:2
On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come.

Proverbs 6:6-8
Go to the ant, sluggard; consider her ways and be wise; who having no guide, overseer, or ruler, provides her food in the summer and gathers her food in the harvest.

Proverbs 19:2
Also it is not good for a person to be without knowledge, and he who hurries his footsteps errs.

Proverbs 21:5
The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty.

Proverbs 21:20
The wise man saves for the future but the foolish man spends whatever he gets

Proverbs 27:12
A prudent man sees evil and hides himself, the naive proceed and pay the penalty

Proverbs 30:24-25
Four things are small on the earth, but they are exceedingly wise: The ants are not a strong people, but they prepare their food in the summer;

Ecclesiastes 11:2
Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.

Conclusion:
The Holy Bible which is full of wisdom clearly is a reference of purpose. Every acts and teachings we can find in the Holy Books are under a great purpose. Therefore, we can say that the righteousness of saving and setting aside money depends on its purpose. Yes, investing can be better than saving, but saving under a good purpose can be better than a risky investment. Saving money for an emergency fund is recommended for this uncertain world. Saving money for the future of your children (educational fund) is also wise. But saving money without a clear purpose is dull. Saving money can also teach us self-discipline – a virtue that gives us great results in our lives. It also orients us to patience and prudence – two virtues that keep us away from financial troubles. Hence, let us be disciplined, patient and prudent persons. Let us save money with a great purpose. If you love your family, you won’t give them a gloomy future. Finally, if you honor God, you should always see to it that you always bear fruits for your people to be picked.

5 things to do when you don’t have money

Victorino — Thu, 13 May 2010 10:05:07 +0000

What are the things we can do when we don’t have any money? I just got no money today. The reason is that I have not yet collected my billing for the services I have rendered. It’s somehow funny to consider the fact that I don’t have any cash in my hand. I also don’t have credit cards, since I only use debit cards which I only load with money when I have purchases online. Now it’s a crazy challenge thinking what we can do when our wallets run dry. So I take this opportunity to meditate and nurture my brain with ideas that can somehow help my self and anyone who may have arrived in this freaky situation. When, you can’t get anymore money in your pocket, the following are things you can try to do:

1. Spend your time
Having no money doesn’t mean having no resources. Time can be equivalent to money, and vice versa. Some people are rich with money but are poor in time. Some people are rich with time but poor when it comes to money. Now that you don’t have any money to spend, it’s time to spend your time. Maybe during the time that you have money, you found yourself traveling in many places. Now that your have no money left with you, this maybe the chance to spend your time with you home. Try to spend time cleaning your room, spending time with your lovely pets, or with your families. It can also be the opportunity to spend time with you books, your garden, your body (doing exercises), and many other things you can spend with your time at home or even at your nearby neighbors.

2. Fasting
Having no money isn’t bad at all at a certain point in time. It can be a golden opportunity for fasting. When material and monetary things are in absence, we can concentrate on spiritual things. When we have money, it’s hard for us to abstain from buying foods, drinks, and other material things that our body needs. Now, when money is not in our hands, we can do fasting. Meaning we can try to abstain from gluttony, drunkenness, gambling and extravagance – things that weaken our spirits.

3. Rest
Activities can be costly. Hence, if we don’t have the money to cover our entertainment and other activity expenses, the best thing to do is to “rest”. But keep in mind that having a rest is great when we are tired. This means, we should only take a rest at a reasonable short period of time – enough to energize and rejuvenate our body and minds. A few days without money can be a good few days of rest. This can also be more relaxing if a person who doesn’t have money also doesn’t have debts or any obligations.

4. Think
When we can’t do something because it will cost us to do or when we can’t travel to any places because we can’t afford to travel, the best thing to perform is thinking. Thinking certain things can be beneficial to us if done properly and timely. In exercising our minds, we can be able to create useful ideas and strategic plans. We can also do meditations and realizations which can nurture not only our brain but also our soul and our whole personality. These are the things that we usually forget when we are busy spending and playing our money. Hence, when money is gone, these are the nicest things we can do to ourselves.

5. Find money
If you don’t have money, then you should find money. If you already don’t have time to spend, if you’re already tired of resting, if your fasting period is over, and if your plan and ideas are now must go into action, then you should now start finding and earning money. It’s now time to use your rejuvenated self to work for money. This is now the moment to put those ideas you created into reality. Your plans must be acted now. If you have something to work on, then work it now. If you have goods to sell, sell them now. If you have services to render, render them now. If you have receivables, then collect them now. Money comes to us if we think it and work for it.

The important key to effective budgeting

Victorino — Sun, 09 May 2010 13:21:21 +0000

Budgeting is like enacting our spending, earning and saving today what we will do in the future. In other words, it is a process of bringing in a piece of paper or spreadsheet the lists of our planned revenues and expenses. The objective is to minimize expenditures, maximize earning, and fuel our savings. Budget may also come in the forms of imposed rules and policies. That is why many people sometimes view it as something that hinder their financial freedom. But this misconception is not practically right. Financial freedom doesn’t mean you are free to spend it all, buy all what you want, and get all what you want. This freedom means the capability to harmonize every financial element around us such as revenues, expenses and savings.

There are many important things to consider if we want our budget to go into success. These include making them specific, quantifiable, realistic and documented. We should specify our budget and make details so that we can have a clear picture of what we will follow. Measurability is also important in any financial plan, especially that we are dealing with money. Quantifying our budget is also vital in estimating future financial figures. We must also see to it that our budget is realistic and achievable. A conservative approach is more likely to succeed than a frustrating idealistic budget. Moreover, budgets must also be supported by documentations which are very useful in tracking and monitoring them. Tracking our earning, spending and saving behaviors will give us an idea on our weak points and strong points when it comes to our personal financial matters. With this, we can always find ways to strengthen our weakness and preserve our strengths. However, all of these things may not be enough for our budget to be taken efficiently. We should also realize one thing, and that is what I will discuss in the following paragraphs.

The important key to an effective budgeting lies on the value and importance we give to it. We may have a specific, measurable, attainable and trackable budget but it may not just be enough to help us reach our financial objectives. It is important to ask ourselves the following questions. Why are we making a budget? What is its great importance to our lives? These questions should be answered by our selves. We need to have a sense of direction. Budgets are tools that we can use to make our finances stable. But still we need to know its essence and values. Many people failed their financial plans because they don’t value them. Several financial gurus will teach you how to manage your personal finances. But without the sense of purpose you may only falter at the end. Our own budget should have a great impact in our lives.

In every plan we build, we need to assure that it is important to us. In every budget we create, we should see to it that it is relevant to our lives. As for me, I am budgeting because I want to save money for the establishment of my own corporation. I want to have a company that will employ people and give them jobs. I also want to offer quality products and services that will give my clients and customers satisfaction. This is why budgeting is so important to my life. Now, you can also try to meditate and know the roots why are you making a budget. Even a child can give great importance to his own budget to save a few bucks from his school allowance to buy a nice toy. Therefore, ask yourself once more, why I am budgeting? We all know that systems and tools facilitate our goals (financial goals), but our values are the ones who will give those goals the sense of direction and the sense of destination.

How to win your war against debt?

Victorino — Tue, 04 May 2010 05:27:37 +0000

I understand that in every battle, time is an essence. Hence, this will be a quick article for everyone to read. In a short time, the reader will be able to know how to win his war against his debts, as well as his financial freedom. The following are the keys to defeat debts:

Prevent the battle
Prevention is still the best cure even as against our debts. The supreme warrior is one that can win a war without going into a battle. This is possible through planning and making precise calculations. The person who wins is the person who has the best plans and most precise calculations. Therefore, before we spend, let’s first calculate and see to it that it is according to our strategic plan. This is to assure that we will not be fallen into the necessity to rumble debts.

Be a great leader
To gain victory over our every endeavor, we should become great leaders of our selves. We should manage and control our selves efficiently and effectively. Great leadership is a combination of gentleness and strictness. Hence, be gentle on your expenses and be strict on your self-imposed rules and policies.

Be a great spy
This is applicable to the things around you and to the things within you. To achieve triumph, we should always gather enough information that will help us decide the best financial decisions. Let us research every loan products like payday loans, debt consolidation, unsecured personal loans, and other loans if they are advantageous or disadvantageous to us. Let us be wise and be careful not to fall unto their traps. More importantly, we should also take the best efforts to know our selves – just like spying on ourselves. Monitoring and tracking our personal financial behavior (our weak points and strong points) will help us place our selves in the right financial position.

Energy and rapidity
Being in war means we need to set ourselves on fire. We need to defeat our opponent by attacking him like a lightning, which is full of force and speed. To annihilate our debts, we should act at the earliest possible time – NOW. There should be no time that will be wasted, as well as strength that will be wasted. We should preserve our momentum, which is also a very important ingredient in winning every battle. Therefore, if you are not doing anything to extinguish your debts, start doing something now. Do what should be done and stop what should be stopped.

Deploy your army
When battle has not been prevented and you have no choice but to face that battle, then you need to position your army. In your war against your financial woes, your army consists of your self as the general or commander and your men as your assets and resources. Your resources could be tangible or intangible and humans or not humans. Your tangible resources could include your properties (real estate or personal) and your intangible resources may consist of your attitudes, knowledge and skills. Your human resources may compose of your relatives, friends, allies and affiliates. Your not human resources could include your location, weather, economy which are advantageous to you. Now, all you have to do is to gather and organize all these resources of yours and deploy them effectively as your army to defeat your enemy – your debts.

Can gluttony make us poor?

Victorino — Thu, 29 Apr 2010 17:42:35 +0000

Can gluttony really make us poor? Yes it can, as well as drunkenness. Even the Bible has warned people to not be tied up with gluttons and drunkards because they become poor.

“Do not join those who drink too much wine or gorge themselves on meat, for drunkards and gluttons become poor, and drowsiness clothes them in rags. – Proverbs 23:20-21”

Spending too much on foods and wines can exhaust our money and even our unsold assets. This even becomes worst for people who have already become addicted to meat and alcohols. And to prove it further, these clumsy habits will make us sick and unhealthy, causing our works to weaken and our income to fall. Drunkenness and gluttony also destroy our self-discipline. It strongly influences indolence and procrastination. Consequently, it gives a person failure in every goal he will try to attain – may it be personal, spiritual or financial.

The words of God don’t lie. I personally experience it and can prove it to be true. I have observed that buying and consuming excessive foods, which I cannot resist because of their mouth-watering taste, destroys my financial budget. Moreover, I’ve also proven to myself that avoiding drunkenness and wild partying can give me a lot of cash savings. Therefore, I conclude that gluttony and drunkenness can indeed make a person poor. On the other hand, self-control and fasting can significantly help us save money and increase our work to earn more profit.

How to reduce your monthly expenses?

Victorino — Thu, 29 Apr 2010 07:50:49 +0000

We are facing a monthly challenge, and that is how we can manage our monthly expenses. Business, professional, personal and household expenses are spent because we need or we want them. But sometimes coping our expenditures become a hard task that usually goes beyond our income and resources. The result is falling into debt and other financial troubles. Who wants to have stability in his or her personal finances? Of course everyone wants. That’s why, we should learn how to handle and tame our expenses daily, weekly, monthly, yearly or even permanently. The following are ways to reduce our monthly spending:

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.

How to save money on your date?

Victorino — Mon, 29 Mar 2010 13:12:54 +0000

Love is greater than money. That’s why most of us, when it comes to the thing we called love, we often ignore what we spend for it. When it comes to our special woman, especially when we still courting them, we even promise to give them the sun, the stars and the moon. Consequently, our pockets run dry buying expensive flowers, chocolates, jewelries, and dating our girls in elegant restaurants. But though love is more valuable than money, there are still ways to save our wallet without reducing the power of love. In the following paragraphs, we will discuss how we can say I love you to our love ones and win their hearts without losing our pennies.

Dating involves money spending, and the best first thing to do to prevent any financial troubles is planning. A personal plan is a set of goals and procedures to effectively and efficiently accomplish something. If you are about to go to a date, ask yourself – what is your objective on that special day? If you are a frugal yet a true lover, you may aim to win the heart of your girl without destroying your pocket. Just like a soldier, you need to make a battle plan if you don’t want to go home heart-broken and wallet-broken. To achieve your goal, you need to create procedures to achieve that goal. These procedures may include researching, evaluating, analyzing and making the best decisions to capture the heart of your woman and guard your bank account.

Researching involves knowing the place, the foods, and other things that will complete your perfect date. It’s always good to bring your girl in a place you already knew. This is because you can be able to make an accurate budget compare to when you will bring her to a place which you don’t have any idea. If you already had an experience in a particular restaurant, you can be able to know the prices and the volume of the food they serve. With this, you will be able to avoid having an excess order of foods for you and your date. Since a date only consists of two people, you should only order foods that are just enough for two persons. Unconsumed food means a waste of money.

If a date needs a good policy, it should be honesty. One effective way to avoid future obligations (financial or emotional) is to be an honest person and a true lover. Many girls crave for men who are elegant. But don’t forget that because of the scarcity of Earth’s men who are true and real, there are still many women who are praying to meet honest men. So go on to your date and say the truth, show the truth, spend the truth and nothing but the truth. If you will pretend to become an elegant macho man, even though you’re just a macho man and not classy, you may be tempted to spend at the sky limit. Eventually, you may end up overwhelmed by your credit card bills. Therefore, it is always great to embrace into saying that “the truth will set you free”…free from rejection, free from debts. And oh yes, don’t forget to always make an early reservation for the day you will go to your dream date.

Tips on Cutting Your Bills and Saving Money

Jay — Thu, 25 Mar 2010 04:37:36 +0000

Reducing or cutting bills is extremely important in every household. In doing so, one’s lifestyle and personal finance is not only changed but more money is saved as well. Money that is saved from cut bills can be used by the family in paying other expenses such as mortgage or loans. Let us learn more about the different tips in cutting our bills and achieve savings from it in this article.

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.